Wednesday, April 01, 2009

Rethink Needed on Shipping Tax

This week I wrote to Southampton Test's Labour MP Alan Whitehead urging him to press government to rethink the disasterous tax hike it is planning to impose on the port of Southampton:

Dear Dr Whitehead

Light Dues and Irish Subsidy

I am writing regarding the Department of Transport’s consultation on proposed amendments to the Merchant Shipping (Light Dues) Regulations 1997.

I am sure you will agree that at a time of extreme economic difficulty for all businesses, and in particular international shipping, there is an onus on Government to minimise potential additional costs which might harm employment. This is of particular importance for Southampton as the local docks is of huge importance to the economy of the city and wider region.

As you will know, any ship docking in at all UK and Republic of Ireland ports must pay a fee (Light Dues) to cover the costs of maintaining coastal navigation aids –such as lighthouses. I am appalled to see that the Department of Transport is considering increasing Light Dues by 6p this year. In addition to this the Government is proposing significant increases to the maximum chargeable tonnage from 35,000 to 50,000 net registered tonnes. Adding even more injury to the shipping industry the Government proposes to increase the number of chargeable voyages from seven to nine.

While we will agree on the importance of maintaining such navigational facilities as lighthouses, it should not mean that costs should be allowed to spiral uncontrollably upwards. There are two factors which have lead to the possible planed increases both of which could be controlled.

The first issue concerns the management of the General Lighthouse Fund. The GLF is proposing to allow expenditure (costs) to increase by 18% over the next four years. This is despite the fact that the GLF was tasked by the Department of Transport with identifying efficiencies. Indeed, as I understand it the forecasts for last year were for a 17% increase in the same period. So they have revised their figures upwards. Regarding a solution, many in the industry are wondering why it is that we require three separate General Lighthouse bodies, when they could be brought together and efficiency savings made.

The second factor is the Irish Subsidy which also comes from Light Dues. As you will know, it has been 80 years since the Irish Free State received its independence and we are still subsidising their lighthouses and navigational aids. Until 1985 the entire cost was covered by the UK. At present the cost split falls unfairly upon ships using UK ports only. It is absurd that we are still paying 50% of the Southern Irish portion of the lighthouse costs. The assessment of the Brook Report last March suggested that Northern Ireland accounts for only 15 per cent of the costs, so Britain should be paying 15 per cent not 65 percent. While I appreciate that officials are working to revise this cost sharing arrangements, I would remind you that your Government has been promising to tackle this issue since January 2004.

The shipping industry has been particularly hard hit by the current economic turmoil. For example, freight rates for containers shipped from Asia to Europe have already hit zero with customers just paying bunker rates and terminal charges. The Baltic Dry Index (BDI), which measures freight rates for bulk commodities, fell 96 per cent several months ago. UK Ports are also under severe pressure from foreign competition, with competitors on the continent not charging such fees as Light Duties. Any additional and unnecessary cost pressures at this time could lead to lines missing out stops at UK ports altogether.

I would be grateful if you could consider the points I have made and let me have your views.

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