MINUTES OF EVIDENCE WEDNESDAY 5 MAY 1999

The Chairman:

Good morning, Minister. You and your companions, Mr Robin McMinnis and Mrs Barbara Faloona, are very welcome to the Ad Hoc Committee on the Port of Belfast. We are making a little bit of history here today, and we are looking forward to hearing what you have to say. We have already received copies of the Department of the Environment's memorandum, so, without further ado, I invite you, Minister, to speak. I realise that you have time constraints.

Lord Dubs:

Mr Chairman, thank you for inviting me and allowing me to give evidence on Belfast Harbour Commissioners' proposals for the future of the port of Belfast. If we are making history in the process, so much the better. I apologise for the fact that my time with you is limited. When I accepted the invitation I was not aware that it would be, so please bear with me. The restriction was imposed upon me later.

You have already received the Department of the Environment's statement, and it would be pointless to repeat everything in it. But let me deal with certain aspects - and I am going to be political.

I am not a fan of privatisation, as I have made clear in, for example, the consultative document on the water industry. In the introduction to that document I said that, personally, I am against privatisation. I opposed the thrust of Tory policy on privatisation through the 1980s, when I was in the House of Commons. However, I think it is right that I should put the arguments about the Belfast Harbour Commissioners' proposal in the light of my own instinct not to be in favour of that approach. But I am in favour of it. Let me explain why.

I did not like the idea that there were fat cats in the privatisations. I did not like the fact that there was a lack of any public influence over privatised industry. I did not like the fact that money from previous privatisations went into the Treasury and never reappeared except in tax reductions. There are certain basic principles which govern my approach to the matter. There must be no fat cats from this process, but there will be a golden share which will give the Department of the Environment and the Minister who succeeds me important control over the way the new operation will function. It is also quite likely that the Department of the Environment will have an equity stake in the new business. But, above all, every penny will stay in Northern Ireland.

The only purpose of doing this is to see whether the resources that are tied up in the harbour are best left that way or whether they could, in the interests of the people of Northern Ireland, be better used for other purposes in Northern Ireland. And because I believe that that is the case I support the proposal. I am concerned, first of all - and this is the bottom line - that there would be fundamental safeguards and, secondly, that the benefits would be for the people of Northern Ireland. If the harbour is left as it is-making some changes-its potential will not be released for other benefits in Northern Ireland.

Some people have said that there is an element of political blackmail in the way the Chancellor's package was introduced. I am not happy about that type of wording because - here I am teaching you to suck eggs - with every political decision where you are choosing one priority over another you are, in a sense, saying "I prefer this to that. I forgo one for the sake of the other" if money is finite. We are doing the same here.

Having assessed the priorities, we believe that there are urgent needs in terms of the announcements made by the Chancellor of the Exchequer, in terms of the economy of Northern Ireland and of the transport infrastructure-needs that everybody accepts are crucial. Those are more important than whether the harbour is kept in one type of ownership or another. That is what drives me on. Otherwise we would simply be locking up the assets and keeping them without the benefit. There are other models for dealing with the harbour, most of which do not realise the money or provide the safeguards. The model BHC proposes does.

We significantly extended the informal consultation period because of representations from Members of the Assembly. I think that was right. I was very unhappy to learn that the legislation provided for a formal-consultation period of only six weeks. That was quite wrong, and I was taken aback when I heard it. Although this is an informalconsultation period because the final detailed proposal has not come forward, it gives everybody - particularly this Committee - a chance to go through the matter in detail, as is proper. I hope that the Ad Hoc Committee will be a model for other Committees of the Assembly.

I want to make one or two further points. I have given you my political position. The Department has a number of duties which are, as it were, quasi-judicial in considering the Belfast Harbour Commissioners' final proposals. I have to be careful that I do not do what I should not do, or that the Department does not do what it should not do, which is to get involved in the details when the Department and my successor will have to adjudicate on some of the details and make a decision. That would not be proper. I can only talk about the main principles.

The commissioners' proposals must be robust, the technical details must meet the needs, and we must get full value from any sale of the port. There must be no question of losing out - and that includes judging the right point at which to float the shares. If the market is down we will have to hold off, otherwise we will not get full value. We have had some experiences in the past that were not good.

The Department also needs to address the widest strategic issues arising from the commissioners' proposals. There is the question of the effect on other ports in Northern Ireland. We are still working on that. We have been consulting particularly with Lisahally and Warrenpoint about their plans to change their trust status a little. Those are under consideration. I want to ensure that any change in Belfast does not damage the economic prospects of any other port.

It is a competitive business. Essentially, Belfast is competitive with Dublin. Dublin has had some difficulties, but is sorting those out. I would not want to see Belfast constrained and unable to continue to enjoy a good share of the total port business in Ireland as a whole. Much of Belfast's business comes from the Republic, and I do not want that to change. We must make sure that Belfast stays as competitive as possible, while doing what we can to protect the legitimate interests - economic and otherwise - of the other ports.

In looking at this issue, I have considered the long-term interests of the port of Belfast and of the economy of Northern Ireland. I have sought to show you that I want to learn the lessons of other privatisations, and do not want to repeat the mistakes that were made. I also want to find a way to fund the road schemes that were announced by the Chancellor. I have stressed that the Department must remain neutral on these proposals because we may, at some stage, have to adjudicate.

One of the key points to emerge is that the original proposal by the Harbour Commissioners has already been modified to give Northern Ireland residents, including port users, the opportunity to have a stake in the business. I should be interested to know, Mr Chairman, when you expect to report on what you have done, because that will clearly have an influence on our thinking.

