Lord Dubs:

It is up to the Harbour Commissioners, who have no doubt been busy with this particular aspect, to develop the most businesslike way forward for the harbour. The Government have published integrated transport proposals, and I would like to see Belfast Harbour Commissioners playing their part.

There are other considerations such as the requirement for extra warehousing, docking facilities for ships, logistic centres and integration of the railway system with the harbour. These are some of the ideas which I hope would flourish under the impetus of the new structure that we are talking about. I have not met with the Harbour Commissioners for some time, and so I am unaware of their latest thoughts on these matters. Certainly there is no point in developing the proposals unless we have an entrepreneurial surge within the harbour to ensure that it expands.

Mr McMinnis said that the Belfast Harbour Commissioners believe that they are on a plateau. With the Northern Ireland economy doing so well at present - and I hope it will continue to do so - I would not wish to see them accepting that things are levelling off. All the pressure is for expansion. This is how the economy should be moving and the harbour along with it.

I would not be happy for the Harbour Commissioners to say that this is going to be it for all time. That is why there are opportunities for the other ports as part of the expansion.

Mr Morrow said that he was unhappy about the whole consultation process. I am bound to say that we have tried to bend over backwards in this matter. That is why we want to put the Assembly in the driving seat and why we have expanded significantly the amount of time for discussion before the formal consultation period begins. At an earlier meeting, which you attended, Mr Chairman, a view was strongly expressed both by you and your colleagues that the formal statutory 42-day period for consultation was not adequate. I agreed with that view totally - for a scheme of this complexity it was not proper to limit the consultation period to 42 days, whatever the minimum statutory requirements. That is why, before entering the 42-day period, we felt that there should be a lengthy period, of which this meeting is a part, to enable full discussions to take place and to allow the Belfast Harbour Commissioners to meet the political parties, this Committee and others. Consultation is continuing, and that is both healthy and proper. The Government are very anxious to hear the Committee's recommendations.

As to the existence of other proposals in addition to the Harbour Commissioners, I am not aware of any. The original initiative came from the Harbour Commissioners. I do not know if they had other internal proposals before putting forward the present outline document.

Your last point concerned privatisation and whether the harbour is likely to be sold wrongly. I am concerned that the Government learn from past mistakes, and there were some mistakes. Indeed, I had to defend my Department against some of the actions of the last Government when the Westminster audit processes were very critical of past sales, particularly the sale of the airport. We have learnt from the past. We shall not repeat those mistakes. The people of Northern Ireland must get the maximum benefit from their assets. That is why we have said that the £70 million will stay in Northern Ireland, that there will be no fat cats and that there will be a golden share. All that will safeguard the public interest.

Mr McMinnis:

We know that the Belfast Harbour Commissioners did look at other options, which were rejected, before coming forward with this proposal. The existing legislation provides a means by which they can move from the public sector to the private sector. The Harbour Commissioners have come forward with a scheme to achieve that end. That is what they are engaged in and that is the process that we are embarked upon.

Lord Dubs:

Certainly the only proposal they have put our way is the one we are talking about.

Mr McMinnis:

Absolutely.

Mr Campbell:

The difficulties facing this Committee have been mentioned in the Minister's response - for example, the increasing competitiveness of other ports. We are united in trying to ensure that, whatever happens, Belfast is able to ward off competition from other ports and become even more competitive. We are attempting to build in safeguards into whatever process is agreed upon.

Leaving the mechanism to one side, there is no realistic valuation - or, indeed, valuation of any sort - in the equation as suggested by Mr McGimpsey. If it eventually transpires that a valuation is arrived at, perhaps through a prospectus, and it is considerably in excess of the Chancellor's valuation of about £70 million, what would happen to the additional funds?

Lord Dubs:

That decision will have to be made at the time. The Department may retain some of the equity - keep a proportion of the harbour's value - for use in the future, thus maximising the proceeds of the sale. That judgement will be made by the Department, based on the price realised.

The £70 million, to be used as a contribution towards roads' schemes was the minimum amount that the Chancellor thought would be realised; it is not meant to be a limit on the value of the harbour. If it emerged that the harbour was worth £140 million, the Department could keep a 50% equity stake for use in the future; other options are also available.

Mr Campbell:

My concern, which is probably shared by others, is that in the future, depending on how much is required to top up existing infrastructural development we may have to look at the valuations of other assets to see if the roads' infrastructure, water developments and other projects can proceed.

Lord Dubs:

If the Government or the public sector are sitting on assets which are not being properly used - and this also applies to local government - it is their responsibility to ensure that those assets are being properly used, and the best way of doing that may be to dispose of them to a developer.

However, I do not believe that a stream of assets for disposal will come to light to enable significant additions to be made to public expenditure in Northern Ireland. There are smaller pockets of assets that the Government could decide to dispose of but nothing on the scale of Belfast harbour. The assets do not exist to allow for a Belfast-harbour type event every two or three years. When I use the word "Government" I mean the continuity of the civil service and the Administration - albeit in a different Departmental structure. All these issues will be for the Assembly to decide on.

Mr Bradley:

In May 1998 the Government agreed in principle to Belfast harbour establishing a public/private partnership. The summary of the Department of the Environment's written submission refers to that agreement, and I quote from page 8

"In doing so, however, the Government recognised that this particular option may not be appropriate to all Trust Ports and has announced its intention to extend the statutory powers and ease the financial controls of the other Trust Ports, in order to better equip them to meet the challenges ahead."

It is 12 months since the Government announced their support for the public/private partnership. Is the Minister able to reveal the Government's intentions towards the trust ports - and how advanced those intentions are?

Lord Dubs:

We have had the review, and Warrenpoint and Lisahally have presented proposals. I am not sure whether Coleraine did that as well. They said that they wanted maximum freedom of action, almost akin to being privatised. We were concerned that if they were to have that, there would have to be good structures for public accountability. We are not sure whether some of their proposals would be possible without primary legislation. We are engaged in discussions with them. I am sorry that discussions are taking longer than the trust ports might have hoped, but their suggestions went much further down the path of commercial freedom of action than we had anticipated. We have to see what statutory provision would be needed to enable them to move in that direction and whether we can achieve public interest and public accountability safeguards that are consistent with that. Those issues are being discussed.

Mr Bradley:

Do you agree that it would be difficult for this Committee or the Assembly to make final decisions until we know those intentions?

Lord Dubs:

Many matters are interdependent, but I hope that the Committee's deliberations will not be delayed by its members wanting to wait to know the outcome of discussions between the Department and the trust ports in Northern Ireland. Those discussions may finish quickly, but if they do not, I hope that that does not cause delay. I am anxious to see the harbour decision resolved quickly because there needs to be a clear way forward for public spending that has already started based upon the £70 million from the harbour. We could get into real financial difficulties.

Mr Bradley:

I would have a completely opposite view on that. I should like to think that all matters on all ports would be on the table. The proposals for Belfast should not proceed until the consequences are fully known.

Lord Dubs:

I think that the consequences of the proposals in Belfast are known or can be assessed when the Harbour Commissioners present their scheme. However, we do not know how the new structure and new operational methods will affect the other trust ports in Northern Ireland. I am not sure whether the decision on Belfast harbour will depend on how Warrenpoint is structured. It may be the other way round, and Warrenpoint may wish to move forward when it knows what Belfast harbour intends to do.

