Orders of the Day — Merchant Shipping

Part of the debate – in the House of Commons at 11:17 pm on 29th November 1993.

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Photo of Mr Mark Wolfson Mr Mark Wolfson , Sevenoaks 11:17 pm, 29th November 1993

Mayday, Mayday, Mayday. This debate is a distress call of behalf on the British merchant shipping industry, and it is one in a long line of debates, amendments, committee reports and questions to Ministers that have for more than a decade —and certainly ever since I entered the House—sought to achieve Government action that would halt the catastrophic and unnecessary decline of the British merchant fleet.

I make it crystal clear that this is not a request for Exchequer handouts to an inefficient industry unable to compete on world markets. Our shipping industry is highly efficient and competitive. In several sectors, United Kingdom operators are among world leaders. The Department of Transport itself has stated that British companies have taken significant steps to rationalise their activities and to improve their competitiveness. Wage costs, thanks to a revolution in labour relations in recent years, are kept at competitive levels.

The Government have a policy to assist the industry, and on many occasions Ministers have spelt it out to the House. Why, then, is there still a problem and what is it? The difficulty arises because the Government's policy has not been successful in the past, it is not working now, and it shows no sign whatever of being successful in the future.

Other developed countries provide measures to encourage investment and to reduce crewing and operating costs that the British Government have steadfastly refused to contemplate for Britain's merchant shipping industry. Instead, the Government's policy has been to persuade our competitors to abandon their support measures and, in the meantime, to do nothing to enable our industry to compete on level terms, which is what the industry asks for.

I believe that those terms must now be provided. If they are not, as surely as night follows day, the merchant fleet will continue to decline and, by the time of the next election, we may very well see "the end of the Red Duster". That was to be the title of the debate when I applied to Madam Speaker for it. I suppose that, unfortunately, the Table Office must have intervened, and bowdlerised the title to the blander one of "Merchant Shipping". Either way, I am delighted to have the opportunity of the debate.

I ask again, is the end of the Red Duster—because that is what we are contemplating, for sure—what a Conservative Government wish to preside over? If it is, I believe that they should say so and we shall know where we are, but if it is not, the measures that I shall speak about are essential.

Let me first spell out several examples of what other Governments are providing. On the investment side, German shipowners are now allowed tax depreciation that gives, in effect, a 50 per cent. first year allowance, but that is in addition to a continuing depreciation allowance, reduced corporation tax rates on foreign earnings and existing operating subsidies—the continuation of those was confirmed, contrary to expectations in Britain, earlier this year.

In the Netherlands, shipowners receive ship investment grants, the scope of which was recently extended. Furthermore, shipowners may now elect for a reduction in the profits tax in place of the subsidy, and that gives further flexibility to owners.

Let us now consider crewing and operating costs and the way in which other countries' measures have helped their shipping industry. In France, the level of contributions that are made by the shipowner to the seafarers' social security fund was cut by 50 per cent. in October 1993, making the cost of employing French seafarers comparable to crew costs on the French second register.

In Sweden, shipowners receive the income tax that is paid by their seafarers and a portion of seafarers' national insurance contributions as a wage cost subsidy. That measure had been cancelled, but was reintroduced and extended indefinitely in October this year.

The Norwegian Government are considering increasing substantially the subsidy that they provide for the employment of Norwegian seafarers, and the United States Government are actively supporting a new maritime subsidy scheme for designated ships operated by US companies at a cost of $1 billion over ten years.

Those are all measures that were either recently introduced or confirmed. Unfortunately, they are a broadside—it gives me no pleasure to say this—which demolishes the Government's argument that working for level terms is the right way forward at this time. The Government are going backwards, not forwards, as the examples that I have given show.

Working towards level terms may be the right way forward in the long term, but at present all our European competitors and the United States are moving firmly the other way. If my hon. Friend the Minister can tell me otherwise to any significant extent and give me examples, I shall be glad to hear them. In addition to the countries that I have already mentioned, Belgium, Denmark, Finland, Greece, Ireland, Italy, Luxembourg, Portugal and Spain all provide some form of tax allowances and related benefits, which in most cases are superior to what is available in the United Kingdom.

My purpose tonight is to impress on our Government the vital importance of taking urgent action to stimulate the renewal of our merchant fleet, which is aging fast, and express the hope that that will be reflected at last in tomorrow's Budget. We must staunch the decline of our merchant fleet and encourage the training and employment of British seafarers.

In terms of investment—the specific point on which I want to focus tonight—the purpose of what the industry asks for is the fiscal treatment of British owners on level terms with those of their competitors specifically by introducing a 100 per cent. first-year allowance for investment in ships. Interestingly, there is a precedent for that. Effectively, a sectoral maritime enterprise zone would be created, following the precedent of regional enterprise zones, of which shipping companies cannot take advantage. I should also like to see extended to seven years the period of roll-over relief which currently applies to the balancing charges on the sale and purchase of ships.