My final point is that I suspect that many of you, if you were to put yourselves in my place, would adopt a position very close to that which I have adopted, regardless of the perspective from which you approached the issue. Equally, if I had been on your side of the table over the past few months I might well have taken a very hostile attitude to the proposal that BHC are putting forward. However, we must be flexible. I have suspended some of my ideological principles in order to look at this in the best interests of Northern Ireland. I suspect that if you were sitting in my chair, with all the information that we now share, you might well come to the same conclusions as I have.

The period for consultation has been extended, and I can think of no similar situation in the past 20 years where a Government has been as open and transparent as this one about what we are seeking to do, taking people's views and answering their questions. I believe we have fulfilled the wishes that were expressed earlier in the process by Members of the Assembly with regard to the procedure that we have adopted.

The Chairman:

Thank you, Minister, for your frank statement. You asked when our deliberations might conclude. We hope to finish in the latter half of June.

Mr Tierney:

May I seek clarification on that point? The Minister says that he awaits the outcome of our deliberations. I thought it had been decided that the Assembly would make the final decision. Is Lord Dubs saying that he is waiting for our report so that the Department can make the decision?

Lord Dubs:

Nothing has changed. All I am saying is that the Department is very interested in the work of the Committee and in its conclusions. Those will inform the Government, but they will not change our agreement on the way to take the matter forward.

Mr Tierney:

I asked for clarification because the Minister said that the Committee's report would go to him.

The Chairman:

The Committee will, of course, report to the Assembly. The report will be the property of the Assembly.

Lord Dubs:

Nevertheless, Mr Chairman, given the work that you and members of the Committee have put into this matter, you will want the Department to be interested in what you are doing. As soon as we have access to the report, after it has been presented to the Assembly, we shall, of course, consider your conclusions in detail.

Mr McGimpsey:

On page 8 the submission states

"should the Assembly decide to reject the Belfast Harbour Commissioners' proposals, as presented ... it is highly unlikely that the Commissioners would bring forward a Transfer Scheme".

The phrase "highly unlikely" does not rule it out entirely. This is the point that Mr Tierney was making.

Lord Dubs:

These proposals came from the Harbour Commissioners. They were not the Government's proposals; they were not Department of the Environment's proposals. The Government said simply that there would be no compulsory privatisation but that if any of the trust ports came forward with other schemes the Government would consider them. That is what we have done. The wording to which you refer says simply that the Harbour Commissioners are independent people who will decide what to do in the light of changing circumstances.

Mr Wilson:

I have read the brief that we got from the Department and have listened to what you have said, and a number of concerns immediately spring to mind. I noted your words carefully when you were referring to the decision about the transfer of the port or to the possible privatisation of the port. I do not know whether it was a slip of the tongue or if there is any significance in it, but you said "if it comes to me". I always understood that this decision had been passed over to the Assembly, yet it appears from what you have said today that it is not quite clear whether it will rest with the elected representatives in Northern Ireland or not. Perhaps you will clarify what you meant by that phrase.

The second thing is that I am concerned that the Department has already made up its mind on this matter. Let me quote from the brief that you sent us. In the House of Commons on 12 May the Secretary of State said

"The Department accepts that transfer of the port to the private sector and the establishment of a public/private partnership, as outlined in BHC's proposal, represents the best option for the future."

I hardly think that that fits with your statement here this morning that we have got to stay rather neutral. That hardly seems like a neutral statement.

The third thing is that it appears that the Secretary of State's judgement was made in the context of the review of the trust ports in Northern Ireland and, indeed, was based on the conclusions of that review. You have said that you await with interest the information which we will produce and that you want us to go through the matter in detail, but your Department has refused to make that review of the trust ports available to us. The reason you have given is that it contains sensitive commercial information.

However, all those we have questioned here, apart from the Belfast Harbour Commissioners, say that they have absolutely no difficulty with the information contained in that review being put into the public arena. In fact, they have said that it is already in the public arena. Why, if you value the work of this Committee so much, has the Department decided to withhold from it a document on which it has based its own tentative conclusions?

I noticed in the report that the loss to the public sector's spending programme, if the sale does not go ahead, will be about £70 million. You say that that is a conservative valuation. Are you really saying that 2,000 acres of land in Belfast's city centre, albeit with restrictive leases and everything else, together with a port infrastructure, is worth only £70 million or thereabouts? If that is a conservative estimate, how far are we out on this?

Lastly, with regard to the fat cats, we were told by the Harbour Commissioners that about £6 million worth of shares would be made available to the workers in the harbour. That works out, by my estimation, at about £60,000 worth of shares each. I suspect that most workers in Belfast harbour would not be able to buy shares on an equal basis and that some employees will buy a substantial amount. If the harbour is valued at £70 million there will be great potential for the fat cats when it is resold. What control would the Government have over the pay of chief executives and so on? We have seen fat-cattery in that area. Will the Government place wage limits on those who hold executive positions in the harbour?

Lord Dubs:

There are about six questions there. I used the phrase "if it comes to me or my Department" simply because I was not sure when the Committee might report. June has been mentioned, which is next month. If the details come to me I may have to think about the matter, but that does not change the Government's overall position.

The Government expect the Assembly to take over soon. In that event the Assembly and a local Minister will be responsible for deciding policy. That is our stated position, and that is still expected to be the case. I am responsible for the Department, and if issues are put to me I may have to say something. I do not want to prejudice the way in which the Department will make an objective, quasi-judicial decision by commenting on the details in advance. That would prejudice the Department even if the final decision were made by a new Minister.

The Government have said all along that they are committed in principle to this policy. The Secretary of State said so in reply to the parliamentary question. Following the Good Friday Agreement and the prospect of an Assembly taking over, the Government agreed to the request from Members that the Assembly could make the decision. The Chairman was at one of the earlier meetings.

There is a difference between the Government saying that they believe that this is the way forward in principle and giving all the details. The Committee should bear in mind that the legal scheme has not yet been put forward by Belfast Harbour Commissioners. When it is, the Department and the Minister will have to act in a quasi-judicial manner.

