Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of Witnesses (Questions 120 - 139)




  120. Have you applied for support of that kind?
  (Mr Whitehead) Yes, a number of my members have applied for feasibility study funding and have received it. The criteria are extremely tough and it is quite a lengthy mission to get financing from the Commission under that scheme.

Miss McIntosh

  121. It must be approved by the home government in any event which tends to be the biggest hurdle. How would you like to see best achieved greater transparency of state aid? I understand one of the difficulties at the moment is identifying what is state aid. Each port here pays up front and each user of the port pays light dues up front and just about every charge you could possibly pay. How can you make transparent what your competitor ports in the North Sea and the Channel receive from other sources?
  (Mr Whitehead) There is a lot of work to be done here and one of our disappointments at the moment is that the Commission think they have done more than they actually have. They have expanded what we call the Transparency Directive which will allow more information to be brought out about port funding and under new proposals it looks as though they may get more transparency into port accounts. Quite frankly, until we get much better information about sources of finance, what is done with the finance, rates of return and so on, we are going to be rather stuck on this one. There is no doubt that the Commission lack good cases on which they can base a development of the policy and possibly of the law. I perhaps ought to add that there is quite a lot of quite legal state aid. The expression state aid tends to suggest that it is automatically illegal, but under current Treaty rules a lot of it is legal. That is also a big problem for us because it is simply not available to the UK, nor do we want it to be, but it then distorts the market.

  Chairman: You do not want it but you will take it if somebody offers it.

Miss McIntosh

  122. You would also rather other people did not have it.
  (Mr Whitehead) It depends how purist we are at the time. We could genuinely say that, tempting though it might be, we would not want it because of the implications that has. If we are going to run a solid campaign in Europe, there is little point in us indulging in the kinds of things that go on on the continent.

  123. May I ask, in a positive way, rather than saying UK ports compete against each other, how we can increase short sea shipping? How can we improve capacity for coastal shipping between UK ports? In my humble submission, that is a potential growth area and one we have not begun to tap into.
  (Mr Whitehead) Probably the potential is quite small realistically. It has been interesting over the past few months to see an increase in short sea shipping of containers because of the difficulties with the rail network. It seems that difficulties in other modes have a tremendous impact on short sea shipping. Certainly roads paying their own way, rail paying its own way, so at least you get a levelling out of competition, would probably be a major factor in stimulating short sea shipping. The market has to work on this and the market takes decisions.


  124. Can you quantify the increase?
  (Mr Whitehead) The potential increase?

  125. No, the increase because of the problems with rail. What are we talking about, three per cent, five per cent?
  (Mr Whitehead) It is very difficult. I can get figures for you, but I heard reports from a couple of ports who do not deal much in containers who suddenly saw a big rise towards the latter part of last year.

  126. Could you give us a note on that?
  (Mr Whitehead) Yes, I can give you a note.
  (Mr Gray) There is certainly great potential in the future for short sea shipping, but it is more likely to be on the longer routes. You could say for example Southampton-Grangemouth or Southampton-Tyne, to name two. It does add cost, it is additional handlings, ships are not so cheap to run. There is also the transit time. One could argue that overnight rail could get there much more quickly than a vessel for example. There will be a certain cost involved and it will be necessary perhaps, presumably through Brussels, to give financial support to shipping lines who wish to offer this sort of service. It is slowly increasing. This may also be linked to the congested road network that we have at the moment and rail has certainly not been functioning very well this past few months as we know and that has impacted on all of us.

Miss McIntosh

  127. Do you think the potential to increase traffic through our ports and to compensate for the lack of duty free will only be reached when particularly road and rail access to the ports has been vastly improved over that which is currently enjoyed?
  (Mr Sloggett) Every port would claim that it had not got the rail and road connections that it desperately needs. There is a sense in which we could all do with better. You can drive from Scotland to northern Italy and only pass about six roundabouts and five traffic lights and they are all in Dover. The only time the dual carriageway came to Dover was when the Channel Tunnel was built, so we feel fairly injured about the degree to which we are given support in road and rail infrastructure and I know many of my port colleagues feel the same.

Dr Ladyman

  128. For the Committee's information, a part of my constituency is in the Dover district, so I do have a constituency interest in the success of the port of Dover. I should very briefly like to touch on the issues around phasing out of duty free again. I think I would probably have slightly interpreted the changes in the ferry industry over the last few years a little bit differently. It seemed to me that there was huge over capacity for passengers, that therefore until there was some rationalisation which came about with the P&O merger, the loss of Sally Line from Ramsgate, people were being forced, in order to get passengers onto their boats, effectively to run loss-leader services. It was not so much the phasing out of duty free, it was the fact that there was over capacity in the first place.
  (Mr Sloggett) I am not sure there is very much between us. There was over capacity, really brought about by the introduction of the Channel Tunnel. Overnight—or at least over relatively few years—you have had a huge amount of additional ferry capacity going across the Channel (ie the Channel Tunnel) and that certainly resulted in prices tumbling and a lot of people taking advantage of that. You could, for example, if you wanted, cross the Channel with one operator a couple of years ago at a price of minus one pound. He would pay you one pound to get you onto the vessel. That is a situation which was no longer tenable when the profits of duty free were not available. So the prices have gone up and hopefully now will find some sort of equilibrium.

