Examination of Witnesses (Questions 120
WEDNESDAY 14 FEBRUARY 2001
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.
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
(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.
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
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
(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.
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
(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.
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. Overnightor at least over relatively
few yearsyou 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.
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.
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
(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
(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
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
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