The next question was about trust ports. The Northern Ireland trust ports review was carried out in consultation with various ports. It was made clear from the outset that the report would not be published because it would contain commercially sensitive information. That was the basis on which the consultation process was started, and it would be bad faith for us to depart from the undertakings that were given to the trust ports. It is for individual trust ports to decide whether to release commercially sensitive information. Our approach is the same as the one that was adopted by the Department of the Environment, Transport and the Regions when it handled the parallel Great Britain review.

The £70 million is not a valuation of the port, which I hope is worth a great deal more; it is a working figure to show how the Chancellor's package was made up. If the sale of the port realises more than that there will be more money for the roads, but at least £70 million - depending on how large an equity stake the Department retains, among other factors - would go towards the road package.

I have said emphatically that I do not want any scheme that would result in fat cats. That has already taken place at the airport, and I resent the fact that cats have been allowed to get fat over the past 15 to 20 years. Shares for the workers is a detail of the scheme that the Department would want to look at. At this stage, it is not appropriate to comment on that because the Department might have to decide the basis of such a scheme. Perhaps you will allow Robin McMinnis to say some more about that and about the control of the wages and salaries that would result from the scheme going forward.

Mr McMinnis:

The proposals from the Belfast Harbour Commissioners on the shares which might be available to their employees have not yet been presented to the Department. We will have to discuss that with them in the future. The legislation does provide certain parameters within which they are required to operate. The Minister has made it clear that no fat cats will be created as a result of this privatisation. It is normal practice for a private company to determine the wages of its senior managers, and if the Belfast Harbour Commissioners were privatised, the board of directors would charge an audit committee with overseeing their affairs.

I was responsible for leading the review of trust ports. As the Minister has said, we were at pains from the start to respect the confidential nature of the information we were privy to. We consulted the DETR, and its approach was exactly the same as ours. While the review of trust ports coincided with the Harbour Commissioners coming forward with their proposals, those proposals did not stem from the review of trust ports: the legislation which permitted that had already been in place for two or three years.

Mr Neeson:

A number of things concern me. In spite of what you have said about political blackmail, I am concerned that the sale of the harbour is linked to the roads programme.

I am angry that the A2 Carrick-to-Belfast road has once again been left out of all the schemes. I hope that the money made on the sale will be kept in Northern Ireland and spent on improving its infrastructure. Translink was given a grant, yet a clause allowed a clawback on the profits it made in the last year. Can you give me a cast-iron guarantee that any money realised on the sale will be spent in Northern Ireland?

Harland & Wolff and Shorts rent vast tracks of land which they clearly will not need in the future. How do you intend to safeguard the public interest in the event of this land being sold?

Lord Dubs:

The point that I would like to make about Translink is that it has to do with the public-sector borrowing requirement and the EFL. Translink is getting more public money in subsidy than may be clawed back from it. These may seem very technical points about the way in which the Treasury controls public expenditure, but I assure you that Translink gets more money than has been taken from it.

The Chancellor of the Exchequer gave an undertaking that the proceeds from the sale of Belfast harbour would stay in the Northern Ireland block and therefore would be spent for Northern Ireland purposes. The Secretary of State and I have reiterated that on a number of occasions. I cannot see that the Assembly would do otherwise, because it would be their money. It is unusual for the Treasury to give such a commitment in relation to a privatisation, but one has clearly been given in this instance. It is there in black and white.

The land belonging to Harland & Wolff and Shorts is a more complicated issue. I will ask Mr McMinnis to answer that question.

Mr McMinnis:

The proposals drafted by the Belfast Harbour Commissioners, which we are considering at the moment, provide that the holder of the golden share would have to consent to the disposal of any asset. Our understanding is that the Commissioners have no plans to sell land. Indeed, it would be against their policy to do so; they hold the land in trust. It is intended that they would come to the Department, as the golden shareholder, for any approval that was needed in the event of their considering the sale of land.

Your concerns about this land are well known to us and to the Commissioners, so it may be worth exploring the issue further with them.

Lord Dubs:

I see the golden share as a safeguard that would allow the Department of the Environment and my successor to say "No, we do not accept that scheme to dispose of land."

The Chairman:

Thank you, Minister. May I say, in relation to the Chancellor's statement, that Belfast harbour is a trust port. Over the years it received no money from the state. It raised money from its own operations, and it developed as a profitable organisation within the city of Belfast and benefited Northern Ireland in general. It is a Northern Irish asset, and the funds of the central exchequer, or indeed the Northern Ireland exchequer, not having been called upon, it is only right and proper that that asset and any proceeds from it should remain within Northern Ireland.

I believe that I reflect the views of the Committee in saying that the Chancellor is not really being generous in allowing those moneys to remain within Northern Ireland. Those funds belong to the people of Northern Ireland.

Lord Dubs:

He is generous in comparison to the Conservative Chancellors of the last 20 years, but I agree entirely that it is right and proper that every penny of the proceeds should stay here. That is the bottom line.

Mr Tierney:

You asked about the timescale of this Committee. Are you on a timescale? The reason I ask is that when you addressed my earlier question you said that the matter was going back to you and not to the Assembly. If I understood your answer, you said that if the Assembly is not set up, somebody else will make this decision.

Lord Dubs:

I did not quite say that.

Mr Tierney:

It was along those lines. I would like the Assembly to have been up and running yesterday, but is there a point at which you consider that a decision will have to be made in the absence of devolution?

You said that other options would not release the money. According to some of the submissions that we have received, other options could release the money. I do not know whether you have looked at other options such as increasing powers. I accept Mr Neeson's point, but the Chancellor's announcement of money for the roads infrastructure, which we later found out was subject to the sale of the port, put a heavy burden on this Committee. It is blackmail to a degree, if nothing else.

Have you looked at other options, and could they release the money needed? The submissions that we have received say that they could.

