WEDNESDAY 3 JULY 2002
Mrs Gwyneth Dunwoody, in the Chair
Mrs Louise Ellman
Examination of Witnesses
MR DAVID JAMIESON MP, Parliamentary Under Secretary of State, Transport, MR STEPHEN REEVES, Divisional Manager, Ports Division, and MR ANDREW BURR, Ports Division, Department for Transport, examined.
(Mr Jamieson) Thank you very much, Mrs Dunwoody. I am David Jamieson, the Parliamentary Under Secretary for the Department for Transport.
(Mr Reeves) Stephen Reeves, Head of Ports Division in the Department.
(Mr Burr) Andrew Burr. I work with Steve in the Ports Division.
(Mr Jamieson) If I may, Mrs Dunwoody, I would like to make a few brief opening remarks which I hope will help the Committee. First, can I say that we, as always, welcome the Committee's interest in Government policy for the ports industry, which aims to foster its continuing success in a sustainable way.
(Mr Jamieson) I think they are both important. We as a government need to have a long term view which is set out in Modern Ports, but there are some very short term issues such as safety, and there are issues that can be dealt with in the here and now. We have public inquiries going on, for example, at the moment and those will be for the short to long term. We have to look at both issues with due regard.
(Mr Jamieson) We do not fund the ports. In some of the other European countries, they run their ports very differently to ours. We are satisfied that the market place has generally worked extremely well in supplying the ports facilities in this country. We see our role as to respond to the framework of regulation, to ensure that safety is in place and to ensure that the environmental aspects are put right. We see ourselves as an overall regulator and we see the market having to respond to providing the provision in our ports.
(Mr Jamieson) In terms of the actual structure of the ports, it would be our view that we would not be funding those. Successive governments have made that clear over the years, but there is an interface between the development of the ports and improvements that may take place or extra transport that may be needed. That will be a matter for negotiation between the ports and the SRA. It may be that the port sees some advantage in providing some of that funding but in the end that will be a matter for negotiation between the two. There will be other areas as well. The Highways Agency plays a very important role in this in making sure that the road links are there. In some cases, there may be a role for the local highways authority for local roads which may be important in moving goods out of a port area. We see also the freight facilities grants may be assisting, for example, some sort of improvements to the rail martialling yards or improving the work on a line that may help the freight to and from the port.
(Mr Jamieson) The ports themselves will develop on a market basis.
(Mr Jamieson) What has happened up to now is that the market has provided the services in the ports and they have grown on the basis of a market division being there. If there is a gap in the market, as we have seen recently with the four applications that have been made, the gap is attempting to be filled by the applications that have been made to improvements in ports.
(Mr Jamieson) When these inquiries take place, we have a role of oversight of those. We have a final decision on them. The socio-economic aspects of the inquiries and the environmental aspects we have to consider. If those go through the inquiry stage and they are accepted by the government, then it is incumbent upon the ports to work with the SRA and with the Highways Agency and those responsible for the multi-modal studies to look at the infrastructure issues that are important to them.
(Mr Jamieson) That will be a matter for the regional planning bodies to make their recommendations.
(Mr Jamieson) In some cases, that may be the case, yes.
(Mr Jamieson) No, I do not think we do. A regional development agency may be working with whoever is operating the port with a view to investment in that area, but these matters have been very much devolved now to regions and we think it is very important that those decisions are made at a regional level and that that discussion goes on at a regional level.
(Mr Jamieson) We would not see any direct government funding going into the port itself. However, there may be a case for various assistance. As I mentioned, the freight facilities grants may be available. Regional selective assistance may be available for other matters outside of the port that may enhance economic development in that area.
(Mr Jamieson) I detect there might be something behind this question. That would be a matter for the regional development agency working in the overall structure of government guidance of these particular matters. You mentioned Liverpool. The objective one programme has provided certain road infrastructure projects that have assisted the economic development in that area and some of those may benefit movement of freight from the ports.
