Witnesses:
Mr D P Galway and Capt A K W Gardiner
(Larne Harbour Ltd)

The Chairman:

Good morning, Gentlemen. You are very welcome. This session will last one hour. I ask you to confine your opening remarks to approximately 10 minutes, after which Committee members will put questions to you.

Would you both like to speak, or will one of you act as spokesperson?

Mr Galway:

I will probably do most of the talking, unless there is something on which Capt Gardiner can help me.

The Chairman:

Thank you, Mr Galway. Would you like to start.

Mr Galway:

Thank you for the opportunity to appear before the Committee. Larne is one of Ireland's major ro-ro Ports. Belfast is one of our major competitors and Dublin is probably another. The port of Larne is a private port, and we are a statutory company, operating under an Act of Parliament; we also belong to the P & O group. Since sending our outline submission to you, I have been briefed, last Monday, by Belfast Harbour Commissioners on their proposals. As yet there is very little definitive meat on those proposals, so it is difficult to comment on them.

Details of the review of Northern Ireland's trust ports which was carried out last year have not yet been published, and it would be difficult to comment on what "enhanced trust port status" means because we do not know what enhancements there will be. Before making any definitive comments, we would need to have that information.

In principle, we have no objection to privatisation. It is the detail that we are concerned about. We query the value - about £70 million - that has been rumoured in the press. That seems to us to be a gross undervaluation, but without sight of the definitive information, it is difficult to quantify. We also have a question for the Chancellor of the Exchequer and the Secretary of State: if the value is significantly in excess of that which has been rumoured, where will the funds go? Will they be used to benefit Northern Ireland?

We are concerned, as I suspect is Belfast, that the proceeds from its privatisation are going towards road schemes. Dublin is one of our major competitors, and the delay in improving roads in Northern Ireland hampers our competitiveness and the competitiveness of industry in Northern Ireland. Our catchment areas are gradually spreading north, but the Chancellor's recent increase in diesel duty - it is 40% cheaper to buy fuel south of the border - is also hindering our competitiveness.

The lack of progress on roads schemes seems to be tied to the Belfast privatisation, but there are ways of getting money without having to go down the privatisation road totally.

There seems to be only one proposal on the table - that of the Belfast Harbour Commissioners. We do not have enough information to be able to consider whether or not it is worth putting any alternative proposals forward. We also understand that any alternative proposal would have to have the consent of the Harbour Commissioners. Any viable proposal that we might make would have to clear that hurdle before the Chancellor or the powers that be could consider it.

The Belfast Harbour Commissioners and those who run the other trust ports do not need to produce accounts in the same detail as private companies, and so it is difficult to get to see the wood for the trees. Likewise, the trustees of trust ports do not have the same responsibilities or risks as those of private companies, and any changes made to Belfast's status should equalise the situation.

Our main concern is the distortion of competition. Since the mid-'70s, all the ports in Northern Ireland have benefited from the European Regional Development Fund, and Larne has received £11 million since 1973. But the maximum assistance provided to us for any scheme was 50%, while Belfast was getting 75%, and we were not allowed to apply for any assistance for lift-on/lift-off, bulk or general cargo facilities. Belfast's grants were many times ours - its Commissioners can provide you with the necessary detail.

The Department of the Environment, whose transportation programme 1989-93 emphasised Larne's position as Northern Ireland's principal ferry and passenger port, stated that Belfast would not receive grant for facilities which would take traffic directly from us and that we would not get grant for lift-on/lift-off facilities. These terms do not seem to have been applied, and Belfast and Larne are major competitors in these areas.

If Belfast were privatised we would be concerned that grants in excess of those which have been available to a private port could seriously distort competition. Capital expenditure is a major element of a port's costs. The playing field is already uneven. But if a port that is to be privatised is going to get grants of 70% or thereabouts, as opposed to the 50% or less that a private port gets, the playing field should be levelled by some form of claw-back.