Another submission mentioned the golden share. We have been told that the European Commission is looking at this issue and that there is a possibility that it will be cancelled. Has the Department of the Environment considered it?

Lord Dubs:

First, the timescale is influenced by the fact that we have already started on some of the schemes mentioned in the Chancellor's initiative. We had to do that because we had given an undertaking that there would be no unnecessary delay. We started in good faith.

If there is slippage, there will come a point when we do not have the money with which to finance the schemes announced by the Chancellor. The Treasury will not advance the money to us unless there is a clear undertaking that the whole matter will be proceeded with otherwise difficulties will arise.

The Government and I are still acting on the assumption that the Assembly will assume responsibility as soon as possible. However, the Assembly will be faced with the same timing difficulties when making the decision. Either the money for road schemes is released from the sale of the port of Belfast, or is found elsewhere, or the schemes do not go ahead. That is the Treasury's dilemma.

There are other options. First, we are dealing with the proposal from the Harbour Commissioners. Secondly, I am not satisfied that other options can release the money and provide the safeguards to the extent to which this one can. Those are the two aspects: providing safeguards and finding the necessary money. There are other options. We have looked at all of them, and I am satisfied that this one seems the best to achieve those two ends.

There are some doubts about the golden share. I am acting on the assumption that the golden share will be there and that it will be a safeguard. If, for some reason, the Harbour Commissioners eventually decided to proceed in some other way, the Department and my successor would want to be satisfied that the necessary safeguards for the Department of the Environment and the public were there. The golden share, in our view, would do that.

The European Commission has been looking at the concept of the golden share in a number of member states, and there are some mutterings from Brussels. The Commission has not approached us about any of the existing, or planned, golden-share provisions in the United Kingdom. We believe that we can argue the case for the golden share given the importance of the port to the Northern Ireland economy. If it is a Brussels dilemma, we shall resist it - or my successor will.

The Chairman:

Minister, in view of the time constraints, I intend to invite Committee members to ask questions and then give you an opportunity to answer them as quickly as possible.

Lord Dubs:

I am really embarrassed about this. When you invited me my day was clear for hours after this meeting was due to end. Now I have had a royal visitor thrust at me. [Laughter]

The Chairman:

Is that what they do with royal visitors?

Lord Dubs:

The Ministers from Scotland and Wales are all campaigning in Scotland and Wales, so I have had to take over. Perhaps I should withdraw that remark and be more tactful. Anyway, I am most embarrassed about this. I am happy to answer the questions quickly. Mr McMinnis will stay, or I would be very happy to come back on another occasion. I have taken up your time, and I do apologise, although the prevailing circumstances are outside my control.

The Chairman:

The Committee understands your difficulty. Members should put their questions as succinctly as possible so that the Minister may reply quickly.

Mr Hutchinson:

I have two questions, and I will be as brief as possible. The first is about the block grant, and the second is to do with the golden share.

I am concerned about the block grant. At the beginning you said that this was not being put forward as a threat. However, in at least three places your document states that if we do not go with this, there will be a £70 million deficit. You do say that it should remain in the block grant. I accept that, but is this meant to replace a block grant, or is it new money?

Lord Dubs:

It is new money.

Mr Hutchinson:

This document does not say that; in fact, it says the opposite. Even the press statement released by the Secretary of State said that if this were to fail, there would be a shortfall of £70 million in the next financial year.

With regard to the golden share - I have to be honest with my colleagues here - I am not convinced that the people who are going to be in government would not sell it at some stage. When there was a golden share in North Sea oil the Labour Party had clause IV - you do not have this now, and therefore it is no longer an ideological problem - but you went against your ideology and sold it off. So golden shares are not necessarily any guarantee. If the Government want to sell, they can do so. The other thing is that it may become illegal in terms of trading in groups.

Mr McGimpsey:

Bearing in mind the time constraints, I will be brief. The Minister's suggestion that he come back and talk to us is an excellent one, as this is one of the biggest sales - if not the biggest - that Northern Ireland has ever seen.

I will start by making a political statement. In my opinion the harbour and the land are held in trust for the people of Belfast in particular and Northern Ireland in general. I do not believe that the Harbour Commissioners - or anybody else - have the right to have put forward these schemes the way they have done. I have a deep sense of unease about this - and have had right from when it was first mooted. I think that what we are talking about here is a giant land sale with a port thrown in. I do not understand how the Harbour Commissioners can come here and boldly say that privatisation cannot go ahead if the land is separated from the port. I do not believe that, and I do not accept it.

I asked the Harbour Commissioners for their valuation of the land. They could not tell me. I asked for a valuation - even a notional amount - that they thought they would get, but they could not tell me. It is irrational and illogical that nobody seems to have any idea - or we are told that nobody has any idea - how much money is going to be realised. We discovered that there was £22 million lying in their bank account. When that became public knowledge we were told that this land would go back into the Treasury; the money would go back into the public purse. What would have happened to that money had the sale gone ahead at the start?

The planning approval which you recently gave for the D5 site is something which, as you know, everybody, including Belfast City Council, the Chamber of Trade and the Chamber of Commerce, opposed because of the doughnut-city effect on Belfast. I put it to you that that D5 approval would be worth around £35 million, at current market prices, to a developer. It seems to me that that decision alone has enriched the Harbour Commissioners by that amount. The figure talked about for the roads is £70 million - this came out at that time as the notional value of the harbour - bearing in mind that there is about £22 million lying in the account and that you have a further £35 million to come in terms of the valuation. These are my concerns.

I am concerned also about the membership of a board which represents nobody. This is a super-quango. Your documentation says that the Government neither control nor own it. If the Government appointed all these people I would be concerned about their being asked beforehand, either officially or privately, what their feelings were about privatisation of the port.