(Mr Jamieson) Not directly. They have an overall responsibility in their freight plans. We have in the ten year plan our objective to increase the amount of freight on the railways but any instruction would be contained within the Strategic Rail Authority's future plans.
(Mr Jamieson) I would have concern if any of the organisations were not working together, were not assisting each other in the overall aims that we have. That would be fairly obvious. If we felt the process was not working and they were not responding to each other, I think yes, we would have concerns.
(Mr Jamieson) I thought this would be an important issue for you. It is an area that has grown rapidly in the last few weeks. Firstly, we support the liberalisation of ports. We had serious reservations about the Directive when it first came out. We thought it would be disruptive for our ports; it would have an adverse effect on investment. We strongly believe that there should be competition between one port and another because we feel that that is what creates competitiveness and that is what drives down the costs. What we did appreciate is that our ports are at a different stage of development and growth to many of the ports in other parts of the European Union. They tend to operate much more on a landlord/tenant model; whereas ours tend to be vertically integrated. We did have very considerable concerns about the Directive as it stood. We have listened to all sides in the industry. The trade unions have made some very strong views; so have the port operators and many others have made views to us. I am very pleased to say that we have, by negotiation, effected a very large number of changes to that Directive which we think will be beneficial to our ports industry.
(Mr Jamieson) Some of the changes now avoid the necessity to break down the vertical integration of services, to unbundle those services. We felt that could be extremely disruptive to some of our ports running very successfully. We have now excluded some of the dedicated terminals that just deal with oil or one particular good coming in and some of the highly seasonal ports as well that operate mainly in the summer period perhaps with holiday or tourist traffic. We now have longer periods for the contracts. Originally, it was 25 years; we have got that up to 36 years. There is an explicit acknowledgement now of private ownership for new ports. There will be no tendering of the services for up to 40 years. We felt, had that not been the case, that would not have attracted the private investment that people would have made. Very importantly, there is the exclusion of casual labour and self-handling. We have made sure that those who are handling things on the ships are keeping to the standards of that port and not a lesser, more unsafe standard. We have, as this was only decided before the Council on 17 June, drawn together a short paper for you showing how the situation was originally in February 2001 and where the text is now in June 2002. If it helps the Committee, we can provide copies for you.
(Mr Reeves) I have probably lost count but I reckon we have had a dozen drafts, if we go right back to the first one from the Commission in February last year. We then had the Parliament's position, which made a number of suggestions at the European Parliament. We then had an amended proposal from the Commission in February this year, which took some of those changes on board, but we have been meeting in the Transport Council Working Group under the Spanish presidency since the beginning of February on virtually a weekly basis at times. The presidency has been producing revised drafts not after every meeting but after every couple of meetings. It has really been a very hectic pace and that is one of the reasons why everyone has found it very difficult to keep up with it. We have given your Committee a copy of the latest version, 25 June, and we have also circulated that to the Ports Associations.
(Mr Reeves) It will be formally a Council common position after the jurist linguists have had a go at it. It will go to the Parliament as the Council's common position in the autumn. I cannot say that we have achieved absolutely 100 per cent what we want.
(Mr Reeves) We are pretty near. As the Minister said, we have 36 years plus an additional optional ten years for the duration of the contracts where there is significant investment under the transitional provisions. In essence, this means that most of our ports, we think, are going to be very minimally affected, unless of course they choose to have additional service providers come in, but they do have a very major element of discretion now resting with the ports. We think most of them are going to find that they are not going to be adversely affected and, in many cases, arrangements could in theory continue unchanged towards the year 2040. We are talking about very long periods. There is still an element of market opening which we think will be useful in particularly some of the continental ports, dare I say it, but we think we have gone a very long way towards achieving what we wanted. I believe the European Ports Sea Ports Organisation, the British Ports Association and others have acknowledged that.