Mr McMinnis:

The proposals from Warrenpoint and Londonderry ports are incorporated in their written submissions to this Committee. We respect those proposals which we have looked at. There is an honest difference of legal opinion as to whether we can enact the changes that they are contemplating without primary legislation. They think that we can do it by way of a harbour Order, which means that, under direct rule, a senior civil servant would sign the instrument and it would simply go to Westminster and that would be that. As the Minister said, the changes go far beyond what was envisaged at the time of the review of trust ports. They are comparable to private company powers but do not mention the public accountability aspect that was covered in the review of trust ports. The draft is silent on that issue. One of the proposals that we were running with as a result of the review was an increase in district council representation on the boards of the ports.

As I have said, there is an honest difference of opinion and we are getting senior Crown counsel advice on the matter. Even if we had that today, I am not aware of any relevant Northern Ireland legislation currently going through Parliament. This issue will come before the Assembly, and it will decide exactly how much the powers of Trust Ports should be widened. In a sense, the decision almost comes back to the Assembly whose Members will decide whether to endorse the Confirmation Order on the port of Belfast.

Lord Dubs:

May I add another point? If the Assembly should decide not to proceed with the plans for the privatisation of Belfast harbour, then the powers of the harbour in that new context would need to be looked at. The harbour could not be left as it is; there would have to be some changes, albeit less than those envisaged by the current scheme. I speak on the assumption that the Assembly will think likewise.

The Chairman:

Minister, the submission from both Warrenpoint Harbour Authority and the Derry Port and Harbour Commissioners included what seemed to be a very clear legal opinion - although I do not pretend to have expertise in such matters. Their submission stated that they were discussing that opinion - the one they had sought from counsel in London - with the Department, and that opinion was very clear in terms of making a Harbour Order. Why it is necessary to go any further? Why can that opinion not be accepted?

Mr Wilson:

Dover port was given additional powers to enable it to do the kind of things that Belfast Harbour Commissioners want. Were those powers granted through primary legislation or through the same mechanism as the Harbour Order?

Mr McMinnis:

I do not know the answer, nor does my colleague. We will come back to you on that point. In reply to your point, Mr Chairman, the legal advice we received from our solicitors suggested that the legislation that had come forward could not be enacted other than by primary legislation. The initial draft contained provisions for amending primary legislation. You know better than I that subordinate legislation cannot be used to amend primary legislation. So there has to be a change in the draft to address that.

However, there remains a difference of opinion - respected legal opinion - obtained by Londonderry and Warrenpoint ports. It is only fair that we should seek the views of senior Crown counsel on that opinion. Our solicitors have said "Fine. We hear what they say. Let us see what senior Crown counsel have to say". However, whether implemented by primary or secondary legislation, the proposals are so far-reaching that it is only proper that the Assembly should have time to consider them in detail, and perhaps the best way of doing that is by means of primary legislation. If it can be done by subordinate legislation - by means of a Harbour Order - that too could be considered by the Assembly in due course.

Ms Morrice:

I would like to approach this in a very simplistic way. I fear that we could be blinded not only by economic but also by maritime science.

We should try to imagine that we are in the position of a family whose chief asset is the family home. Obviously, if the family needs a short-term solution, it would want to sell quickly, get the money and hand the house over to someone else. However, if it were looking for long-term, rather than short-term, benefit, a financial adviser would tell the family to rent out the property, in order to make more money in the long term, and, thus, to keep hold of the asset. The family may sell the garden to developers, who will provide cash which can be used to refurbish the house - but, again, why would the family sell the garden to the developer, thus allowing him to make money out of it, when the family itself could make money out of it? Is this not a case where we appear to be looking for a short-term fix, when we should be looking for long-term benefits?

Lord Dubs:

I would assume this family is not restricted by legislative structures and does not have the Treasury looking over its shoulder. I appreciate the way in which you have described the issue, and it might help to clarify our thinking if we were to see it in those terms. The difficulty is, however, that, as things stand, even if the Commissioners were to use the land as you suggest, the financial benefits from that would not accrue to the people of Northern Ireland but would relate solely to the limited expenditure which the Harbour Commissioners are legally allowed to incur. The current legislation does not allow the Commissioners to do even those things which, they feel, might enhance the commercial attractiveness of the port, whereas the plans which we envisage - disposing of the port's assets, while retaining a public interest - would produce a pot of money which could be used for whatever is in the wider interests of Northern Ireland.

Ms Morrice:

In the short term.

Lord Dubs:

No. The road schemes are of long-term benefit. The problem is that most of the options relating to the future of the harbour either constrain the harbour management's freedom of action, or, if they do not create constraints, do not produce any money which can be used for other purposes.

The real political question is whether the money - £70 million, at any rate - should be used for the road schemes, thus providing one kind of benefit for Northern Ireland, or retained to allow the harbour to operate in the way which you have suggested, thus creating a different kind of benefit. That is, clearly, a political decision. The Government felt that the former option would be better, because it would enable us to do what we would have had to do anyway, namely make the harbour more entrepreneurial, to allow it to compete more successfully. You can devise other models, such as Dublin, to which reference was made last time. But, one of the drawbacks - apart from the fact that Dublin port managers are watching the Belfast situation very carefully, as they may want to privatise at some point in the future - is that that model would not allow us to use the income generated as freely as the harbour managers might like. Certainly, there would be no money for the road schemes if we were to follow that model. There are problems with trying to do all these things under the same scheme, but it can be done, if it is politically acceptable.

Mr M Murphy:

The Minister places great emphasis on the £70 million for the road schemes. What happens if, 10 years from now, the same situation arises, and we again need money for roads? If we have sold off all our assets, where is that money going to come from?

Lord Dubs:

Most of the money for the roads of Northern Ireland, including the five-year schemes I announced a few weeks ago, is drawn from normal public expenditure. We do not, at present, have any income from the sale of Belfast port, but we feel that there is an enormous opportunity to generate money from the sale of the port to improve the strategic road network. Once those improvements are made, all that is needed is the money for maintenance.

Improving the strategic road infrastructure in the way suggested should be of long-term benefit to the Northern Ireland economy.

Mr Beggs:

It is claimed that the privatisation of the port of Belfast is needed to allow it to develop and to fight off competition from other ports. I am concerned that this is spin. What is actually happening, and you have alluded to it, is that the port's trading profits have actually plateaued. Do you agree that they have plateaued because efficiencies have already been achieved, and so the proposed privatisation is unlikely to provide additional and significant benefits for the present trading operation at the port?

The trade through the port of Belfast is related to the future development of Northern Ireland in terms of gross domestic profit and exports. The privatisation will not have a significant effect on the port's trading operation. The port is being sold under false pretences as it is the release of the landbank that provides the greatest potential for the future owners of the port. Do you agree that expertise in port operations is entirely different from expertise in property development?

Warrenpoint has 33 acres, Lisahally has a similar small acreage and Larne has 60 acres. The Belfast Harbour Commissioners have over 2,000 acres to be privatised. About 500 acres of the landbank is used in port related activities. I have not heard an explanation why the 1,500 acres of non-port related land is to be sold to a private consortium that would be able to profit by property speculation. Can you explain why the 1,500 acres should be sold off in this manner?