Finally, have you looked at the Dublin trust port model? We are told that part of Belfast Harbour Commissioners' problem is that they cannot utilise the profits they make, but there is an example of how you can hold onto a port for the greater good - the public good - and at the same time free it up to make its own decisions and borrow money on the open market.

Mr Bradley:

Minister, I think you said something to the effect that you want to ensure that the privatisation of Belfast port does not have any adverse effects on ports such as Warrenpoint. I was a little surprised that you are so much in support of the privatisation of Belfast port when we have not yet heard of any safeguards for other ports such as Derry or Warrenpoint. How can you bring those ports on board if there are no safeguards or incentives? How can you even bring representatives from those areas to accept privatisation thinking? Mr Goldie and Mr Doherty expressed their fears very clearly. Those fears are very real. I have heard nothing from you this morning, Minister, that would make those people any happier.

The Chairman:

I intend to stop the questions at this point as I know that the Minister is under stringent time constraints.

Lord Dubs:

First of all, there will be a £70 million deficit if the sale of the harbour does not go ahead. The sale of the harbour is to provide new money in the sense that the schemes announced by the Chancellor were additional to those which were to be afforded out of the block. If the money does not come from the harbour, either it will have to come from elsewhere - through cuts in other areas - or the schemes will not go ahead. Apart from the Chancellor's initiative on the harbour, the proceeds of the sale of the harbour will represent additional resources to be spent in Northern Ireland.

It seems to me that the golden share is a permanent safeguard. The Department of the Environment might also have equity that could be sold, but it is my understanding that the golden share should stay in perpetuity. It depends on the details of the scheme. You mentioned your sense of unease. I understand that. Indeed, we have talked about it before. I believe that £70 million is a gross underestimate of what we would get for the harbour, even if we kept between 20% and 25% equity within the Department of the Environment, plus the golden share. The golden share and keeping equity are two different things.

I do not want to go into the details of the D5 approval, but I would be happy to come and discuss it with you on another occasion. Certainly it has increased the assets of the harbour, and therefore £70 million may well be a gross underestimate of what might be achieved if market conditions were right and the sale were properly handled.

We have looked at the Dublin model. My understanding is that the authorities in Dublin do not act under controls from their finance people such as are imposed on by the Treasury. They have a different approach. I also understand, if I am not certain, that the Dublin model was set up as a preparatory move to possible privatisation there. So they are doing the same thing. We would need a different legislative basis for Belfast harbour and a different Treasury aim to allow Belfast harbour's surplus money to be released in the way in which you are suggesting it should have been and in the way I wanted it released when I first came on the scene.

The last question about the effect on other ports is difficult. We are discussing with the trust ports how they might have a more competitive edge and fewer constraints. There are legal and other difficulties.

We cannot shelter any port from competition. We do not want Belfast to suffer from competition from Dublin, but it is a competitive business. We want the vitality of Warrenpoint - indeed, the vitality of all the ports in Northern Ireland - to continue. We will have to look at that matter in more detail. I can give no guarantees, just as I cannot guarantee that the present arrangements in Belfast harbour would not have a damaging effect on other ports here. I cannot guarantee that now, so I cannot guarantee it under the new set-up, but we would consider what safeguards there might be.

The Chairman:

Thank you very much, Minister. The Committee will consider your kind offer to come again.

Lord Dubs:

Mr Chairman, I would be happy to come again, especially as this session has had to be cut short - certainly shorter than I would have wished. If you want me to return I will make sure that there is nothing in my diary - nothing foreseeable. Thank you for your forbearance, your questions, the interest that you are showing and the work you are doing. If you do invite me again I will be happy to come.

Lord Dubs withdrew.

Mr Beggs:

Mr Chairman, are the proceedings ending now, or will we be able to continue by putting questions to the Minister's civil servants?

Mr McGimpsey:

Mr Chairman, I think the Minister must come back. One of the most important questions is the separation of the land from the port operation. The Minister did not address that issue. I appreciate that he was not trying to evade the question, but it is an important matter. Membership of the quango that is guiding the process is another important issue.

The Chairman:

It is unfortunate that there is a royal visit today, and the Minister's time is -

Mr Wilson:

Is it unfortunate that there is a royal visit, or is it just unfortunate in relation to this? [Laughter] Mr Chairman, are you making a political point here?

The Chairman:

You can interpret that in whatever way you wish - perversely or otherwise - but it is unfortunate that the Minister was unable to stay longer. It is up to the Committee to consider a suitable date for his return.

Mr Beggs:

We have reached a critical stage in our deliberations, and it is important that this happen quickly.

The Chairman:

Mr McMinnis may be able to assist us.

Mr McMinnis:

I am happy to stay, but I realise that I am a poor substitute for the Minister. [Laughter] I am sure that the Minister would be happy to come back on a convenient date. If you wish me to relay that message to him I will be happy to do so.

The Chairman:

The Committee Clerk will talk to the Department and arrange a suitable date as soon as is practicable. I wish to thank Mrs Faloona and Mr McMinnis for coming today.

MINUTES OF EVIDENCE THURSDAY 13 MAY 1999 (Mr J Tierney in the Chair) Witnesses:
Mr V McGovern, Mr J Thornton
and Mr N McPartland
(Warrenpoint Port Users' Association)

The Chairman:

On behalf of the Committee I welcome the representatives of Warrenpoint Port Users' Association. Mr McGovern, perhaps you could give your presentation, after which members of the Committee will put questions to you.

Mr McGovern:

I am honorary secretary of Warrenpoint Port Users' Association and owner of Trans Europe Express Ltd. My colleagues are Mr McPartland, director of McCalla Freight Ltd., and Mr Thornton, director of the Kersten Hunik Group.

On behalf of Warrenpoint Port Users' Association we thank the Committee for this opportunity to make a presentation. We should like the Committee to note that this submission is totally independent to any information that may be provided by Warrenpoint Harbour Authority.