We request that there be an independent study of the potential impact of the privatisation of Belfast on Larne and other ports. Indeed, we understand that the Department of the Environment has commissioned such a study. It is difficult to see how the impact of privatisation could be neutral.

That concludes our submission. The distortion of competition is our main concern. At present, there are insufficient facts available on the Harbour Commissioners's proposals to enable us to give a definitive comment.

The Chairman:

Thank you, Mr Galway.

Mr Wilson:

You spoke about the effect of privatisation on ports. Belfast Harbour Commissioners have told us that Belfast would not pose any threat to ports such as Larne, Londonderry and Warrenpoint because you depend upon a geographical area. That is the chief factor in your favour. The Commissioners quoted the percentage by which trade in other ports would fall if there were no charge for using Belfast. I cannot remember the figure that they gave, but it was small. Perhaps you could comment on the nature of your trade. Is it as geographical as the commissioners say, or is there a strong element of competition? You stated in your submission that trust status places no significant restrictions on ports. If the organisational structure of a port is not important, what is the important factor in determining whether it is successful?

Mr Galway:

Your first comment was about trade. I met Gordon Irwin, the Chief Executive of Belfast Harbour Commissioners, on Monday, and he made a similar comment. Business through Londonderry is largely bulk and general cargo, so its trade would be affected by a very small amount.

Our catchment area is the whole of Ireland. Unfortunately, because of the improving infrastructure in the South and particularly the difference in fuel prices, that catchment area is spreading further north. Our catchment area is the same as that of Belfast, and we are major competitors for the same type of business. There is a potential impact, but at the moment we have insufficient information to assess it properly.

To be successful, a port must be dynamic, efficient and able to do a deal quickly. Customers will not hang around. We must make the best use of our assets. One of the reasons for our success is that Larne is a small, tightly run port with well motivated staff.

Trust ports do not have the same responsibilities as private ports. There is no provision for trust ports to become insolvent for they are backed by the Government. I carry personal risk, just as a company director has responsibilities if his company goes insolvent. The Companies Act does not apply to trust ports, whose trustees are entitled to be indemnified out of the assets. There is also no statutory duty for a trust port to publish the same detail in its accounts. We publish our accounts through the Companies Registry, and the detail that we give is much more than that published by a trust port.

Mr Wilson:

You are saying that there are advantages in trust port status and that day-to-day business has no restrictions.

Mr Galway:

I have not noticed anything to make me think that Belfast is not a very aggressive competitor.

Mr Neeson:

You are clearly concerned about distortion of competition in the event of privatisation. The Stena Line has moved from Larne to Belfast. Surely that shows that there is already competition. Would competition become unfair if privatisation went ahead?

Secondly, I do not think that any of us believes that there will be full privatisation of Belfast port. Various options would be considered. Can you suggest any options for the Committee to consider in relation to the future of Belfast port?

Mr Galway:

You mentioned competition. Stena moved from Larne in 1995. I am not aware of the details of the deal that was done to attract the company; that is a commercial matter between it and Belfast, and we were not privy to it. Certainly people are voting with their wheels and their feet, and Larne is doing reasonably well in a very tight market.

As to the alternatives to full privatisation, the information which Belfast harbour has given us is not sufficient to allow us to assess the different options. One would have to be privy to more information to be able to form an opinion on the matter. For example, it might be possible to dispose of some land and keep it in Northern Ireland under the control of Laganside.

Alternatively, the Northern Ireland Local Government Officers' Superannuation Fund could be used to buy or invest in land so that the benefits would be retained in Northern Ireland and, for example, used to accelerate the roads programme. There are many options. A cat can be skinned in many ways, but you need sufficient facts to be able to formulate a programme.

Mr Neeson:

If shares were floated, would P & O show an interest, bearing in mind its ownership of Larne?

Mr Galway:

I cannot speak for P & O, but at the moment it seems to be a fairly closed deal. Our concern is that there appears to be only one option on the table - the PPP (public and private partnership) scheme, of which we have no details at the moment. I would like to see the thing much more open.