(Mr Jamieson) This is an interesting area. It is the degree to which there is competition between ports in this country and ports in other countries. We think there may be state aid in other countries and it is a matter that we are keeping a close eye on, but it is a matter of debate as to what effect that has on ports in this country.
(Mr Jamieson) If we felt that money had been made available through state aid to ports in other countries and that state aid was affecting the competition between our ports and ports in other countries, we would certainly not hesitate to do so.
(Mr Jamieson) Nevertheless, we still have to ask the question whether or not that creates a lack of competitiveness between our ports and theirs.
(Mr Jamieson) Yes.
(Mr Reeves) This is a reference to Article 6 in the Directive, pages 19 and 20 of the latest text. You will see that it says that Member States shall ensure the competent authority -- which will in general in our case be the Ports Authority -- may require providers of port services to obtain prior authorisation under the conditions set out in the following paragraphs. Paragraph two says that the criteria for granting the authorisation may only relate to the following items. They include things like the professional qualifications of the provider. What it is basically therefore allowing is for the competent authority to take that into account when deciding whether to grant an authorisation -- in other words, to allow a service provider to come in. We think the aim there is to allow for consideration to be given to whether the proposed service is compatible with existing services in the port and whether it is indeed compatible with the future development objectives of the port.
(Mr Reeves) They might be able to rely on that to say what was being proposed was not consistent with the way they wanted to develop the port.
(Mr Reeves) That is always a potential.
(Mr Reeves) You would have to look at the circumstances and there would have to be a judgment.
(Mr Reeves) You can quite imagine that somebody who was running a deep sea container port would not be particularly enamoured with somebody who wanted to come in and offer a service handling bulk coal. This is a hypothetical example. It would not be consistent with the way they wanted to develop the port and I think it is that sort of situation which this is aimed at.
Chairman: We shall hope you are correct.
(Mr Burr) The predecessor committee raised this question and we have discussed it with the ports industry since they expressed concern about it. We know that in some localities they have recognised the need for a better understanding of what I might call the economic footprint of the port and the benefits. For example, on the Humber, the regional development agency for the Yorkshire port has recognised the need firstly to identify the present added value that the port does contribute to the economy and to provide a base on which they can develop a strategy for adding to that value. It annoys them that lorries drive out of Hull to factories elsewhere that could be driving those things into the Hull area and creating jobs locally. The government accepts that that is something on which more work needs to be done. Regional development agencies are the best people to do it. We are working centrally and we have open discussions with the ports industry to especially look at those who have already done studies of this kind. The Port of London Authority, for example, have done studies of that kind, to understand how many jobs are related to the activities on the river. We are trying to get a bit of a head start on the methodology by talking to people who have done it, with the object of providing some guidance to the regional development agencies and promoting exactly that kind of inquiry.
(Mr Burr) It is one of the actions in the ports policy paper that we have to take forward. We are a bit dependent on the partnership with the ports industry because we will get off to a better start if we work with people who have done this work already. We need to agree some priority with them as well. My personal view is that it is a pity we have not already managed to start that work, but the statisticians and people involved have also had to implement the Maritime Statistics Directive and other imperatives of that kind.
(Mr Burr) We do not always have choices.
(Mr Jamieson) We have responded in good time to this. We took representations from all concerned and we are making grants available at the present time. I do not think there has been any particular delay.
(Mr Jamieson) I think it has potential in certain circumstances to considerably help some of the ports. The grant is specifically aimed at taking goods off the road and putting them onto water. We obviously look at them very carefully and they have to be judged on that criterion. We look to see how many lorry loads and tonnes of goods we can take off some of the major trunk roads and motorways in particular and put them onto shipping. We are also doing that, as you probably know, with a different grant regime for inland waterways.