Lord Dubs:

Although the profits at the port of Belfast have plateaued, and the Belfast Harbour Commissioners do not see the situation changing, I believe that it ought to change. There is continuing growth in the Northern Ireland economy in the gross domestic product. I would be dismayed if the ports in Northern Ireland were not to derive an increasing benefit, although perhaps not proportionate, from the growth in the economy, because so much of our economy depends on trade, exports and so on. There is a problem caused by changes in the type of products exported. For example, there has been a decline in coal and animal feeds. This means that some of the volume in port trade has gone and the harbours have had to look for other forms of business. That is why this has become a more competitive area. But I would expect the port of Belfast to expand as the economy expands, and the profitability from its operations should also expand.

Secondly, much can be done to increase the attractiveness of the harbour, such as improved access. I do not want to criticise the port of Dublin but it has access difficulties. It is hard to get transport in and out of the port of Dublin because of the congestion, and they are trying to resolve this difficulty. We have to achieve ease of access to the port of Belfast for haulage companies, not just for those based in Northern Ireland, but also for those from the Republic. That requires expenditure on the roads that lead to it. The Belfast Harbour Commissioners would have liked to put their own money into the Westlink upgrade, but that was not allowed. The Harbour Commissioners would have provided £20 million for the upgrade as it would have made the port more competitive. It is clear that there are some things that need to be done to improve the competitive edge of the port of Belfast. These are some of the ways in which the Assembly and Belfast Harbour Commissioners could help the port of Belfast to develop.

Mr Wilson:

The Minister has just returned to the point that I was going to raise with him. Minister, you said earlier that you were not aware of any other ways for the harbour to go forward. Your Department carried out a review of trust ports, and a way forward was suggested as outlined in your document. It said that the ports should have extended powers which would enable them to better meet the challenges ahead. On the public accountability aspect it said that district councils should have greater representation. Some of those challenges were outlined in your submission; the need for diversification; the need to be able to raise capital for infrastructure and developments, both inside and outside; and the need to engage in other ventures. Evidence from others suggests that all of that can be done under extended powers. The Department's review said that the way forward to meet challenges was through extended powers. Evidence has come from other ports - and Dover is a prime example of this. Under extended powers it has been able to raise money, to diversify and to engage in infrastructure development. Why have you not proceeded down that road? Why are you tied down to the Harbour Commissioners' proposals for privatisation?

Lord Dubs:

It is partly because the Harbour Commissioners' proposals came forward and were a way of achieving the two ends that you referred to earlier. One is to give the harbour a more competitive cutting edge, and the other is to put the land assets that are within the ownership of the harbour to good use.

Essentially we looked at the smaller ports when we carried out the review of trust ports. Belfast harbour is an enormously important port in the UK. I am not saying that the others are unimportant, but Belfast is crucial in terms of its relationship to the Northern Ireland economy.

Mr Wilson:

But the review of trust ports included Belfast harbour, so the recommendations must have applied to Belfast harbour as well. I know that you are keeping that review secret, from us, so perhaps I am not in a position to make a judgement, but I imagine that those recommendations apply to all trust ports.

Lord Dubs:

The Belfast Harbour Commissioners' proposals came forward separately from the review of trust ports. As I said earlier, Belfast harbour and, indeed, other ports are structured in such a way that they are constrained and cannot spend money in ways that would allow them to enhance the competitiveness of their operations. That seems to be particularly critical for Belfast harbour because of its size and competitive position in relation to Dublin. I know of no other comparable Trust Ports scheme which could easily and readily - with Treasury consent - give Belfast harbour a way of spending their money in the interests of the development of the harbour. Earlier I gave the example that it might want to expand its activities, or make them more effective, by developing some port installations in parts of England or Scotland. I am not saying it will do this, but it is an option.

There are other things that Belfast harbour may do such as developing access into the harbour and into warehousing and other facilities on the harbour land. Some of this may not be possible or may not be permitted. The Treasury, I believe, would never allow the trust ports to borrow money in the same way that a privatised Belfast harbour could.

Mr Wilson:

What about Dover?

Lord Dubs:

Dover was mentioned, but I am not aware of that being permitted. Certainly, other publicly owned businesses have not been allowed to operate that way. They operate under the public service borrowing rate within the external finance limits, and they do not have that freedom. Belfast harbour does not have that freedom at the moment, because the Treasury will not allow it.

The Chairman:

I propose to finish at this point. Perhaps the Minister will make his concluding remarks.

Lord Dubs:

Mr McGimpsey raised a question about the membership of the board of Belfast Harbour Commissioners. The decision on the future of Belfast harbour was made by the board which was appointed in 1994, so when three replacements were appointed last year there was no question of their being vetted on their attitudes to the area under proposal. We wanted to be sure that they were au fait with all the developments, but it was not a question of vetting them.

I am not normally in favour of privatisation, unless there are exceptional justifications for it. However, I believe that there are exceptional justifications in this particular case. I have no ideological axe to grind. I would be in favour of privatising the port of Belfast if the benefits to the economy of Northern Ireland and of Belfast outweigh the benefits of leaving it as it is. The suggestions of the Belfast Harbour Commissioners would be to the advantage of Belfast's economy. Inaction benefits no one.

I understand your members' reservations, but I believe that this privatisation proposal is different from others which have been marked by political opposition, including my own. I believe that the Government have learnt from the mistakes of past privatisations, and that all the essential safeguards have been put in place. May I remind you of some of them? There is a guarantee that all the £70 million will be spent in Northern Ireland. We will guarantee that there will not be a repetition of what happened at Belfast International Airport by preventing people buying shares and then selling them on. It is likely that the Department will retain a share of equity, which might be 25%, to be disposed of later or retained. There will also be the golden share which will give the Department the power to ensure that the public interest is protected. These safeguards go a long way to meeting the concerns expressed by the Committee. The safeguards persuade me that the transfer of the harbour to the private sector represents a move that will benefit both the harbour and the economy of Northern Ireland in the long term.

I know that the disposal of the landbank causes great concern and that the Committee is pursuing the matter with the Belfast Harbour Commissioners.

The Harbour Commissioners themselves are looking at your concerns to see how they can be met. I hope that they will be sensitive to your point of view, which I am sure they are aware of. I am very sensitive to this and I am sure that they will be equally so. There are real potential benefits in these proposals, which I support in principle. The details have still to come forward. The full value of the port, including the cash reserves of £20 million, will be realised through the levy mechanism.

The Government or, on devolution, the new local administration, is being offered the chance to retain an equity stake in the company, which can be held or cashed in at a later stage. The form of the sale will afford local residents and port users, for the first time, an opportunity to take a real stake in the future of the port. The Harbour Commissioners would have to queue up for shares along with the residents. Employees will have a limited facility to acquire shares, but the Commissioners have accepted that they will have to queue up if they want to do that. The transfer of the port to the private sector will allow the port to develop its full potential and so ensure its long-term economic viability.

Taking the wider view, steps will be taken in parallel with the sale of the port of Belfast, subject to the views of the Assembly, to extend the powers of the other trust ports so that they can continue to compete on as level a playing field as possible and consistent with their need to be publicly accountable. This is a balanced package which promises much, and will enable us to fund a number of much-needed schemes. Despite the safeguards contained in the proposals, you may decide that further modification is desirable. Whatever view you come to, I urge you not to reject the proposals out of hand. I hope you will feel able to go back to the Commissioners and suggest changes if you are unhappy. Equally I would caution against giving the Harbour Commissioners a blanket endorsement of the proposals as they stand at present.

