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Pilotage Commission (Additional Function)Order 1982

Volume 431: debated on Tuesday 22 June 1982

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7.23 p.m.

rose to move, That the draft order laid before the House on 17th May be approved.

The noble Lord said: My Lords, I beg to move the Pilotage Commission (Additional Function) Order 1982. This order has been examined by the Joint Committee on Statutory Instruments. They have considered an explanatory memorandum from the Department of Trade and I understand that they are satisfied as to the legal basis for the order. The order gives the Pilotage Commission the function of devising schemes to compensate marine pilots for loss of employment or reductions in earnings. It was envisaged in Section 4 of the Merchant Shipping Act 1979 that the commission's functions would be extended in this way. Subsection (2) provides that, subject to affirmative resolution of both Houses, the Secretary of State may by order confer on the commission such functions as he considers appropriate for any of the purposes mentioned in subsection (1). Subsection (3) states that such an order may provide for the making of compensation schemes by the commission.

I should like to take up a little of your Lordships' time to explain some of the background to this order. In recent years, and, more particularly, following the United Kingdom's accession to the EEC, there has been a substantial shift in the level of shipping movements away from the West coast ports of the United Kingdom, to East and South coast ports which offer the shortest routes to the major European markets. The growth of containerisation and the increase in the size of tankers has reduced the number of ships entering nearly all ports, and the worldwide recession has affected shipping more severely than most other economic activities. As a result, the demands on the pilotage service have reduced considerably in all ports. It is likely that demands on the pilotage service will be even further reduced, as more masters and first mates qualify to undertake their own pilotage in the approaches to those ports which they visit regularly.

I would explain to your Lordships that these masters and first mates are issued with pilotage certificates by local pilotage authorities, which effectively means that they do not have to take a licensed pilot when they enter a port. Until the passage of the Merchant Shipping Act 1979, these certificates were issued only to British subjects, but, because of the obligation arising from our membership of the EEC, the 1979 Act made it clear that any EEC nationals who are masters or first mates of EEC flag vessels can apply for these certificates, and this significantly extends the potential number of holders.

A further very important factor is the need, which has been long recognised, for a major re-organisation of the structure of pilotage in the United Kingdom. The provisions on pilotage in the 1979 Act, which established the Pilotage Commission, provided the legislative framework under which the re-organisation could take place. The commission has started this work and it is clear that re-organisation will add still further to the number of surplus pilots. There are some 40 pilotage authorities responsible for the organisation of pilotage in 78 pilotage districts in the United Kingdom. The best known of these is, of course, Trinity House.

The pilots themselves are self-employed, except in Orkney and Shetland, although I would explain that they operate within a regulatory framework which is made under pilotage legislation, and their earnings are determined by national agreement between pilot and shipowner representatives. But their self-employed status means that they cannot be discharged merely because the demand for their services falls away, partially or entirely. Indeed, incentives need to be devised if their numbers are to be reduced to the extent that is likely to be required. We do not yet know how many pilots will become surplus to requirements, but at present there are about 1,400 pilots and this could be several hundred too many.

The Pilotage Commission advises that there is little prospect of natural wastage leading to reduced manning levels, except over a period of many years. It has advised my noble friend the Secretary of State that, in order to make progress with reorganising the pilotage service, and, in particular, increasing the efficiency of that service, it is essential to devise a national scheme which will provide financial incentives for the voluntary surrender of pilots' licences, and my noble friend the Secretary of State has indeed accepted this advice.

The order that is before us this evening enables the Pilotage Commission to consider the form which these incentives might take. It does not, however, empower the commission to raise the finance that may be needed to implement any detailed scheme which it may propose. The approval of the Secretary of State will be needed for this and he has made it clear that he expects the commission to work in close consultation with shipowners, pilots and other interested parties. He has also urged on the commission the need to achieve early agreement between the parties and to give this the highest priority in its work programme.

I hope that your Lordships will bear with me if I give some indications of the possible—and I hasten to stress the word "possible"—sources of finance; indeed, the commission is examining all possibilities. First, Section 2 of the Merchant Shipping Act 1979 empowers the commission to make schemes requiring pilotage authorities to make payments to assist the commission to meet expenses incurred in performing its functions. This would be in the form of a levy on pilotage receipts and it is entirely lawful for this levy to be passed on to the shipowner in the form of increased pilotage dues. But these schemes require the confirmation of the Secretary of State before they come into force.