We take this opportunity to highlight the fact that it is the port users who provide the tonnage and services via the port, and as such any effect on the cost structure of the port carries a direct consequence for the users. At this juncture we shall provide an overview of our submission. The full detail is separately available.

It is the firm belief of Warrenpoint Port Users' Association that the privatisation of Belfast port would have a dramatic negative effect on the viability and cost effectiveness of the port of Warrenpoint, thus adversely affecting the cost structures that enable port users to maintain competitively priced services. Such a development would create a distortion of competition between the Northern Ireland trust ports. It would lead to predatory pricing and evolution towards monopoly dominance for certain important trades.

That dominance would be driven by the profit motive, ultimately leading to increased costs for the Northern Ireland economy as a whole, and creating a significant consequent danger to local business and the fragile economies of the localities served by, and dependent upon, the existing port structure and utilisation within the Province.

We contend that, currently, there is healthy and intense competition between the Northern Ireland ports, and that that is allied to the influence of key ports in the Republic of Ireland. That vigorous competition has enabled the Northern Ireland ports to provide cost effective services both to their immediate natural hinterlands and to the Province overall, benefiting the economy with lower transport costs and a variety of scheduled services, and basically providing a range of realistic options.

Current statistics show that Belfast port services in excess of 60% of existing Northern Ireland tonnages, import and export. Warrenpoint caters for approximately 5% of the total. Being the premier port, Belfast will always enjoy that percentage. By comparison, the Republic's premier port, Dublin, caters for about 35% of throughput, albeit within a larger market.

We are aware that the basic requirement of Government policy over recent years is to have regionalised, cost effective, efficient and modern ports. This to sustain local employment and economies, and to provide facilities to allow Departments that are entrusted with securing inward investment to offer realistic choices to potential investors.

The long-term effect of the privatisation of Belfast port would be to endanger and ultimately destroy such policies at a time when we should be looking for the economic benefits to be had from the peace process. Because of its size, Warrenpoint port is more cost effective than Belfast or Dublin and offers a service to a number of local users who would be unable to sustain the higher costs involved in using the port of Belfast, particularly increased haulage costs. The overall consequence would be to reduce the amount of traffic going through the port of Warrenpoint, thus restricting the port to a niche market serving only the immediate hinterland. The port would no longer have the critical mass of business necessary to sustain its current cost-effectiveness.

We contend that a competitive, cost-effective trust port at Belfast would make a significant contribution to the Northern Ireland treasury. In the long term, this would be more beneficial to the economy, than the income generated by a one-off privatisation.

I hope that our views will be of help to you in your deliberations.

Mr Neeson:

It is important to have the views of port users, as they have substantial vested interests in its future. First of all, I would like to ask Mr McGovern, what he means by the privatisation of the port of Belfast. Secondly, I would like to know how important the planned expansion of the port at Warrenpoint is to the users - this is something which, I know, is causing considerable controversy in the local area. Are the port's main competitors not Greenore and, to a lesser extent, Dundalk, or even Dublin - to where Merchant Ferries transferred its business from Warrenpoint?

Mr McGovern:

As we stated in our submission, Warrenpoint is a trust port, and we feel that Government control would act as an honest broker. If the Government retained their control in the port of Belfast, they would be there to act as an honest broker. The privatisation of Belfast, while it may not have any immediate impact, would lead to a situation where the managers of the port of Belfast would regard the traffic currently coming through ports such as Warrenpoint or Londonderry - or Derry - as target business which they would pursue.

In addition, the landbank at Belfast gives it a distinct advantage over Warrenpoint and the other ports, which can generate income solely from port activity. Belfast port has a landbank from which it can generate substantial income in the form of ground rents and other rents.

Realistically, the Belfast Harbour Commissioners could charge absolutely nothing for their port activities and make the cost of moving cargo through Belfast minimal. That would be the impact of privatisation, and there is no way in which Warrenpoint could compete on an equal footing.

To develop Warrenpoint the port needs deeper water and more space. Ships are getting larger. The container users, in particular, use the four ports at Cork, Waterford, Dublin and Warrenpoint. Ships can easily enter the ports at Cork, Waterford and Dublin, but unless Warrenpoint gets deeper water, their entrance could be restricted. Warrenpoint is currently using all the space that is available to it. During the last 12 months ships have been turned away from the port, as there is not enough space to cater for the cargo. If a business is not going forward, it is going backwards, so Warrenpoint needs more space to develop its facilities.

At present Greenore is not considered strong competition. However, if Belfast is privatised to the detriment of Warrenpoint, the Southern Government could be encouraged to invest in Greenore, to the further detriment of Warrenpoint. Greenore will not be developed to any great extent as long as Warrenpoint remains economically viable and healthy.

Mr Beggs:

You are concerned about the intense competition that would result from the privatisation of Belfast, but does Warrenpoint not already face strong competition? Is your particular objection to the privatisation because of the incorporation of the landbank in the sale?

Mr McGovern:

The answer to your first question is yes. The shipping, transport and freight industry is one of the most competitive businesses in Ireland. Warrenpoint is a trust port, and unfair pricing based on revenue not derived from shipping activities would be unfair. The landbank could subsidise the actual shipping activity in Belfast. What we need is an honest broker.

Mr Murphy:

Would the privatisation of Belfast port have any detrimental effect on the future development of Warrenpoint? You referred to the loss of trade and the distortion of competition. What trades would be affected?

Mr McGovern:

In our summation we highlighted the specific activities which would be vulnerable to intense competition from Belfast. The containerised traffic and the roll-on/roll-off traffic, which constitute a substantial part of the traffic moving via Warrenpoint, would be affected. Warrenpoint has greater economies of scale - probably because of its size. The cost structure is finally balanced, and a very marginal reduction in the rates offered by Belfast per movement of container could entice Warrenpoint's container and roll-on/roll-off traffic to Belfast.