Mr Wilson:

I do not think there is any chance of that.

Lord Dubs:

Many details have still to be worked out between the Department and the Commissioners, including clawback terms, share offer structure and so on. It would not be in the public interest to prejudice those negotiations. The focus should be on the broad concept at this stage. Even if the Assembly were to endorse the Harbour Commissioners' proposals, the formal transfer scheme has still to be published and will be subject to a further six weeks' statutory consultation on the specific details of the scheme. There will be further opportunities for elected representatives to influence the proposals and, on the assumption that we move to devolution quickly, any Confirmation Order made by the Department would only come into effect if affirmed by the Assembly.

We are all agreed on the importance of coming to the right decision, in the interests of both the port and the wider local economy. However, it cannot be postponed indefinitely, as the uncertainty would be damaging to the port's development and, indeed, to the port users. The most immediate problem is the potential shortfall of £70 million in this year's public expenditure should the decision to proceed with the sale not be made. In the absence of a firm decision fairly soon - by the end of June - cuts may well have to be made. I appreciate that that is something the Assembly will want to wrestle with, and I am sorry to put you in the position of dealing with such a difficult problem.

Thank you very much indeed. This has been an interesting and useful discussion, and we will be interested to learn the outcome of your deliberations. I wish you good luck and look forward to hearing from you, even if it is only by means of a leak.

In my experience of Northern Ireland, leaks do not come from just one person.

The Chairman:

Thank you, Minister, and thank you to your colleagues as well.

AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 20 MAY 1999 (Mr S Wilson in the Chair) Witnesses:
Ms N Skelly, Ms C McAuley,
Ms M T McGivern, Mr B Hanna,
Mr M McGimpsey and Mr R Stoker
(Belfast City Council)

The Chairman:

Welcome back again. I know that there were difficulties last time because so many members were not available. We have received your revised submission. Thank you for that. We have been advised that Mr Dodds cannot attend this morning. Mr McGimpsey is going to have to be a bit schizophrenic and introduce the delegation. [Laughter]. Are you going to speak to the paper, Mr McGimpsey?

Mr McGimpsey:

 No. As you know, and for the benefit of my colleagues, I am deputy chairman of the development committee. The committee is responsible for the council's response. Mr Dodds is the chairman and, as you have explained, is unable to be with us.

Rather than wear two hats, I want to, in my role as deputy chairman, introduce the members of the delegation. The team will then give the presentation. We have Bob Stoker, the deputy Lord Mayor; Brian Hanna, the Chief Executive; Chrissie McAuley, a member of the development committee; and Marie -Therese McGivern our director of development. They are the team responsible for preparing the submission and therefore they will present it to the Ad Hoc Committee.

The Chairman:

There are other officials from Belfast City Council here also. If responses are required from the people sitting behind those at the table would those individuals please come forward. The microphones will not pick up responses from anyone sitting away from the table.

Mr Hanna:

As chief executive of Belfast City Council, I am going to say a few words and I will then hand over to Ms McGivern, who will give a more detailed outline of our submission.

We are grateful for a further opportunity to come before the Ad Hoc Committee, given that we had very limited time on the first occasion and in that time we made some important points. In the interim we have had the chance to look at the matter in more detail and seek further guidance from other sources.

In summary, our presentation covers the following areas. First, we have tried to set the presentation in the planning context. We have reviewed statutory and non-statutory documents which cover planning and economic development within Northern Ireland, and the references made in each of those in relation to the significance of the port. These are items such as the 'Shaping Our Future' process, 'Strategy 2010', which has recently emerged, various transportation documents, planning policy statements, 'The Belfast Harbour Local Plan 1990-2005', and the 'Belfast Urban Area Plan 2001', which we anticipate will be updated following on from the regional strategic framework. I will leave the detail of those, and the conclusions that we came to, to Ms McGivern.

The second area we looked at was the contribution of the port to the regional and Belfast economies. We were looking at the economic impact of the port on the city and the region, primarily focusing on trade, employment and tourism. We looked at things like port traffic, effect on the city, employment and tourism.

Thirdly, and this is an important part of our submission, we have tried to look carefully at the experience of port privatisation elsewhere. We have looked at the consequences in six examples of trust ports that were privatised and also the ports at Dover and Tyne which have retained trust status. We have also tried to do a critique of the proposals by Belfast Harbour Commissioners - a number of aspects of that are covered in our submission.

Finally, we were pressed to produce an option. Initially we felt that we did not have sufficient time to consider an option and the council had not come to a considered view at that stage. We now feel that we can make a proposal, but we are qualifying it by saying that it is of course possible that some other option may be better than ours. We have done a lot of research in a short time. We find it hard to understand why more detailed research has not been done to date, on such an important issue. In a four-week period we have come up with a lot of information that contradicts some of the points made by others. One of our concerns is that we have not had sight of the Department of the Environment's review of trust ports. Now that the evidence has come out into the open, it is quite clear that that study basically recommended that the legislative powers be extended and that the financial controls be eased with the aim of enabling the Harbour Commissioners to better meet the challenges ahead. We entirely agree with that. It was also recommended that the public accountability of trust ports would be improved by increasing district council representation on the boards. I find it quite pleasing to agree with something in the Department of the Environment's submission, even though it was not published.

I will now hand over to my colleague, the director of development, who will put more flesh on the bones of our presentation.

Ms McGivern:

I am not going to talk for very long. There is a lot of detail in our report and it would be better to take questions, which my colleagues who have done the research will be able to answer.

In the section on planning context, we are saying that every significant policy document emerging currently from the various Government Departments indicates the importance of the port and the significance of it in terms of planning related to the 'Shaping our Future' document, economic development related to the 'Strategy 2010' report and the whole issue of the transportation infrastructure, citing, in that context, 'Transportation in Northern Ireland: The Way Forward' and the 'Moving Forward: Northern Ireland Transport Policy Statement'.

We conclude from all of those that the common theme that connects every document and statement relating to the port area is its recognised importance, both locally and, more importantly, regionally. The decision whether or not to privatise should not be made without careful consideration and detailed analysis of its potential impact and after a comprehensive consultation.

In the second section we turn to the contribution of the port to the economy of Belfast and the regional economy of Northern Ireland. We analyse the economic impact of the port in terms of trade, employment and tourism. I will not go into every fact and figure that we have used. Suffice it to say that we have produced clear evidence on the issues related to its impact on tourism, the amount of employment that the port provides and the amount of traffic going through the port, which has risen significantly over the last eight to ten years, and it is evident that the port of Belfast has made a significant economic impact on Belfast and on Northern Ireland as a whole.

It is the primary gateway for tourism and trade into Belfast and Northern Ireland and therefore sustains and creates substantial direct and indirect employment in Belfast and the region.

The third section of our submission relates to the experience of port privatisation elsewhere. In it we analyse the consequences of port privatisation in terms of its capital expenditure, financial performance and business and traffic. We relied heavily upon the work carried out by Richard Saundry and Peter Turnbull from the University of Cardiff. They are acknowledged as world experts on ports and port privatisation. They have recently completed a major research study which looked at the performance of privatised and public ports in the United Kingdom. Their conclusions did not confirm the claims made by Belfast Harbour Commissioners about privatisation.