  129. We heard earlier about the Competition Act and I accept the difficulties of defining who is in a dominant position, but it does seem to me that a lot of the loss-leader activities and the sort of activity you described of somebody paying two pounds for someone to go on a ship was quite clearly an abuse of a dominant position.
  (Mr Sloggett) I am not sure that operator could have been defined as being in a dominant market position. As the Department representatives said, it depends how you define the market.

  130. P&O could have been defined as being in a dominant position.
  (Mr Sloggett) Precisely. I am sure they can but they still have market share which is smaller than Eurotunnel's in almost every case.

  131. I would argue that Eurotunnel are in a dominant position and abusing it as well.
  (Mr Sloggett) Of course they are.[1]

  132. That is what comes of having Ramsgate in your constituency. Can we move on to look at some environmental issues? To what extent do major ports take responsibilities for the environment seriously?
  (Mr Whitehead) Dealing with the environment is a huge issue for ports, both in terms of these publicised issues of dealing with development and specially protected areas, but ports themselves do a tremendous amount of work. We are encouraging our membership and the European organisation is encouraging its membership to carry out monitoring, water quality monitoring, sediment monitoring, to produce environmental indicators, to do reporting. There is a tremendous amount of work going on within ports.


  133. Do you have that in a manual? The aviation industry has just produced a manual for airports. Do you have that in a manual which is easily accessible for ports?
  (Mr Whitehead) We are just about to publish it. It was agreed at the end of last year and we will publish it in a few weeks time. That will set out a new strategy for ports. It is really an indication of the seriousness with which we look at it. We also accept that we need to know more about what is going on within the environment for which we have responsibility. There is a lot of work.

Dr Ladyman

  134. Are the costs of this a burden to the industry or are they relatively insignificant?
  (Mr Whitehead) We shall find out. The environment generally generates pretty substantial costs, but it is part of running the business. We accept the responsibility and will provide the resources to do that.

  135. When obvious disputes arise between the need for business to flourish and the needs of the environment, how is the conflict resolution dealt with?
  (Mr Whitehead) That is a very broad question. We do not always know what the questions are going to be for one thing. Ports do not always know when they are going to develop. Those involved in big developments will have particular questions they have to answer. What we are saying is that we want to make sure that the industry generally is in a state of readiness and preparedness, not only for new developments, but for operational changes and so forth. It needs a good level of knowledge about its activities to do that. I think we are making tremendous progress in increasing that knowledge.
  (Mr Sloggett) Ports are now being required to be a lot more open and accountable than they were. While there might have been a time when environmental data might not have been published, more ports are publishing it, making it available to people, so that if we are not actually fulfilling our environmental duties, people will make sure that we do.

  136. What about the suggestion which was made by the previous witnesses that there is some evidence that special areas of conservation are not being defined on entirely scientific grounds on the continent and therefore not burdening their operators with the same costs of operation as we have in some ports in the UK?
  (Mr Dempster) This is a matter of considerable concern to us. As the Committee has seen, some research has been done looking at the boundaries of the designated areas in special areas of conservation in European ports. It is fairly clear that the boundaries have been carefully drawn so as to avoid interfering with the navigational channels approaching the ports. In a number of cases in this country, particularly one on the Severn estuary and another which is still under discussion on the Humber, that has not been done. The whole of the estuary has been designated and that could potentially have very serious implications both for the present operation of the port and for future development. The Department's witnesses said, which was quite correct, that the final decision on this will rest with the European Commission and they will be going through a process of moderation which means that they look at all the proposals from the Member States to try to ensure that they are all put forward on an equal basis. Unfortunately this process is conducted by the Environment Directorate in the Commission and all the evidence is that the pressures within that Directorate are to see more designations rather than fewer. I have to say we have little confidence that this process will remedy the unfair situation which we feel UK ports have been put in.

  137. Do you think it is the Commission which should be looking at the way designations are done on the continent or we who should be changing the way they are done in this country?
  (Mr Dempster) There has been a recent case which confirmed that it was not for the UK Government to seek to take economic factors into account. That was upheld in a recent case in the European Court of Justice. Unfortunately it is pretty obvious that is what has happened in continental Europe and there is an issue here which we do think the Government ought to be trying to address.


  138. Do you have an indication that they are?
  (Mr Dempster) You heard the witnesses earlier.

  139. I know what I heard. Have you had any talks with the Department about this aspect of it?
  (Mr Dempster) Yes, I have written to them but I have not yet had a reply.

1   Note by witness: In this answer, I meant to agree with the first part of the question and to remain silent on the second. Back

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