(Mr Jamieson) Because of the nature of ports and the way that they are structured in this country -- there are many of them of different sizes -- it is very difficult for the government. The ownership of the ports makes it very difficult for us to make that assessment in the same way as we can in other areas. It does depend on a number of other things. Because 97 per cent of all the imports and exports in this country go by sea in and out of the country, it is very much reflected not just in consumer demand such as for air services but in the fortunes of the economy.
(Mr Burr) The policy paper did also acknowledge that we needed to understand the industry better.
(Mr Burr) The policy paper perforce took stock of where we were. It was a long time since there had been a comprehensive look at ports and we did not claim that the policy paper had all the answers. It was a bit of a snapshot and we had to work with what we had. We were honest about the lack of information. One of the things since then that we did was to develop a paper on development prospects and demand for container capacity, because that seemed to be a critical priority. That is where the development pressure seems to be most acute. There is quite a sharp debate about how that capacity should be provided, how much capacity should be provided, and we were going to have to make some very big decisions and ministers would in the coming years. We felt that was an area where we needed to push forward just these kinds of concerns. We put this paper out. What we found during the research for that paper was that there was a reasonable consensus about the likely rate of growth and ----
(Mr Burr) Yes. The industry is very complex. It is not like passengers at airports. Every box has something different in it. There seemed to be a consensus that there would be steady growth. What was more difficult was to get an agreed handle on when a port was full. There are people who will argue for a tighter fit. The users want flexibility so they are not tied to very narrow slots because they are weather dependent and so on. That debate is still continuing.
(Mr Jamieson) It is not unusual for directives to be implemented in different ways in this country to other countries in the European Union.
(Mr Jamieson) The great truth of the day has been spoken. It will come as a total surprise to you to hear this. There is a serious point here. Environmental issues are taken very seriously in this country and quite properly so. There is an increasing awareness of environmental issues and that is reflected in the use of ports and estuaries. However, we do have some concerns about this and we have asked English Nature to carry out a review of the way the directives are being implemented in comparison from here to other countries. We want to see if there are differentials. Once we have done that, it will inform any further action we may want to take.
(Mr Jamieson) I do not think we are gold plated. We do take environmental issues very seriously. If we did not, the ports industry would be very exposed and would get itself an extremely bad name. It is right we have to look to the directives and we have to be guided by those, but we also have to be very much directed and guided by public opinion in this country. Government has to react and respond to that appropriately and that may be different. We may have different priorities from other countries. Nevertheless, it is a matter that we are aware of and we are looking into most carefully.
(Mr Jamieson) That is a very fundamental, important question. The inquiry process that we have is there to expose the socio-economic needs of a new port development. It is there to look very much at the environmental needs and the impact on people in the area. That inquiry process in this country is independent and separate from the government and the other players in it. It thereby has to assess very carefully the differing demands. This is one of those areas where we have to tread very carefully to find a balance between very important environmental issues -- and they are important; we have a precious coastline that we must protect -- and on the other hand, we have our economy and we have the needs of the people and the businesses of this country which we also must make sure develops as a 21st century country. It is a delicate and balanced line. If you said to me, "Have we got the balance about right?" I think we probably have, but it is one of those balances that will shift with the way public opinion develops.
(Mr Jamieson) The role we play is trying to find that fine balance. You will know that in some of the cases not related to ports -- the example in Hastings of one of the road developments there -- the balance was towards the environmental issues and we turned that down. Equally, with ports, we have to look very carefully at that balance and make sometimes a judgment that does not please one of the parties.
(Mr Burr) Another thing our stock-take identified was that we need some more sophisticated guidance on this issue for the people preparing projects, for the people who wanted to contribute to the debate about them, for inspectors and for the people who make the decisions. I know the Committee has noted that we have published a consultation paper proposing a project proposal framework on ports which aims, along the lines of the later framework for road developments, to provide just that kind of template.
(Mr Jamieson) That template does give an opportunity for all the parties, both those proposing the particular scheme and those people opposed to the scheme, to have a better handle on the issues.