Recent independent research offers both a negative and a positive scenario for the future. It was commissioned by the Chamber of Shipping, but it was carried out by Professor Douglas McWilliams. He used econometric modelling to predict the future of the shipping industry under, first, the current regime and, secondly, a regime of 100 per cent. first-year allowances. Under the current regime, the picture is extremely gloomy. The report estimates that the size of the United Kingdom-owned fleet will fall from its present level of almost 14 million dead weight tonnes to 8·5 million dead weight tonnes by the year 2000, and to 5 million dead weight tonnes by 2,010.

The number of seafarers would fall from its present level of 19,000 to 9,000 by the year 2000 and to 4,000 by 2010. The invisible earnings of the United Kingdom shipping industry would also be substantially reduced under the current regime. However, a policy of 100 per cent. first-year allowances would encourage greater investment in ships by United Kingdom owners. It is estimated that by 2010 the policy would have paid for the expected renewal programme and brought £360 million in overall additional tax revenues per year. It would maintain the size of the fleet at more than 11 million dead weight tonnes. It would also create or preserve 15,000 jobs in shipping and other industries. Most importantly, it would increase the invisible earnings of shipping to £6·6 billion from the present £3·7 billion.

That report was independent, but it confirms the arguments made by the Chamber of Shipping in the past five years. The prospects for world shipping are good. Estimates are that world trade will grow at about 4 per cent. compound until the year 2010. The Department of Transport supports that view. The demand for shipping services will expand, as the report recognises.

British companies are ready and able to take advantage of those opportunities in the right conditions, but unless the United Kingdom shipping industry is able to compete on an even footing with its rivals it will be unable to sustain its share of the market or its current contribution to our economy. If it sustains and improves its position in an expanding market, the benefits will feed into sectors other than shipping, especially the manufacture of shipbuilding and marine equipment and, most vitally, the various services in the City of London. That will help to keep Britain and London at the centre, where they are now, of the maritime world. We cannot expect that position to continue if we are not developing people with a maritime background, who then come ashore and work in the maritime industries later in their lives. That has always been the backbone of the strength of Britain's business contribution world wide to shipping activity.

One of the great difficulties in obtaining full recognition of the importance of these issues by Government may be the wide range of Departments and Ministries whose interests are affected, which include the Department of Transport, the sponsoring Ministry, on whose behalf my hon. Friend will reply. The Department of Trade and Industry is concerned, and the Department of Employment and the Ministry of Defence are involved. Key to all this, of course, is what I have to call tonight the baleful influence, so far, of the Treasury. That inevitably diffuse appreciation of the issues may dilute the real impact and urgency that Britain faces. It tends to result in a lower priority being given to the shipping sector than to other transport sectors.

I appreciate that, in making that point, I am not making a totally fair comparison. However, it is right to point out to the House the tiny proportion of the annual budget of the Department of Transport that is devoted to shipping matters. It is about 0·5 per cent. The annual budget is £6 billion and sea transport gets £30 million, which mainly covers safety and pollution control work. I ask my hon. Friend to ensure that shipping is given a higher priority in the Department than it has had in the past. It is surely essential to us as an island nation—to the carriage of our trade, to our economy, to our balance of payments, to our employment, to our skills and, not least, to our defences.

I know that Ministers argue robustly that the latest information makes them sanguine that if sea lift was required in an operation of the kind that we had to carry out in the Falklands or in the Gulf, in one way or another, ships and crews could be chartered and made available to do that sea lift. This is certainly not the view of Sir Julian Oswald, the recently retired First Sea Lord, who, addressing a meeting recently in another place, made it clear that he had deep concerns on the issue. I believe that current senior officers in the Royal Navy share those concerns. That issue too is of major importance.

I now turn to the most recent committee report—the report, produced by the Select Committee on Employment two or three days ago, containing its recommendations following a study into the decline of employment in the merchant fleet. It made a number of important points. It expressed its concern at the decline in the number of officers and ratings and said: The extra cost of employing British crews has been made harder to bear by the fact that the UK industry is forced to compete with countries which have introduced strong financial assistance for their own merchant fleets. It repeated what others have said when it reported: Britain is not training enough officers to meet either future demand or the needs of related industries. In uncovered an interesting point when it said: Furthermore, we are concerned that public funds intended to subsidise training opportunities for UK seafarers are being applied to train staff from competitor countries. That issue must be addressed.

The Committee also focused on the need for training enough officers to take their place in jobs ashore in the future. It also spoke about defence requirements. In conclusion, it reported: We welcome the modest support that the taxation system currently provides the shipping industry, but we believe that measures to encourage investment in ships and reduce employment costs are essential to safeguard the future interests of the merchant navy, of related industry, of our national defence and of those young people seeking a career in shipping. I rest my case, not on what I have just said, but on the long line of reports, amendments and discussions in the House and in Committee, and in the outside world, which have unfortunately demonstrated that the prognosis of decline has come true. That must not be allowed to continue.