Mr Beggs:

Do the Belfast Harbour Commissioners control a much larger proportion of land than that controlled by Larne harbour?

Mr Galway:

Our total land ownership at Larne is 120 acres, 70 acres of which are for port-associated or property development. The Belfast area is much larger. However, much of it is covered by long-term leases belonging to Short Brothers and Harland & Wolff. A good property developer could find ways to release much of that land for development.

Mr Tierney:

You said that when you met the Belfast Commissioners you did not think that you got enough information. Is that correct?

Mr Galway:

I had a meeting with Gordon Irwin, the chief executive of the Belfast Harbour Commissioners on Monday, and I got the information that was made available to other consultees. But again there is no detail in the proposals.

Mr Tierney:

Was the submission made to this Committee the same as that made to you?

Mr Galway:

I got a package. I can see your colleague's blue folder with copies of the various overheads.

Mr Tierney:

Finally, are you saying that as we go further down the road, you would like to return to the Committee and make another submission, if the full information that you require were available?

Mr Galway:

I would.

The Chairman:

With the indulgence of other members, Mr Wilson would like to ask a supplementary.

Mr Wilson:

No. I want to say that the reason the information is not available is that the scheme does not have to be lodged with the Department until 23 March, and I think that the Harbour Commissioners are keeping it under wraps.

Mr Tierney:

That is why I asked if Mr Galway wanted to come back when full information was available. Perhaps it is too early for that.

Mr Roche:

Mr Galway, I want to clarify your position. It seems to me that your chief concern is competition. With Belfast Harbour's current status, there is competition between you and Larne. We are not trying to eliminate competition. There is nothing wrong with competition per se, but you seem to feel that if the port were privatised you would be facing some sort of unfair competition. That must be your argument, otherwise you will simply be arguing against competition per se, and I assume that nobody wants to do that.

Your submission does not make the matter clear. I would like you to explain clearly and carefully what you feel the unfair competition would be. The only point that I picked up was your reference to EU grant funding, to the differences between what the Harbour Commission gets under current status and what you get. That differential exists and will affect competition whether or not the port is privatised. The argument about unfair competition in the event of the ports being privatised is not a valid one. That is the first thing.

The second thing is that no future grants will be available. Our grant aid is finished, though that is more a prediction than a statement of fact. The fact is that you have not made an argument on the basis of an appeal about the differential grants for there being any form of unfair competition in the event of the ports being privatised. It seems to me you have no argument whatsoever for unfair competition, though I may have missed the point.

Mr Galway:

We have absolutely no objection to competition as long as it is fair - none whatsoever.

Mr Roche:

You did not make a reference to clawback.

Mr Galway:

I did, but a major cost element in ports is the port infrastructure. It costs between £8 million and £9 million to build a roll-on/roll-off quay, which is only a little less than the total we have had in grant from Europe over the last 26 years. Belfast may have received only 50% average grant towards roll-on/roll-off facilities, but it has had up to 75% for other facilities. The average grant level, I note from its handout, is 50%. I query that figure. I have seen figures that are considerably higher. That means that the average cost to it over any period is significantly less than the cost of our assets.

If Belfast were to attain private status its ongoing cost base would be so much lower that it would distort competition. Competition is distorted at the moment, but it should not continue to be distorted if there is a change in status.

Mr O'Connor:

Mr Galway, as someone who is from Larne and who has a fair idea of the situation there, I believe that congratulations must be offered to the port of Larne not only for managing to play up-hill but for playing up-hill into the wind and still remaining competitive.

You mentioned unfair competition. In addition to that, there have been many improvements to the infrastructure of the port of Belfast, enabling many new routes to be opened, and because of the increased grant that allows this, that must give Belfast some improvement in the flow of passengers and traffic. Do you have any comments on that? How will the new routes to Heysham, for instance, affect Larne?