(Mr Jamieson) I did not say it was working well; I said we had a planning system that examined the issues, but if you are tempting me I will say that, yes, the planing system works well. It is also very cumbersome. It can be very lengthy. The length of an inquiry does not necessarily reflect the quality of that inquiry. It may be that some of the very large projects may fall into the category that you have mentioned.
(Mr Jamieson) That is the thrust.
(Mr Jamieson) No. We feel that the way in which our ports are developing currently, meeting the market demand, is the proper way forward.
(Mr Burr) I do not think it would be necessary under those procedures for the government necessarily to come forward in such a statement and say, "We have picked these winners" or these losers. We have a national policy statement in Modern Ports. We could develop that statement as we understand the business better, as we get a better handle on demand and so on. It would be going a step further for a minister to sponsor or rubbish ----
(Mr Burr) The Chairman will rule me out for evasion but the projects that we are talking about have missed those new ideas because they are in the present system. Whether there might be another case, when and if those procedures are in place, would be a matter for discussion when that arose. It may be that the promoter would have a view about whether he would wish his project to be put through that kind of process or whether he would rather the limitations of the present system.
(Mr Burr) I am only competent on the first of those. The policy is in the ports policy paper. The strategy does have to recognise the way port projects are funded and the strategy is that we will support sustainable projects for which there is a clear need, but not so far to pick those cases before the merits of the case have been explored.
(Mr Burr) We have not had any difficulty.
(Mr Burr) We have no evidence that that is so, no.
(Mr Reeves) You rightly said there were two bodies previously. The industry has developed an initiative to bring the health and safety and the skills elements together under a single trade organisation which is Port Skills and Safety. That is something which we very much welcome.
(Mr Jamieson) It is rather early days.
(Mr Burr) They have just about got as far as collecting their first round of subscriptions and appointed some staff. There is a much more overt commitment by senior management in the industry than the predecessor bodies practically enjoyed.
(Mr Burr) I am.
(Mr Burr) The ports were given until the end of last year to report that they had implemented the systems that the code advocates. The latest stock-take suggests that there is no significant commercial undertaking still outstanding. There are a few small ones some of which were rather late off the mark for various reasons, but there is no significant port undertaking that has not confirmed that they have implemented. Rather than simply accept the letters from them, my branch is now conducting a series of visits to up to a third of the ports who have reported to establish what the quality of that implementation was. The visits we have done so far have been very impressive.
(Mr Burr) This is on dock safety now?
(Mr Burr) The number of fatalities is so far a relief. There has not been a fatality this year. Last year, very unfortunately, we had seven fatalities.
(Mr Burr) The pattern is rather uneven. Last year, it was by anybody's reckoning a bad year. One of the things that Port Skills and Safety are gearing up to do which they are going to launch in September is that the industry plans to launch a safer ports initiative with clear targets for reducing the number of deaths and serious injuries in ports and also to reduce the number of off time or off work accidents as well by substantial numbers that exceed the targets in the government's Revitalising Health and Safety.
(Mr Burr) I do not think we collect statistics sufficiently. It is too soon to say.
(Mr Jamieson) The statistics we have are that from 1999/2000 to 2000/2001 major injuries in the first of those two years were 135. In 2000/2001 they were down to 72 so there was a 46 per cent decrease in the number of major injuries. There was a slight increase and two more people were fatally injured in that period of time. It looks as if there is a trend for serious injuries to decline and we hope that that trend is being followed through in fatalities as well.
(Mr Burr) The government Health and Safety Executive and the industry agree that this needs a big push and we welcome the lead that the industry is giving in the safer ports initiative. The government will be very firmly behind that, not only from the point of view of encouragement but with a vigorous approach to inspections and prosecutions and the development of guidance on management responsibility, support by the government for the industry's passport scheme to regulate non-permanent employees' training standards and also a review of the dock regulations, not just to bring them in line with all the latest directives and so on, but to see if there are not some tweaks that could be made in there that would make the ports safer.