It may not be immediate or in six months. Regardless of what happens, we as businessmen are competing with Belfast and Dublin ports on a daily basis. That situation is not going to change. We are a service industry and do not get any help from the Government. That is a bit of a bugbear; however the freight and shipping industries have to stand on their own feet and, regardless of what happens, will continue to do that. The freight business at Warrenpoint will fight tooth and nail to maintain its business, but our main concern is that we are able to do that on a level playing field.

Mr Campbell:

The argument that a privatised Belfast port with a targeted pricing structure would affect Warrenpoint has been made before. One can see how that could happen, and it is obvious that that is your primary concern. However, we should look at the problems in a wider context - in the context of the port of Dublin and its constantly developing infrastructure. If, over the next two or three years, Dublin continues to expand - which seems likely from the figures - and becomes much more aggressive in attempting to attract the type of business that you currently have, what problems will that create for Warrenpoint and Belfast?

If Belfast were allowed to compete against Dublin and there were sufficient safeguards for ports such as Warrenpoint and Londonderry so that they were able to continue to operate, and if we were to try to establish those trust ports with sufficient flexibilities that you were not only able to exist but were able to expand within the existing parameters, would that be a solution?

I am really talking about how an expanding Dublin port will affect all of Northern Ireland.

Mr Thornton:

It should be Northern Ireland ports plc fighting Dublin rather than Belfast specifically. It is all very well to mention the public relations aspect of Dublin and the fact that it is very healthy and aggressive, but for Dublin to take a sizeable percentage of the 1.8 million tonnes of business going through Warrenpoint - for the sake of argument - would currently be virtually impossible. Dublin has severe quay congestion; it also has an infamous traffic congestion problem, which is costing a huge amount of money. From a port users viewpoint, a Northern Ireland aspect and, obviously, from the point of view of our own businesses, Warrenpoint's advantage - and this is something which we touched on in the background to the presentation - is its location. About 50% of Warrenpoint's trade is Republic of Ireland orientated. Business is actually originating from the northern and western sides of Dublin. Goods are being transported to Warrenpoint, because it is easier for the haulier to get them there than to Dublin. I realise that in four or five years time new roads might be built, et cetera, and it may be that these problems will not exist in the future.

There is a niche there for Northern Ireland in general and for Warrenpoint in particular. It is a market which we as operators are trying to exploit. The worst case scenario from our point of view would be a privatised port of Belfast (and there are different types of privatisation) competing with Warrenpoint. The port of Mersey was privatised and now operates ferry and container services, which enable it to compete on the sea with us.

A privatised port of Belfast with such advantages could easily develop a monopoly which would effectively destroy the trade of Warrenpoint. Privatisation could see Belfast become the only container port in Northern Ireland; Warrenpoint simply could not compete. If Belfast were the only container port in the North of Ireland, it would add another 90 miles to the round trip in the fight with to the Republic of Ireland. The congestion in the Republic of Ireland gives a market opportunity to the Northern Ireland ports, and this is something that we should be looking at.

Mr Campbell:

If Dublin, as seems likely, deals with its traffic problems in the next few years, that will create more problems for Warrenpoint.

Mr McGovern:

The port of Dublin is not able to deal with the sheer volume of traffic passing through it. There is a plan to ease the traffic problem by building a tunnel from the docks to the M50, which should take about five years. However, the growth in the Republic's economy will see a doubling of traffic in the near future, and it is unlikely that Dublin's infrastructure will be able to cope quickly enough. Warrenpoint can move cargo to Dublin almost as quickly as the port of Dublin can: it takes cargo between an hour and a half and two hours to get from the port of Dublin to the M50; Warrenpoint can match that. Warrenpoint does not merely service its immediate hinterland, it can move cargo economically to Sligo, Galway and the midlands.

Ms Morrice:

The aim of Northern Ireland plc should be to get all the ports of Northern Ireland working together to compete for trade from the Republic of Ireland. Am I right in saying that your plan is to increase tonnage at the expense of Southern competitors, and that that could be done through co-operation between all the ports in Northern Ireland? Following from that, does there have to be a level playing field for all the Northern Ireland ports, recognising that they will not eat into each other's share, to allow you to work together? If Belfast remains a trust port, can you rely on the Government to be an honest broker so that Belfast is not as aggressive as a commercial operator?

Mr McGovern:

I do not see the cargo for Galway and the midlands ever going through Belfast. We contend that that cargo will be lost to Northern Ireland plc. If Warrenpoint becomes uncompetitive and unable to sustain itself, Belfast will find it extremely difficult to compete with Dublin for that cargo.

Ms Morrice:

So that trade will go south?

Mr Thornton:

The short answer is yes. The economy of the Republic is more buoyant. We hope that when things settle down here, we will see all this money coming into Northern Ireland. Everyone will benefit one way or the other, and we hope that it will be in terms of timber, steel and containers.

Because of Dublin's problem with congestion, it is possible for us to service the north side of Dublin more quickly than someone coming from Dublin city. This is a service industry, and it is time-sensitive. People want their cargo moved quickly and efficiently. We are competing in the Republic of Ireland. I know where we are sitting. This is not official policy, but we liaise with the Irish Development Authority the IDA as well as with the Industrial Development Board. If the IDA is talking to a potential importer in Sligo about inward investment, it does not talk about bringing cargo through Dublin, it talks about Belfast and Warrenpoint. It talks about Derry or Londonderry in terms of air cargo potential. While it may not be official, from a practical viewpoint, when citing the benefits of its region, it thinks, as does Dundalk, of Warrenpoint before it thinks of Dublin. There are some things which cannot be official, and probably never will be official, but they are little brownie points in our favour. It is essential that we exploit them, because the economy in the North is not growing as quickly as the economy in the Republic, and there is less scope for increase in volume.