Having carried out this significant and major piece of research, Saundry and Turnbull found that there were - somewhat surprisingly - lower levels of private sector investment, somewhat surprisingly, in the private ports than in the public sector ports. They found, overall, that the performance of public ports was superior to their private counterparts and cited that in the majority of private ports there was a decline in traffic.

They also referred to the failure of private ports to deliver higher levels of investment, an improved financial position or significant traffic growth and concluded that privatisation had constrained competition because, in many of the privatised ports, one major firm or organisation had come to dominate the port and was therefore operating almost as a monopoly.

They gave strong evidence that the six trust ports which were privatised after the 1991 Act were significantly undervalued and that enormous profits were made in the sell-off which each of those ports were subjected to following the initial sell-off to the public.

They also cited the fact that the Audit Office severely criticised the Government in respect of a number of those sales. Their conclusion echoed the conclusions of the Department of Environment, Transport and the Regions and the Department of the Environment which was that the success of ports generally was primarily down to good management; it was not a matter of whether they were publicly or privately owned.

They went on to look at two ports which retained their trust status and did not privatise. These are the Ports of Dover and Tyne. The Port of Dover consultants concluded that privatisation would not be in the long-term interests of either the port or its users. Dover therefore became a trust port with extended powers, and the port has continued to grow and to increase its traffic share - and all this despite the Eurotunnel. It has continued to be a successful and effective port against stiff competition from Eurotunnel. It has increased its traffic share; it has developed a cruise line, has amassed more land, successfully diversified its operations and has encountered absolutely no difficulties in raising additional finance in order to do the things that it wants to do. It is also tied in to the local district authority and regularly consults widely on its proposals. So it operates almost as a model trust port in public ownership.

The Port of Tyne can also boast many of the same success figures in respect of how they have developed as a trust port with extended powers.

Further research by Dr A J Baird relates to privatisation and public ownership on an international scale, and we found, having examined much of this research, that most of the major ports in the United States are not privately owned; they are publicly owned. Most of the successful ports on the European mainland are also publicly rather than privately owned, and in Asia, many of the large ports in Thailand, Indonesia and Australia are also publicly owned.

So international evidence suggests that the most common model of ports administration involves some privately-owned stevedore and shipping lines operating within the context of a publicly-owned port authority which continues to function as both landlord and regulator and controller of maritime traffic. This section of our submission concludes that the evidence indicates that the United Kingdom Government are out of step with the rest of the world in terms of their pursuance of port privatisation.

We turn in section 4 of our submission to the proposals which the Belfast Harbour Commissioners have put forward, and we offer a critique of those. I am not going to go into detail but will simply emphasise a few of the points which we bring to the table. We were hampered by the fact that the Department of the Environment would not release to us its review of trust ports but I know the Committee has been privy to parts of it. We have been informed by other ports, who have been very co-operative in the preparation of our document, that the Department has concluded in the review that there is a need to broaden and extend powers to allow increased commercial and financial flexibility to ports in Northern Ireland.

It seems, therefore, that the Department of the Environment may well be at odds with itself. We cite a number of comments made by the Secretary of State for Northern Ireland and Lord Dubs which would lead one to believe that privatisation is not necessarily the best option for the port of Belfast. The Belfast Harbour Commissioners claim that the creation of an integrated transport company is the way forward and that all other major United Kingdom ports have taken that model. What the Commissioners forget to say in their submission is that these include the trust ports which are retained in public ownership. So the model is irrelevant to privatisation. To argue that privatisation is the only way forward is a false argument.

Our evidence would indicate that access to competitive finance, a reason cited by the Belfast Harbour Commissioners in favour of privatisation, is not a reason for privatisation - the trust ports of Dover and Tyne have access to major competitive finance and are not privatised.

As in our earlier submission we again mention the Belfast Harbour Commissioners' claim that European Union funding would stop and so be no longer a factor. However, it is the case that the framework document 'Sustainable Urban Development in the European Union', issued by the European Union, will inform the views of the Department of Finance and Personnel when it draws up a plan for Northern Ireland. It states clearly that port funding, infrastructural funding, gateway funding and tourism funding can still legitimately be accessed through structural funds. It is our view that a publicly-owned concern is more likely to access such funds than a privately-owned one.

We argue that the appraisal of the options, to date, do not the satisfy the Government's regulations as set out in the Green Book. We cite and quote from this Treasury document and also the Department of the Environment's handbook which is produced as an aid to the interpretation of the Green Book.

We are somewhat amazed that the Belfast Harbour Commissioners claim that privatisation will attract a more entrepreneurial management team. It makes us wonder how they view their current management team. Are the Commissioners arguing against themselves? The management seems to have been relatively entrepreneurial and successful in their current model. What is the problem here? Why should privatisation make them even more entrepreneurial?

The Harbour Commissioners also talk about the need for flexibility and speed of reaction as an important issue in privatisation. Our view is that the management of ports and of land masses is such that flexibility and speed of reaction are not seminal criteria. We feel that the planning for ports is a long-term project. While flexibility is important it is not a major concern.

We have a number of issues to raise about the question of the golden share which has been put forward by the Department of the Environment as an argument for ensuring that the public concern will continue to be important.

We know from a number of rulings that the European Commission has made, in the cases of Italy, Belgium and the Republic of Ireland, that the golden share issue is not regarded favourably by the EU. One wonders therefore if the Department of the Environment will manage to get the EU to agree to the golden share concept, as it proposes.

We have some difficulties with the current valuation of the port. We have indicated in our submission the fact that many of the ports that have been privatised have later been shown - in some cases within 18 months - to have been so undervalued that it resulted in the Government receiving audit criticism.

Also, the research carried out by the ports of Warrenpoint and Londonderry indicates that they will be adversely affected by the privatisation of Belfast port. In terms of those bigger infrastructure issues, when the Department of the Environment places the sale of the port against the building of roads, is it taking account, in the cost-benefit analysis, the adverse effect that the privatisation will have on other ports?

We also have concerns about the lack of consultation, and there are difficulties in linking the sale of a port with an infrastructure project - the development of the Westlink. One of the desires of the Belfast Harbour Commissioners is to see the Westlink developed, as they believe that it will significantly enhance the port. We have difficulties with the Government's suggestion of selling off one asset to build another asset - which will become the asset of a private company.

We also have difficulty with the prospect that Belfast City Council, representing the citizens of Belfast, and Assembly Members, representing the citizens of Northern Ireland, would have very poor, if any, representation on the port if it were privatised.

We conclude, with the assistance of the University of Ulster and the University of Cardiff, that there is significant evidence to suggest that the establishment of a public/private partnership would not be the most appropriate or beneficial option for the port of Belfast or the future of Northern Ireland.

As the Chief Executive has outlined, the option now favoured by the Council is a trust status port with extended powers. That would enable the port to operate on a fully commercial basis, allow it to diversify and give it enhanced borrowing powers. The ports of Londonderry and Warrenpoint have produced new model legislation and have appointed counsel in London to prepare draft constitutions to provide extended powers - so it is possible.

We have undertaken a lot of work in the six or seven weeks since we were last here. It is not exhaustive, but it gives further evidence that a full and independent economic appraisal and further consultation are required. In that context the Council could happily live with any new evidence arguing against trust status, but its current view is that trust status with extended powers is the best way forward for Belfast port.