(Mr Burr) Enough to write a 40 page paper on.
(Mr Burr) The conclusion we reached was that in general the standard of the new pilotage service on the Humber was acceptable and equivalent to the safety standard maintained by the previous service.
(Mr Jamieson) This has been largely in the discussions we have had over the Ports Directive. We have been very clear in making the difference between the way our ports are run and those that are run in other parts of the continent of Europe. That is how we have secured many of the changes to this Directive that we have. I think our ports are considerably advanced in many respects in terms of liberalisation and the way they operate to many of those in other parts of Europe. For example, they are far more responsive generally to the demands of the industry. There is more weekend working. We have made a very good case in supporting our ports in this respect.
(Mr Reeves) The state aid issue is a pretty complex business. Under Article 87 of the Treaty, state aid is that aid which distorts or threatens to distort competition by favouring certain undertakings. There is an argument which has been run in the past that a lot of the state funding that goes into the ports industry on the continent is not state aid in those terms because it is not favouring certain undertakings. It is open to general use. This is just one of the issues. There is uncertainty about what is and what is not state aid in the port sector and therefore we have continued to press the Commission -- and I think they are quite sympathetic to our concerns -- with one or two other Member States, that they really do need to take a fresh look at this area. We were pleased that the Commissioner herself at the Council on 17 June undertook to address the issue of competition between ports by producing a paper on public funding and state aid and by amending the Transparency Directive to cover all the ports covered by the Directive on Port Services, not just above the 40 million euro threshold.
(Mr Reeves) We understand that the Commission officials have already been working on a draft paper on public funding of state aid and we hope to see something issued by them by the autumn of this year, but there is an opportunity over the next few weeks for the ports industry and others to get their concerns across direct to the Commission. We are encouraging them to do that.
(Mr Reeves) I cannot say we have discussed light dues specifically with the Commission. However, we have as the Committee may know recently issued a consultation paper on light dues and I have some copies with me in case the Committee would like some. We have held down the rates over some years now through ----
(Mr Reeves) I agree. In most other European countries, aids to navigation are state funded in one way or another.
(Mr Reeves) The current policy is that users in the UK should pay the costs of aids to navigation and that is broadly the policy in Ireland, Greece and Sweden. We have however asked specifically, in our consultation paper, for any evidence that UK ports are financially disadvantaged in comparison with European ports by the imposition of light dues. We need to remember it is only one factor in the cost of port calls. We have not seen evidence yet that there is a significant distortion of trading patterns as a result of it, but we are encouraging everyone that we are consulting to come forward with some evidence if they have it. What we would like to see more generally is some evidence on the overall totality of port costs so that we can see from the shipping companies, for example, how the relative costs of their port calls in the UK compare with costs on the continent.
(Mr Reeves) I am undecided on that particular point. It is not part of my responsibilities but we can come back to you with a note.
(Mr Reeves) In principle, one of the advantages of proceeding through IMO is that you have a level degree of regulation in particular areas on the maritime side. That is one reason why it is very much an internationally regulated industry.
(Mr Reeves) There is a whole raft of work going on, on the security issues on the maritime side, as you can imagine. A lot of it is linked to the IMO agenda.
(Mr Jamieson) We will undertake to do that.
(Mr Jamieson) It is. This is why we are looking so very carefully at developments in the European Union because we have to make sure that any developments that take place do not disadvantage our own ports. A very good example is the one we have been looking at today, the Ports Directive. It is a very good example where this country has fought its corner very hard and very successfully. Although we have not absolutely everything we want, the work that we have done has generally been approved of by virtually everybody involved with the operation of the ports.
(Mr Jamieson) That is a very poignant observation.
(Mr Burr) They want the decisions on the cases. They have a duty to make informed decisions using the best available information.
Chairman: Minister, you have been very tactful and very helpful. Thank you.