Mr Galway:

Some of those routes will affect Larne, but at the moment we do not see them as having a major impact. We do not see the proposed Troon or Heysham routes having a major impact. At the moment, unfortunately, tourism is in the doldrums. People are still waiting.

Last year total tourist traffic on the various routes from Belfast and Larne was down 3% on the previous year. Larne did very well in a very tight market last year and continues to do reasonably well. Because of the short sea route and the flexibility and efficiency of our service, we are certainly attracting an increasing number of freight customers, and we hope that a boom or increase in tourism would see us playing a major role in that.

New routes can be attractive, but it is altogether another matter whether or not they are sufficiently attractive for a customer to want to spend three and a half hours sitting on a ship crossing the Irish sea in daylight.

Mr McGimpsey:

Mr Galway, the port of Larne is owned by P & O, and I assume that P & O shipping is your biggest customer. Can you or do you make a profit, and what is the harbour's turnover?

Mr Galway:

The port of Larne is owned by the P & O group. Our major customers are within that group, but they are treated in the same way as any other customer. I am satisfied that customers who were with us in the past but who now operate from Belfast would agree that they were never treated less favourably than customers from within the P & O group. In fact, at times the port has bent over backwards to ensure that this does not happen.

Our turnover is just over £5 million per year.

Mr McGimpsey:

Do you make a profit on that?

Mr Galway:

Yes. If we did not make a profit I would not have a job. A profit enables us to develop the port, and last year we made a profit of about £2 million.

Mr McGimpsey:

You said that you have a land bank of 120 acres. Is it all employed for port operations?

Mr Galway:

We have a total land bank of about 120 acres, of which around 70 acres has been reclaimed by us over the past 30 years. We are currently developing this area.

Mr McGimpsey:

How much of the 120 acres is devoted to port operations - ships in/ships out and cargoes on/cargoes off?

Mr Galway:

Around 40 acres are used directly for the working of ships and the marshalling of traffic. However, some of the other land, which we call our Redlands Estate, is used for haulage depots and other port-associated activities.

Mr McGimpsey:

Roughly how much land is used for haulage depots and other activities?

Mr Galway:

Around another 15 acres.

Mr McGimpsey:

So the port can conduct its operations - ships in/ships-out, depots, et cetera - on roughly 60 acres of land?

Mr Galway:

We can, although we have plans to reclaim more land because we are tight for space and require another few acres.

Mr McGimpsey:

Are you in the business of land or property development?

Mr Galway:

We are not in the business of property development. At present we lease the land. We are flexible and can either lease land to others for development or build distribution centres for our own use. We have not built facilities other than those for directly handling ships or for terminals, offices or business centres and the like. None are non-port-related.

Mr McGimpsey:

Am I correct in saying that you have leased some land for property development which is not directly related to the port?

Mr Galway:

It is all associated with the port. The only development which could be described as non-port-related is that used for fast-food restaurants. But, again, they are there to service the port.

Mr McGimpsey:

Are you saying that you can make a profit without becoming property developers?

Mr Galway:

Yes.

Mr McGimpsey:

You know the sort of figures produced by Belfast harbour. If I were to say that Belfast harbour could not survive unless it got a land bank and went into property development, how would you react?

Mr Galway:

I believe that that statement could not be substantiated.

Ms Morrice:

I thank Mr Galway for that very useful insight into the port operations.

I want to go back to the point of competition because clearly the European grants of 50% and 75% are a matter for discussion.

If the port were totally privatised would that mean that there would be fair competition? If it were to go into semi-state or trust status, if it were not fully privatised and the competition were not fair, what protection would you need to ensure a level playing field?

Secondly, if there were full privatisation, would there really be room for two or three ports on this side of Northern Ireland in a free and open market?

Mr Galway:

It is difficult to quantify what form of protection we would need if the port were not privatised or if it were a port with enhanced trust status. We do not yet have all the facts to enable us to answer that question, for we do not know the details of the privatisation or what enhanced port status means.