The Chairman:

Thank you very much, Ms McGivern, for that very full explanation of the document. Some Committee members wish to ask questions at this point.

Mr Tierney:

I asked the Council to arrive at an option, so I am delighted that it has done so.

I would like to explore that option a little further. The issue of the land - its size and value - is a major issue.

Your submission states that if they were given extended powers they would be able to do a number of things - it would, and we are fully aware of that - but what would be the position regarding the land? If, under these extended powers, they were able to sell off the land would the proceeds from that sale go back into the port to be put towards running costs or could some of that money be used for infrastructure? I take your point about the Westlink; improvements there could be regarded as being of help to the port, but the Government announced that other road schemes would benefit from the sale of this land. Would any of this money go into the Northern Ireland purse?

Ms McGivern:

There are some difficulties with this whole issue and the valuation of the land. Take the port of Dover, for example, it has retained land in its environs, not just within the port itself, and has used that very successfully to generate large profits, so we would not necessarily argue that the land be sold off and the proceeds used for infrastructure. What I want to bring to your attention is the fact that Belfast Harbour Commissioners are currently retaining a large asset base, and I have views about whether that could be used for infrastructural development in Northern Ireland. There is an argument for its going back into the port, but if they were to be given extended powers, they could make money.

Belfast Harbour Commissioners currently have a large amount of money sitting in a bank account - about £26 or £27 million. That is a considerable amount of money, and it seems to me that if the port were retained in public ownership, the public purse might have some call on it. That might be another way around it.

This will not be an easy option; it will not be an easy option for the Assembly if it is to be asked to make judgements between the sale of one asset against the development and improvement of infrastructure. Perhaps we need to investigate more fully how we could turn the port into a profit-making entity so that some of the profits could be put back into the public purse and used for infrastructure; but we also need to look at the assets that are in the bank.

Mr Hanna:

The other advantage of approaching it in the way we have suggested is that there could be a fairly substantial element of local and regional political control; if it were to be in the private sector, that control would simply not exist, or if it did exist, it would be not be as far reaching.

Mr Tierney:

We know that they have over £20 million in the bank, but the Government's announcement on infrastructure said that £70 million would be needed from this sale. In your opinion if it is done this way should we still be able to get the £70 million? Or should the money be taken out of the pot altogether?

Mr Hanna:

I can give you a personal view only. I cannot see a very strong argument for improving infrastructure around the Province out of the resources of a port which is in the public sector. How the money should be raised is a political issue, but, arguing against the privatisation route, we have been placed in a difficult position, in that some members of other councils have been saying to us that we are preventing their areas getting a road improvement. That is setting one district council area against another, which I think is a very unfortunate consequence of the line that is being taken here. It is not our business to argue against a bypass at Banbridge, Toomebridge or anywhere else - I am sure they are highly merited - but we have a Roads Service, we have a roads budget, and it is a question of where priorities lie. If the priority is strong enough, then surely the resources should be made available.

Mr Stoker:

Section 5.8 in our conclusions covers that. The trust port with extended powers is our preferred option, but we are always prepared to consider others. It is not just an open-and-shut case. We believe that there should be ongoing consultation.

One thing that has come through very strongly over the last six weeks is the subject of the actual role of Government - what governance is about. First, it has to be representative of all the people, and that is fairly evident from this gathering. Secondly, it must deal with the day-to-day matters of running a city or a country. Thirdly, and most importantly, it must make provision for the future. Now, we cannot be put down in black and white what is the best provision for the future as it is always an ongoing consultation process. In the situation of a trust port having extended powers, it would be for the best for the city -and for Northern Ireland as a whole - if all money and profits were not retained within the port. A system could be devised that would allow the profits to be distributed evenly throughout Northern Ireland for the benefit of the whole country.

Ms McAuley:

In terms of the additional money that is required for roads infrastructure, as Ms McGivern has said, we need to be looking towards the European structural funds. We need to see how best that money can be used for the additional infrastructure. The privatisation of the port is a very shortsighted approach by the Government in terms of playing one thing off against the other-infrastructure against port privatisation. We need to do our research and set ourselves up in a position where we can best use the European structural funds for the betterment of all the people and to ensure that the trust continues to be in public hands.

Mr Byrne:

I welcome the comprehensive nature of the Belfast City Council submission, and I am glad that it is considering the interests of the other two ports and also the whole region of Northern Ireland. One of my main concerns about the Harbour Commissioners' report is that they do not seem to be setting out a plan for the development of the port facilities in trying to regain the port-handling position that they had in the island of Ireland. If we want to develop the Northern Ireland economy it is important for the port-handling facilities at the Belfast port to be developed in tandem and complemental with those at Warrenpoint and Lisahally.

How do you see the landbank being successfully developed on an economic level for the city and for the wider region in terms of employment, trade and tourism? I believe that there is a need for a full and independent economic development appraisal. It is no good simply to have an economic appraisal of the asset as it currently is. It needs to be an appraisal of its development potential. Belfast has 25,000 people unemployed, so this is the ideal location for an employment-driven strategy. Perhaps it could help to unite the different parts of the city, and that would be very important.

Mr Hanna:

It is important to place Belfast and its port in the context of Northern Ireland as a whole, and, indeed, in the context of the island of Ireland as a whole. That is what the regional strategic framework process is all about, and we are moving on soon to public hearings. We have consistently argued that Belfast should retain its heart-of-the-region position. That is not just for the good of the people of Belfast, although clearly those elected to Belfast City Council have to consider them very carefully.

However, many people who work in Belfast do not live in Belfast. Any day in Belfast the population is very substantially increased by people who travel to work there. If we are to be honest about this, we should admit that the Harbour Commissioners have been very successful, and, over time, have made significant improvements to the port. This may have been achieved with the help of structural funds, but, as Ms McGivern has already said, there is no reason why, under the arrangements agreed in Berlin, we would not continue to have access to some of the money included in structural funds, as we will have a form of Objective 1 status for five of the next six years.

If the port, including the landbank, were to be run as a trust port with extended powers - subject to the relevant planning controls and to a certain amount of political influence on the board and, we hope, from a new Northern Ireland Executive - the Harbour Commissioners, under these new arrangements, should be able to continue to develop the port successfully and for the general good. There will be checks and balances in the planning process and other aspects of the port's operation, so I am not unduly concerned about that. The Commissioners should be given the opportunity to develop and expand the port, as long as the correct balance is struck. The evidence does not suggest that privatising the entire port will be a huge success - although it might be; it suggests that there are other ways of doing this.

Belfast contains roughly one fifth of the population of Northern Ireland - I remember being at a conference where I argued that Belfast was the heart of Northern Ireland, only to be told by my colleagues from Ballymena that, if Belfast was the heart, then Ballymena was the brains; a fair riposte - but we are not here to argue a narrow case for Belfast City Council. The fact is that Belfast has a very important role to play in the future development of the Province.

Mr Byrne:

Does the Development Committee of Belfast City Council intend to identify a model whereby the landbank could be developed in such a way as to provide industrial units and, thus, create employment, making it a more economically viable area? Also, if the port is to assume the status of trust port with extended powers, as you are suggesting, how can we ensure that there is sufficient regional representation - as referred to by Mr Hanna - on whatever management body is then established?

