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

Memorandum by the Chamber of Shipping (P 23)



  The Chamber of Shipping represents the British shipping industry, comprising owner, operators and managers of ships. Almost all its members are users of the major British ports, and each of the latter will number Chamber members amongst its worldwide customers.

  The Chamber has a close and cooperative relationship with the UK ports industry, and particularly with its two representative bodies, the UK Major Ports Group and the British Ports Association (whose membership also encompasses some of the larger ports). Generally speaking, we do not differentiate in our thinking about ports policy matters between "major" and other ports. The views in this Memorandum are, except where stated otherwise, applicable to all commercial ports in the UK.


  It is self-evident that, as an island and a major trading nation, Britain's ports have always made a major contribution to the national economy. Despite the growth of airfreight and the opening of the Channel Tunnel, about 95 per cent of our foreign trade is carried by sea. Furthermore, despite the enormous improvements in land transport infrastructure, as much as 24 per cent of domestic freight moves by sea.

  Over the last decade or two in particular there has been an enormous investment in new port facilities and equipment, not only by port operators themselves but also by shipping operators and other service providers. This capital investment in terminals, dredging, container and other cargo-handling equipment, rail connections etc—has been stimulated by two underlying structural changes in the ports industry. The modernisation of the labour supply arrangements in the late 1980s, through the removal of outdated employment structures and restrictive working practices, led to rapid improvements in both stevedoring costs and throughput, particularly in the major ports, all of which (with the exception of Felixstowe) were previously covered by the National Dock Labour Scheme.

  This deregulatory reform gave greater impetus to the second important change—the injection of large amounts of private investment capital into the industry. This arose not only from the privatisation of port operators (whether truly in the public sector or local trusts) but also from a more general improvement in the quality of management and the wider application of mainstream business skills.

  The result of these changes have been to put UK ports generally amongst the most competitive, efficient and flexible, certainly in Western Europe. On the whole, those costs that can be controlled by port operators compare favourably with their nearby competitors in the EU, though there is undoubtedly room for further improvement in efficiency in some areas, particularly container handling. There is healthy competition between UK ports for most traffic (excepting that for direct port-side industrial terminals such as oil refineries or steelworks, or where ship operators themselves have made considerable investments, as is the case with some ferry operations). This level of competition has been to the benefit of British trade and the shipping companies engaged in it.


  No doubt the ports industry in their Memoranda will have considered in some detail the problems and opportunities that they face. Our underlying concern is that the improvements over the recent past in relative efficiency and competitiveness of British ports must not be compromised by over-regulation. There have been no serious signs of any such initiatives from the British Government but there is a distinct threat of damaging results from a package of proposals from the European Commission due to emerge over the next few weeks. In addition to proposals on port service, considered below, the Commission is expected to take steps to make the flow of public funds into Continental ports more transparent as well as proposing that such funding in the ports sector should continue to be approached under the normal EU State Aids rules, rather than through any special new regime. That approach is welcome.

EU Proposals on Port Services

  There is undoubtedly a need in many parts of the EU for a package of reforms along the lines of those seen in the UK over the last 15 years. However, the Commission's approach is expected to be based firmly on its home ground of opening markets and removing restrictions on competition (particularly for "commercial port services" such as stevedoring, towage, mooring and pilotage) as well as State Aids Policy. The Commission considers, maybe rightly, that deregulation of the labour market, the infusion of private capital and the modernisation of management are all matters for national governments. It is regrettable therefore that many governments have shown a lack of political will to tackle these failings within their own ports sectors.

  The Commission is likely to propose a Directive that will require commercial port services to be open to competition, either by multiple service providers or by competitive tendering for exclusive or limited contracts or licences. It may require that in the larger ports, for stevedoring and cargo handling in particular, there are at least two competing service providers and that, if one is the port operator itself, it is clearly separated from its parent. This approach is copied directly from the existing EU Directive concerning ground-handling services at major airports.

  In the UK, where is extensive inter-port competition, ports have developed differing "product strategies", generally responsive to the target customers' needs. Some major ports, notably Felixstowe and Bristol, have decided to offer an "integrated service" with a range of port commercial services, including cargo handling, as a single package. This can have benefits, actual or potential, of bringing business and labour efficiencies and quality standards, to the benefit of customers, for example by encouraging multi-skilling and the deployment of integrated labour resources to cargo-handling, maintenance or other port functions as required. The ports concerned argue that since they are entirely privately-owned ports, receiving no public funding whatsoever, and are in competition one with another, their freedom to offer their service in this way should not be compromised.

  The Chamber has considerable sympathy with this view and would not welcome any moves which would roll back any of the benefits accruing from the hard-won reforms of the UK ports industry. However, it must be noted that this is held against a underlying belief in not only the need for inter-port competition but also open access to the port services market, whether by independent service providers or by ship operators themselves. Unfortunately this is needed in some other EU member states and it is likely therefore that shipowners will favour the introduction of some EU instrument in this regard. The principles adopted in this regard by the European Community Shipowners' Associations are annexed.