Secondly, charges levied for the use of pilotage certificates could be increased by the pilotage authorities, subject to approval by the Secretary of State of the by-laws giving effect to these increases. Thirdly, the commission could, if it wished, borrow within its statutory borrowing limit and it could borrow such sums as it thought necessary. At present, the statutory limit is set at £200,000, but this could be increased by order to £500,000. But such borrowing, which need not be from the Government, would provide for perhaps part of the cost of a scheme to be spread over a period of years, with repayments being refunded through the levy arrangements which I have already outlined to your Lordships. Fourthly, pilots themselves could contribute towards the cost of a scheme and payments would have to be agreed between the pilots and the promoters of the scheme. I am sure the House will appreciate that this would not be the sole source of finance. The number of pilots potentially surplus and the need to reduce their number quickly make this inevitable.

It is therefore likely that the main cost burden will lie upon the shipowner, although of course there will be major offsetting savings from the reduction in the pilots' earnings as more pilots leave the service. Some 70 per cent. of the pilotage dues in United Kingdom ports are paid by ships which are not registered in this country. Nevertheless, the charge which falls on the British shipowner remains substantial and the Government simply cannot disregard the adverse effect that additional charges would have on an industry which is already under intense financial pressure. Port authorities, too, are much concerned about anything which diminishes the competitiveness of the services which they can provide. The pilots, on the other hand, are deeply anxious about their livelihoods and about the maintenance of the highly skilled and experienced service which they provide to the shipping industry, and it is understandable that they should seek the best possible terms on which they would be prepared to leave the industry.

I have made these general points in order to attempt to identify the conflicting considerations that will need to be resolved by the commission when they make detailed proposals on the form and the funding of compensation schemes. Before my noble friend the Secretary of State confirms any scheme he will wish to be satisfied that an acceptable balance has been achieved. It simply is not possible to form judgments at this stage, and especially this evening. They must await the full consideration of the proposals of the commission when they come forward. With that, I commend the order to your Lordships.

Moved, That the draft order laid before the House on 17th May be approved.—( Lord Lyell.)

7.35 p.m.

My Lords, may I thank the noble Lord for explaining the draft order in such detail. Your Lordships will very much have appreciated the fact that the noble Lord was able to go into the amount of detail which he did in explaining the order. The order itself is not contentious but its results could be highly contentious. The noble Lord explained in detail the problems which have arisen and which have made necessary the laying of this order, but any scheme devised by the Pilotage Commission to induce a pilot to retire early is bound to create problems. The noble Lord himself underlined a number of the problems. Who, in fact, is to pay the inducement to persuade a pilot to retire early? Is it to be the shipowners? Is it to be the remaining pilots? Is it to be the Government? Or is it perhaps to be the European Economic Community? The shipowners are unlikely to be happy about paying this inducement as they will not derive any benefit from making this payment. The pilots themselves will not wish to see their earnings eaten into by having to make a payment in this way. And I am sure that the Government themselves will plead poverty.

The noble Lord explained how this situation has arisen: that is, that, as a result of our accession to the European Economic Community, more traffic is coming into the east and south coast ports and less into the ports in the west. One would have thought that because it was a result of our closer links with Europe there would be a strong case for suggesting that we should expect some help from the European Economic Community in this way. One wonders whether the problems which the noble Lord indicated might be solved by natural wastage. In his introduction he did not give us any indication of the present age structure of the 1,400 pilots. Is the noble Lord able to give that information to the House? In view of the remarks which he made, I wonder whether the problem really arose in the ports on the west coast which lost trade as a result of the movement of trade after our accession to the European Economic Community. As it is now possible for EEC nationals to have pilots' licences, will there be opportunities for re-employment, in particular of some of the younger pilots, within Europe itself?

As the noble Lord indicated, there arc inevitably many difficulties in creating any scheme for compensating those who are self-employed. As the noble Lord indicated, United Kingdom pilots are self-employed in some 76 out of 78 pilotage districts. None of the items which is listed in the order will of itself make any of the pilots redundant in the normal way. The events described in the order would certainly reduce the amount of work available to pilots in a particular district and could result in their earning less than they do at present. I understand that at present average earnings are in the region of £20,000 per pilot. The only way in which those earnings can be maintained at their present level if the amount of work decreases is, as the noble Lord has said, by some pilots being induced to retire earlier. This order is about schemes to provide such inducement. In those circumstances, it would seem to be wrong for any scheme to have the effect of increasing the real cost of pilotage. I wonder whether we could have confirmation from the noble Lord that this is the Government's view. In his consideration of this point the noble Lord suggested that the shipowners might expect to pay a levy.