Mr Stoker:

As regards the options for the future of the landbank, it is easy to come up with a wish-list, but we must be realistic about what is feasible. It is not simply a matter for Belfast City Council to decide what should be done; any decision should be taken in a wider context, taking into account the wider interests of all of Northern Ireland. This is a massive site, and there are not enough people in Belfast to provide a new workforce; obviously, people will be travelling into Belfast for any jobs created there. It is not just a matter of our deciding what is the best option for this site.

Mr Hanna:

In this context, the development of the regional strategic framework has been an excellent exercise. There has been ample opportunity for interested parties to have an input, and, when it is complete, we will have, for the first time, a proper regional framework for planning and sustainable development. We must look not just at the technical details of planning, but also at ways to secure sustainable development for the whole Province, particularly those areas where there has not been enough in the past. There are great opportunities for employment creation in this area.

The regional strategic framework will set the broad pattern. A local plan will then be drawn up, which will include plans for the optimum development of the area. Some plans already exist, such as the Belfast Harbour Local Plan - and I remember spending a week in the pavilion at CIYMS arguing about how different parts of the land should be used - but, in the context of the regional strategic framework, we will have local area plans, including one for Belfast, a key element of which will be the future of the harbour. Some of this land - for example, 300 acres on the north foreshore, which the City Council created and could, I hope, be developed further - is not, actually, under the authority of the Harbour Commissioners.

It is crucial for the future of the city and the Province that the land be developed for the benefit of everyone. Members of the Assembly should be asking whether privatisation would be in everyone's best interests.

Mr Roche:

May I congratulate you on this very substantive report, characterised by substituting detailed argument for assertion. We seem to have, unfortunately, become preoccupied with the problem of where we get the £80 million that is required for the road improvements, if we do not privatise the port of Belfast? The key point is that the argument for or against privatisation should not be based on whether or not it is going to provide a one-off windfall.

In response to an earlier question, our discussions seem to be overshadowed by the view that if the port of Belfast retained its status with extended powers, we could periodically look at the balance sheet and raid the coffers when we needed some money. That is commercial nonsense. If the port of Belfast is to have extended powers, it must be free to operate and utilise whatever profits it accumulates as a commercial enterprise.

The contrast in your conclusion is between the option of a trust port with extended powers which will ensure that it remains an independent statutory body with all decisions being made in the interests of the port and Northern Ireland, as opposed to a private organisation motivated by the need to return profits to its shareholders. That does not spell out the alternative. The danger of moving away from an organisation geared to maximising profits is that we move towards an organisation that is under the control of politicians who could move it in ways that would secure them a few votes in their local areas. The port of Belfast must retain commercial autonomy, and if it accumulates profits, those must be made available to help it develop in the market place.

Mr Stoker:

It is not up to Belfast City Council to decide what the level of the extended powers should be. That should be the subject of further consultation. We could ask that the extended powers should give Belfast City Council a final veto over all port matters. That would be sufficient for Belfast City Council, but it would not be in keeping with the general principles of inclusiveness, openness and partnership with others.

Mr Hanna:

Despite the port of Belfast's limited powers, all the evidence shows that it has been successful and that it has retained money to allow for further investment. The only constraints that the port of Belfast should have are the normal ones, such as planning, which I referred to earlier.

Ms McGivern:

I did not want to give the impression that we would be dipping into the port's coffers every time we wanted to build another road. It could be argued that there should be some residual cost to the port of Belfast if, for example, it benefited directly from the building of the Westlink. That link could possibly be made.

Mr Hanna:

That is normal practice. That is what happened to Sainsburys when they built a store at Forestside and had to widen the road.

Ms McGivern:

In Northern Ireland the issue of infrastructure will have to be grasped for the long term. How do we continue to build roads? How do we develop the infrastructure? Belfast City Council is at loggerheads with the Department of the Environment regarding the inner ring road, how it will be funded and whether it is the solution to congestion in Belfast. People as well as cars should form part of the equation. We need to consider the issue of public transport in Northern Ireland because that locks into the question of whether we need the number of roads that we say we need. Can traffic congestion be dealt with in other ways?

The Chairman:

The protection of the landbank has been the main vein of the questioning so far, although perhaps there are other areas that we should be moving on to. The current view seems to be that if the port is retained in trust status or in some kind of public ownership, the landbank will be protected. Belfast City Council has been critical of, for example, the Harbour Commissioners' decision to apply for a rezoning of the D5 site - from light industrial use to retail use - and the implications of that.

If extended powers were to be given to a trust port, would that give the port authority an even greater autonomy to do the type of thing that Belfast City Council has already been critical of? Have you any views on how landbank might be protected so that whatever is put on the land more closely reflect the needs of the city?

Mr Hanna:

You have been chairman of Belfast City Council's planning committee for many years and will understand my answer. There will be times when Belfast City Council will disagree with whoever is running the port. There will be times when it will not like the planning decisions, and, inevitably, as happens in a democratic world, situations will occasionally arise - such as D5 - where it will not get its way. Nevertheless, it has to accept that whoever is running the port has the right, within the law and the planning framework, to do what is considered best for it. The planning system and the democratic systems, such as the council and the Assembly, need to weigh in with other wider issues which the system will be able to take into account.

There are other issues. The majority of the Harbour Commissioners' land is leased to Harland & Wolff and Shorts Bombardier. Much of that land has lain derelict for many years, although the area is now being stimulated by projects such as Odyssey and Harland & Wolff's proposal for a Titanic park. An effort is being made to make things happen. However, it will be a matter for the trust port or whatever organisation is in charge to consider all aspects of the port's development for the overall good of its business. If it does not like something that has been proposed, the council will have to argue within a planning context, or in other ways, and it will not always win that argument.

The Chairman:

If the final arbiter on the use of the land will be the planning system, does it matter whether this is a trust port or a private port?

Mr Hanna:

Representatives from Belfast City Council might be sitting on the board, for example, and be able to influence its direction. No one from Belfast City Council could sit on the board of a privatised company.

Mr Wilson:

Your submission did not suggest what type of increase there would be in public representation on the board.

Mr Hanna:

I feel strongly about that. It is important that there be proper democratic public representation. We all know what has happened in Northern Ireland. A wide range of bodies has been set up here that have very little democratic public representation - in some cases none. I am not saying that the majority of the board members should be democratically elected, but there should be a substantial democratisation of institutions such as this to take account of the issues that you mentioned. The view of elected persons may still not prevail, but we must live with that as part of the cut and thrust of debate.

Ms McGivern:

The extensions that Londonderry and Warrenpoint are seeking will significantly increase the public representation on their boards. That is something that we would welcome in a Belfast context. There are larger questions, but you have asked a very important one about how the port is to be controlled even though it remains in public ownership.

A public authority intending to make a profit should do so for the benefit of the public. This is an issue which should be examined, and we would like to see further consultation on the options available. The landbank is significant and will play a role in the development of Belfast. We know, for example, that local residents have difficulties with the proposed extension of the airport. A decision could be taken to turn the whole place into an airport, and no one could stop it. The decision on privatisation is far too important to make on what we consider to be grossly insufficient information. We do not have a definitive answer. It is important that we find a means which allows the port the financial independence to operate, while at the same time ensuring that it is for the good of Belfast and of Northern Ireland as a whole.

Mr Stoker:

We may have been opposed to the D5 concept, but in twenty years it may prove a tremendous success, although I doubt it.