  The overall approach of the British regulatory system, which provides a statutory "light touch" protection for port users in most of the key areas in which port authorities might be able to abuse their statutory powers (for example in the setting of conservancy or pilotage charges, or in matters requiring Harbour Revision Orders), is supported by the shipping industry. Nevertheless there does appear to be some need to ensure that major shipping operators in particular are not shut out from providing port services, particularly for their own shipping services, without good justification.

  It is likely that an EU Directive will eventually be adopted as a result of the forthcoming debate and it is our firm objective to ensure that it provides sufficient flexibility to ensure that shipping industry's interests in preserving the benefits already enjoyed under the present structure and practice in British ports are secured, even though additional safeguards against abuse of dominant position may be developed on a national basis.

Environmental and Safety Legislation

  The Chamber, along with responsible shipowners world-wide, strongly supports effective measures to protect the natural and human environment and the health and safety of all those ashore or on board vessels. This, perforce, means the imposition of restrictions on the activities of both shipowners and ports. We strongly advocate the establishment of rules and standards on a regional or global basis, as appropriate, and that they should be applied with equal vigour by all authorities. Nevertheless, it is important that, in devising regulatory controls, due importance is given to the wider economic interests of the country and its individual businesses, and the application of environmental tests in particular should be transparent.

  We understand that the ports industry is particularly concerned about the application of the EU Habitats Directive, where the designation of new Special Areas of Conservation and Sites of Special Scientific Interest (alongside other protected areas), seems to be proceeding without clarity over the scientific reasons for selection. If this process is to lead to excessive constraints on the ability of ports to develop new or improved facilities for their shipowner customers, that would be a retrograde step.

Modern Ports: A UK Policy"

  The Government's recent Paper "Modern Ports: A UK Policy" is a useful progress report on the development of ports policy under the present Government. There is very little in it that is new—but many of the elements discussed are already taking their own course. The Chamber is actively engaged in all those aspects of review and change, which directly affect their own operations of the costs.

  In particular we welcome the developments on safety in ports: the Review of Pilotage and the introduction of the Port Marine Safety Code. The Code, with its roots in formal risk assessment and in consultation with all interested parties, particularly shipowners users, should provide a much more consistent and solid basis for port authorities to carry out their responsibilities for safe navigation in their harbours. There is ongoing work still on the implementation of the Code, both at national level and in each port, to which the Chamber is fully committed.

  The Government's Paper touches also on a range of policy developments which we welcome—better Planning Advice to ensure that waterside sites are not unnecessarily lost to waterborne transport, the extension of the Freight Facilities Grant Scheme to seaborne freight movements, for example.

  However, little policy groundwork has been laid in relation to the proposals expected to emerge from the European Commission, discussed above. To that extent, further work will be necessary in the UK to policy in the ports field to protect the British national interest.

Other Policies to Benefit Major Ports

Light Dues

  We would identify one matter in particular, touched on briefly in "Modern Ports: a UK Policy", where government policy disadvantages trade to UK ports in particular—the continuing imposition of Light Dues. However long-standing the present system of funding the provision by the General Lighthouse Authorities of lights and other aids to navigation from a tax levied almost entirely only on commercial shipping using UK ports, the effect is to place a burden on British Trade which is not borne by that moving through the ports of our near-European competitors. Around £70mn is levied on shipping per annum, with a large proportion of that being borne by a few operators, principally those operating larger ships.

  Governments of all hues have argued that Light Dues are a "charge" and are consistent with a User Pays approach to the provision of services. This is a false analysis. Firstly a very high proportion of the "users" of the GLAs' aids to navigation pay nothing, either because they do not call at UK/Irish ports at all or because Governments have conspicuously declined to bring them into payment (most particularly leisure users and smaller fishing vessels, who probably place most reliance on traditional and expensive lighthouses), indeed a modest contribution from the Ministry of Defence has inexplicably just been ended. There is in any case a continuing subsidy, at unjustifiable levels, of the provision of aids to navigation in the Republic of Ireland from light dues collected in UK ports, though the DETR have taken steps to secure an improved agreement.

  Secondly, the size of the charge and its frequency make no reference to the extent, if any, of use of the system provided, but are based entirely on the net tonnage of the ship and its trading pattern. Such an arbitrary system is bound to favour one ship compared to another, and it is not therefore surprising that shipping interests are not able to reach a common view of a different division of the burden.

  The Government's stated commitment to the continuation of the Light Dues system, should be changed. It should be accepted, as in all the UK's nearby EU competitors, sundry in the public interest and under international treaty, should be funded from central government funds. Failing this, at the very least, serious attempts should be made to collect a reasonable proportion of the total from all classes of user, particularly leisure craft.

19 January 2001

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