In conclusion, may I say that this order is basically a licence to think. However, it is important that the commission should know the views of the Government in order to avoid future disappointment and frustration when it comes to making the order. I hope that the noble Lord can give us an assurance that when he is in a position to lay an order your Lordships will have an opportunity to debate it.

My Lords, I should like to thank my noble friend for the detailed and careful way in which he has led us through the order. May I also very much endorse what the noble Lord who has just sat down has said, particularly when it comes to the question of cost. However desirable may be a scheme that the commission puts forward, somebody has to pay for the cost of it. This is made more complicated by the fact that the pilotage industry is a self-employed industry and the inducements to make a number of pilots withdraw from their work may be quite costly. Who is going to pay for it? Ultimately the cost must be met by pilotage dues.

Therefore the question that I should like to put to my noble friend, which is no more that underlining what the noble Lord opposite has just said, is, can we have some assurance that when the schemes are put forward, the Secretary of State will be very careful indeed to see that the ultimate cost is not higher and therefore a greater burden on the shipping industry than is the position today? This is immensely important when one considers the difficulty that the shipping industry has in many ways. It must be a question of reducing costs rather than allowing a scheme to go forward which will increase them. I hope that my noble friend will be able to give some assurance on the Secretary of State's attitude to any scheme.

7.41 p.m.

My Lords, I should like to follow the two other noble Lords who have commented on this order. Like the noble Lord, Lord Ponsonby of Shulbrede, I, too, have been advised that British shipowners are seriously concerned about the possible repercussions of this order. As has already been pointed out, it provides for the Pilotage Commission to made schemes under which payments may in certain circumstances be made by the Commission to compensate pilots and their assistants for loss of employment or reduced earnings. But, as the noble Lord, Lord Lyell, made clear, the commission has no funds and no power to raise funds for this purpose—so these schemes, if they are to provide for payment, will, I presume, have to provide for payment by somebody else. The question is, who should that "somebody else" be? The right answer to that question seems to be different in each of the three sets of circumstances suggested in the order.

Before I refer to those, may I first comment on one statement made by the noble Lord, Lord Lyell, who said that one possibility would be that contributions could be levied by the Pilotage Commission towards the cost of carrying out its functions. But the function which is being given to the commission is merely to draft a scheme and not to pay for the scheme. So I do not consider that that clause should be prayed in aid in getting the Pilotage Commission to raise a surcharge out its functions in this way, because it is limited to producing a scheme. I will just leave that for the noble Lord, Lord Lyell, to think about.

The Secretary of State is not, of course, bound to approve every scheme put forward by the Pilotage Commission, but, where he does decide to do so, a further order will be required in each case. But that order would be subject only to negative procedure, and we all know how difficult it is effectively to stop such an order, which in any event cannot be amended. I ask this of the noble Lord, Lord Lyell: is it not incumbent on the Secretary of State to lay down some guidelines for the Pilotage Commission? I hope that the noble Lord will be able to tell us that this is in his mind. This follows on what has been said already by other noble Lords, and I apologise if I am knocking at an open door.

It seems to me that where in any pilotage district the organisation has been improved to the extent that the same number of ships can satisfactorily be dealt with by fewer pilots, then something really has been achieved. 1 understand that in those cases it has already been agreed between the General Council of British Shipping on behalf of the shipowners and the bodies which represent the pilots that the net financial benefits shall be shared between the shipowners and the pilots. In those circumstances, one would hope that any scheme devised by the Pilotage Commission would follow that line.

As I see it, the position in regard to the grant of pilotage certificates is not so clear. The noble Lord, Lord Lyell, explained what these certificates are. If, as a result of the 1979 Act, the number of these certificates is to be substantially increased following the extension of the privilege to citizens of the European Economic Community, thus reducing the demand for pilots, then payments may well be justified to enable some existing pilots to surrender their licences. But it would hardly seem reasonable for all the users of pilotage services to pay for that. I was interested in the suggestion that perhaps the EEC themselves might help. I was going to make the simpler suggestion that, since this is a matter arising directly from our membership of the EEC, the cost would properly fall on the Government.

Finally, in respect of the third category described in the order, where a reduction in demand for pilots results from falling trade, is there really any case for compensation? As has been said, the pilots are, at their own wish, self-employed persons. I do not believe that any other self-employed persons would claim or would expect compensation from potential clients or customers because their business was falling away. This seems to me to be rather a curious proposition.