The Chairman:

We spoke to the Minister yesterday about ports with extended powers, in particular the case of Dover. He seemed unaware of the situation in Dover - his officials probably kept it from him. He said that, under public-sector borrowing requirements, ports would have difficulty borrowing money. According to your submission, Dover has undertaken significant capital expenditure in recent years - £22 million last year alone. Has it done that with recycled profits or has it borrowed the money?

Ms McGivern:

The powers which Dover has been given have allowed it to borrow substantially.

Ms Skelly:

Dover Harbour Board has borrowed a substantial amount from the Bank of Nova Scotia. Its extended powers meant that it experienced no difficulties in borrowing money.

The Chairman:

And Treasury rules did not curtail that borrowing?

Ms Skelly:

No.

The Chairman:

The Department officials said that the extended powers which Warrenpoint and Londonderry wanted would require primary legislation. Was primary or secondary legislation necessary to grant Dover extended powers?

Ms Skelly:

I would need to clarify that with Dover, but, according to the counsel appointed by Warrenpoint and Londonderry in London, only secondary legislation would be required.

The Chairman:

The Department would disagree.

Ms Skelly:

I am sure that you have seen the submissions from Londonderry and Warrenpoint. Dover says that it has changed and extended its powers as the need arises, and in doing that it has encountered no difficulties. However, I can check to find out if that requires primary or secondary legislation.

Mr Maginness:

This is a very refreshing document, cogently argued and of great assistance to the Committee. For the record, however, it states that the Harbour Commissioners suggested that European funding was unlikely to be forthcoming in the future. You disagree with that, and you refer to the framework for sustainable urban development, which was published by the European Union. Does that framework not indicate that funding could be available for development of the land attached to the port for sustainable urban growth, as well as for infrastructural development?

Ms McGivern:

That is correct. The four principles underpinning the framework are as follows: creating prosperity; enhancing social inclusion; developing environmental awareness and good health; and local governance, which is another issue that they are keen on at the European level. But certainly it could be interpreted that the money could be used directly for the port and also for the development of land.

Mr Hanna:

Ms McGivern and I attended a Department of Finance and Personnel seminar on Tuesday. The First Minister and Deputy First Minister spoke briefly at the start, and then we broke into workshops. This seminar was part of the consultation process for the next round of structural funds, which - given that they will be running from 2000 to 2006 - seems a little late in the day. I understand that Assembly Members are to get a similar briefing next week. It might be pertinent for you to ask whether the arrangements being put in place will exclude the possibility of the port authority getting money from structural funds. From our reading of the document we think there are opportunities to get money if you have a substantial case. I understand that following the Berlin summit, we are to have five years of Objective 1 status followed by a transitional year.

This idea that we come along with a paper in May, have a chance to discuss it in July and August so that there can be a final decision in September is the usual problem, which I know that you will all put right when the Assembly is running in its substantive form.

Mr Maginness:

You may not be the right people to answer my next question. The Harbour Commissioners say that they have £20 million in cash. That is derived from their profits, which are very healthy indeed - about 40% of turnover, I think - and as far as I can recall, their net profit is roughly £5 million per year. They seem to have no difficulty in generating that high level of cash reserves. What would they need to raise additional cash for? Have the Commissioners given any indication that they are contemplating future large-scale development that would require moneys beyond the level of cash reserves they currently have and the level of profit they reap annually?

Ms McGivern:

That is one of the arguments contained in the document. We have scant evidence from the Belfast Harbour Commissioners as to why they wish to raise this additional money. They have not produced a business plan. We do not know which way the Belfast Harbour Commissioners are indicating that the port should go. This is one of the difficulties.

It seems to us that if one sets up a proper trust port with extended powers so that it could diversify and could move on, then one of the first actions would have to be the drawing up of a large-scale business plan. That would be the case for any business. It would then be able to assess the amount of money it needed to borrow. Given the amount of money which Belfast Harbour Commissioners have currently sitting in the bank, I do not think that they will have to do too much borrowing in the short term. Perhaps, in the longer term they will need money for larger infrastructural matters.

European funding should be used judiciously. We are only going to have it for another five years and if the port is very profitable there may be arguments as to why we are putting European money into it. We could link it to the infrastructure, which is the Westlink connection and other roads going into the city which might benefit the port. However, to emphasise again, we have no evidence from the Belfast Harbour Commissioners - at least we have not seen any evidence in the public domain - indicating what they need this money for. They talk about making the port larger, changing it and enhancing it. However, we have no indication as to the direction in which they wish to take the port, what specifically they want to do, and what the borrowing requirements for that would be.

The Chairman:

They have talked about buying other ports and vertical integration. They have talked about working towards having an integrated port and transport facility. Have you any views on the use of funding for that purpose?

Ms McGivern:

I do not think we would be supportive of ports buying each other. Ms Skelly spoke to Mr Turnbull about this issue at some length.

Ms Skelly:

Our concern about the creation of an integrated transport company was how that would benefit Northern Ireland. We were concerned as to where the market research was which showed that there was a need for the creation of an integrated transport company. One of the examples we came across involved the port of Felixstowe. It decided to diversify into road haulage, and that turned out to be completely unsuccessful.

The Belfast Harbour Commissioners have not produced conclusive market research which shows openings for such businesses. There is a clear lack of a business plan. We are asking what the creation of an integrated transport company means, and how it will benefit Northern Ireland. That does not seem to have been answered.

Mr Hanna:

Thereby hangs the whole tale of this. There is a lack of real, detailed, hard investigations. Those who want to do something like this should argue their case in a very detailed manner. It should not be left to the local district council to go to the trouble of carrying out the type of research which we have had to do. I am quite happy that we have done it, and I know that members expected us to do it. However, I really do think that it is for those in government to substantially investigate all aspects of this. One is left with the sneaking suspicion that some money was needed for roads and this was a good way of getting it. That is the real, fundamental problem. The hard, detailed research has not been carried out. Those who want to do these things should argue their case in depth.

Mr Beggs:

Is there a real danger of a monopoly situation being created by the vertically integrated transport structure which has been mentioned and which, in the proposal currently before us from the Belfast Harbour Commissioners, would be handed over to a private company? Is there a real danger in what is being developed?

Mr Hanna:

The simple answer to that is "Yes".

Ms Skelly:

We have two examples from an academic, Dr Baird, who is based in Napier University, Edinburgh. He cites two companies with which Belfast Harbour Commissioners have compared themselves. They are Forth Ports plc and the Mersey Dock and Harbour Company. These are companies which Belfast Harbour Commissioners are aspiring to be like. We have examples of where both of these companies have engaged in behaviour which has been viewed as being directly uncompetitive. They have created monopolies. These examples have been included in our submission.

The example of Forth Port plc involved a small shipping company which wanted to open up another jetty further down the harbour and which was being prevented from doing so by Forth Ports plc. The Chamber of Shipping asked Forth Ports plc to explain why they were doing this as the matter was purely uncompetitive.

There is academic evidence that both companies with which Belfast Harbour Commissioners have compared themselves have entered into behaviour which can be considered uncompetitive.

The Chairman:

Thank you very much for your very full submission. As other members have mentioned, it will be helpful. The opportunity to ask questions about it has been very useful also. When we are preparing our final report much of what you have said will be helpful to us in reaching our conclusions.

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