Ms Morrice:

If you entered into co-operation with the other Northern Ireland ports, would you be satisfied to retain the current distribution of market share?

Mr Thornton:

If we did that, we would be going down the road of anti-competition and we would be in danger of breaking European Union regulations. We have to have open and free competition. The issue is this "honest brokerage".

Looking at what has happened across the water, in terms of the Mersey situation, there is potential for the operators of a port such as Warrenpoint to lose out, and that is our major concern. Let us be very honest about this. It is quite easy for me to say that we operate out of Belfast, Dublin, Waterford or Cork and that for me it does not make a difference because my office is my car.

There is a loyalty and a moral responsibility to try to maintain what we can. Warrenpoint has been there for 25 years, and we have been working with them for virtually 25 years. A lot of people depend on us for employment, so we have a responsibility to keep it running well. We also have a responsibility to our Dutch owners to make as much profit as possible. That, bluntly, is our main reason for being there.

In terms of competition, we would fight tooth and nail with our competitor operating through Belfast, as would Mr McPartland with steel or Mr McGovern with timber. That is what the Northern Ireland manufacturer wants us to do.

Mr Bradley:

Coming from your area, as I do, may I welcome you to Stormont to see, if nothing else, that despite what you might read in the papers, there are some Assembly Members and civil servants working. I will be repeating, more or less, what I said during the presentation by the Warrenpoint Harbour Authority.

Under paragraph 5.1 of your submission you have highlighted the economic impact for the local area, and I would ask Members to take that on board. The success which is being enjoyed by Warrenpoint is due to your efforts as port users over the years. It is a success which we cannot afford to lose at this stage. I do not have a specific question. However, I would fear that if anyone was to ignore the plight being put by the Warrenpoint Harbour Authority and yourselves, then the 1000 port-related jobs at Warrenpoint would disappear in a flash. I am addressing these comments more towards the members of the Committee than to the Port Users' Association.

I thank you for the presentation and highlight what I said to the Warrenpoint Harbour Authority. I am not asking you to reveal any trade secrets but do you, as port users, have plans for future development? No business can stand still so I imagine that each of you would be planning to expand.

Mr McGovern:

It is vital for all of the businesses that they continue to grow. I would like to make the point - although this may not be the proper audience - that when we see the growth which is taking place in the southern economy there is no reason why that growth should not be happening 100 miles up the road.

As far as Ms Morrice's question about competing and maintaining the share we have of the existing business is concerned, we want to increase our share of the new business but we also want to see the export level of Northern Ireland plc doubling every two years at least. There is no reason why that cannot happen. We want to see the Northern Ireland economy growing over the next five or 10 years in the way in which the southern economy has grown. There is a responsibility on all of us to make that happen.

Mr Bradley:

When Members are making a decision for the common good it has to be for the common good of the Northern Ireland economy and not of Belfast, the port of Derry or Warrenpoint. Warrenpoint can certainly play its part.

Mr Byrne:

As port users, what limitations do you feel the existing port has as a trust port? Would you envisage any adjustments or changes to the existing status of the port irrespective of what happens in Belfast? What are the present handling limitations at Warrenpoint? Which type of port traffic has the best chance for expansion over the next 10 years?

Mr McGovern:

Would you repeat the first question?

Mr Byrne:

What limitations do you feel there is in the fact that it is -

Mr McGovern:

That it is a trust port?

Mr Byrne:

Yes, that it is a trust port. We are quite aware that there are limitations in that there are strict legislative guidelines.

Mr McGovern:

As an aside to that question, I am sure that members of the Committee are aware of the difference between port authorities and port users.

Mr Byrne:

I am asking you as a user.

Mr McGovern:

I wanted to make the point that there is a difference between a port authority and port users. The port authority is responsible for providing a facility. It is up to the port users to exploit that facility and bring trade through that facility. That is the difference.

We, as port users in Warrenpoint, have worked well with the Warrenpoint Harbour Authority. If we had not, we would not have the volumes coming through the port that we have. The Warrenpoint Harbour Authority has facilitated the port users, in whatever way it can, to enable us to attract cargoes through Warrenpoint.

As port users, we are all competitors. Port users, whether they are in Belfast or wherever, by their nature are competing with each other for business. I do not see any great restriction on Warrenpoint, as a trust port. We get good co-operation and assistance, on an independent and honest basis.

I covered earlier the restrictions on Warrenpoint. We need deeper water. We are using all the space that is available, and we need more. The current development proposal would provide Warrenpoint with sufficient ground for development, allow us to maintain the existing container business and enable us to attract new container business. Space is a day-to-day problem. People will phone to say they have a 1000-tonne cargo coming in the next week or fortnight and ask if we can handle it. If we have not got the space, we cannot handle it. The current space is being fully utilised, and we need more.

Mr Byrne:

Which port traffic offers the best potential for growth and expansion?

Mr McGovern:

We all have a personal interest in that. I am basically involved in the road freight industry. There are different types of cargo for different types of activity. The ro-ro facility, in my opinion, is a vital part of Warrenpoint port - a twice daily link with the rest of the United Kingdom. I move cargoes to Scandinavia. I can move trailers out of Warrenpoint on a Friday night and they are in Gothenburg, Oslo or Copenhagen on a Monday morning - Helsinki on a Wednesday. This is because we can send it from Warrenpoint on Friday evening; it is in Great Britain on Saturday morning and forwarded on to Gothenburg, arriving on a Sunday evening or a Monday morning.

This means that a customer in Warrenpoint can produce goods on a Friday and his customer will have them on a Monday afternoon in Sweden - basically the next day, leaving out the weekend. There is room for development. The facilities are there, but the frustrating thing is that we need more industry, producing more cargo. We can guarantee to get cargo to Europe by the next day or within two days.

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