I expect that all these propositions merit discussion. I am told that at the Joint Committee the Minister did say that he would insist that any scheme must be fair to the shipowners; I am sure he meant also that it must be fair to other people. But I do suggest that guidelines would be of considerable advantage to everyone, including the Pilotage Commission, and that these should be prepared in consultation with all concerned. I hope, too, that it will be made clear, as the noble Lord, Lord Ponsonby of Shulbrede, stated so lucidly at the end of his speech, that no scheme can be approved if it will add to the cost of pilotage in any district.

My Lords, I am sure that the House will be grateful, as we are, for the tremendous interest which has been evoked by this apparently fairly simple order before your Lordships this evening. I am immensely grateful to the two noble Viscounts and noble Lord who have spoken. Clearly they have a great deal of expertise and have studied the order in detail.

Perhaps I may attempt to reply to the questions raised by the noble Lord, Lord Ponsonby of Shulbrede, and by others who have spoken. If I do miss any points I am sure these will be carefully noted, and I will write if I have made any major omissions. The noble Lord, Lord Ponsonby of Shulbrede, asked me a number of questions. The first major point he raised concerned the age structure of the pilots. As far as we are able to deduce, there are at present a little more than 1,400 pilots in the service. Approximately one-quarter of these pilots are over 55 years of age, and some 60 per cent. of the 1,400 pilots are between 40 and 54 years of age. the balance of about 15 per cent. are under 40 years of age. Although some of the older group of pilots may come up for retirement shortly, it could take up to 10 years before what we would call normal natural wastage leads to a significant reduction in the overall number of pilots. Given this age structure, and indeed this pattern, it would be obvious to your Lordships that a scheme for voluntary premature retirement will be one option the commission would wish to consider.

The noble Lord, Lord Ponsonby, also raised the point that I mentioned in my comments about the West Coast ports, and the slightly differing structure of maritime trade with the United Kingdom, which has arisen from among other things the increase in containerisation and port handling and the pattern of maritime traffic. As regards West Coast ports in the United Kingdom that have lost their share of traffic, some of them are worse than others, but if we take one example, Milford Haven, which is oil traffic, this has not been affected by United Kingdom membership of the EEC.

The noble Lord also raised the question of job opportunities for pilots in other EEC countries if they were among those who took voluntary retirement or were surplus to the requirements of the pilotage districts here. This would be a matter for the member states of the EEC and it would depend very largely on their competence in the language and their knowledge of the EEC ports.

Certainly I would confirm that the Government would be reluctant to impose any increased charge on the shipping industry. That is a very major consideration in the thoughts of my noble friend, and indeed I believe of the Government, in looking at the possibilities of trying to raise funds for these purposes. I would also give a very very firm assurance that your Lordships' House would have an opportunity to debate any further order arising from the order that we have before us tonight. I think the noble Lord, Lord Ponsonby, put much of the dilemma that is before the Government and the commission with the order tonight, by calling it a licence to think. I think that puts much of the matter in a nutshell.

My noble friend Lord Rochdale raised the problem of added expenditure as a burden to the shipping industry. There is the possibility that shipowners might have to pay to help out with the funds for compensation, but I would add that so would other interested parties, the pilots themselves and possibly port authorities. I would stress the comment I made earlier, that my noble friend will be very reluctant to impose any increased charge particularly on the shipping industry.

The noble Viscount, Lord Simon, raised several points. The first one, which I agree is particularly important, concerned the Pilotage Commission. I understand that the Pilotage Commission may lawfully levy charges on pilotage authorities already to provide finance to carry out its particular functions. Given the present order that is before us tonight, it would be a function which could use charges already levied on pilotage authorities to promote the compensation schemes. So already the power to levy is there, and the uses to which those charges can be put, I understand, certainly are intra vires. Given the present order, this would be a function, and funds could be expended to see if one could promote the compensation schemes.

The noble Viscount was worried about the negative resolution procedure. I think it is quite in order and quite normal for orders of this nature to be subject to the negative resolution procedure, certainly in your Lordships' House. We have no doubt of the vigilance of all the interests in shipping, in pilotage and in maritime trade, and particularly the interests within your Lordships' House; we are confident that they would pick up any points and give very detailed scrutiny to any orders brought forward in this particular field. 1 would stress to the noble Viscount, Lord Simon, that my noble friend the Secretary of State has no power to impose guidelines on the commission. I think the whole process which he will follow from this order tonight will be very much one of thought and consultation.

My Lords, I hope I have covered the major points that were raised by the noble Lords who so kindly discussed the order before us tonight. If I have missed any points, I will of course fill in the details, and write briefly to the noble Lords who raised them. With that I commend the order to your Lordships' House.

On Question, Motion agreed to.