Certainly we would wish to have equal access to any funds that were going, and we all anticipate that there will be little prospect of additional European funding for ports. Access to ports is a key factor, and if access to the port of Larne is not improved dramatically, that in itself will destroy competition.

Ms Morrice:

Transport access?

Mr Galway:

Yes. A port is only as good as its weakest link, and that is the one major concern that we have.

We are being leap-frogged daily by the vast amount of money that is being spent in the Republic of Ireland, with 85% cohesion funding for its roads, and the catchment area for Larne, and I suspect for Belfast as well, is going further and further north. And, I repeat that the fuel tax is further destroying competition.

Ms Morrice, what was the second part of your question?

Ms Morrice:

In a free and open market is there really room for two, if not three, ports on this side of Northern Ireland?

Mr Galway:

There is. We compete fairly effectively even with the possible distortion of some elements of the grant structure. The customers can demonstrate that Larne is preferred for a large proportion of freight and passenger business. In so far as roll-on/roll-off business is concerned - and that is our main activity - Belfast and Dublin are our main competitors, and Warrenpoint though to a lesser extent. Londonderry does not compete in any measure for the same type of business.

Road haulage costs and delivery times play a significant part in the different products. There are horses for courses.

The Chairman:

Mr Neeson, would you like to ask your supplementary question about the transport aspect?

Mr Neeson:

Mr Galway, I agree entirely with you that access to the port is vital not only this side of the North Channel but on the other side as well. During your introduction you made the point that there are ways and means of raising money for the infrastructure without the privatisation of Belfast harbour. What are these ways and means?

Mr Galway:

The press has mentioned the very considerable land bank in Belfast, and the Harbour Commissioners have said in their proposals that there are 85 acres available for non-port-related development. Property is very valuable in Belfast - unfortunately much more valuable than in Larne. For instance, look at per-acre rents: in Larne we might get £3,000 per acre per annum - perhaps more in some instances, but generally only in sizeable areas - while Belfast gets substantially more than that. So, on land values alone, it would not take the disposal of very much land in Belfast for a reasonable sum of money to be made.

Mr Roche:

Mr Galway, I wish to clarify a point. I absolutely agree with you that a port needs good access - if it does not have good access, it is in serious difficulty - and that there are considerable fuel tax distortions between Larne and Dublin. That is beyond question, but it has nothing to do with the impact on Larne port of any status that the Belfast harbour may have.

The main issue is the impact the various outcomes for the port of Belfast will have on your competitiveness. I agree that those are very important considerations in relation to the overall competitiveness of any Northern Ireland port, but they have nothing to do with the specific issue of what impact a particular status for the port of Belfast may have on competition as far as the port of Larne is concerned.

Mr Galway:

We do not currently have all the facts to be able to answer that question. I will be able to answer it only when the full facts are on the table, so I am guessing. There may or may not be an impact. We just do not know. I accept your point that road and fuel tax may be extraneous to this argument.

We are concerned that the port of Larne will be destroyed if funding is not raised through privatisation or some other means from the sale of the port of Belfast. The Chancellor seems to be holding an axe over our heads by saying that accesses to Larne will not be built if the port of Belfast is not privatised. We must release funds by some mechanism. I repeat that we have no objection to the principle of privatisation, as long as it is fair and open and realises a fair value.

The Chairman:

Thank you very much. Three members have indicated that they wanted to ask supplementary questions about the issue of road access to the port of Larne. However, I feel that this subject has been more or less exhausted.

Mr Wilson:

My question is not on that issue.

Mr McGimspey:

Nor mine.

The Chairman:

Mr McGimpsey has indicated that he is not going to ask about the question of roads. However, the question is supplementary to issues that have been raised. With your indulgence, Mr Galway, I will allow Assemblyman McGimpsey to ask a quick supplementary question. I am anxious to move on to other members who have been indicating for quite some time that they want to ask questions.

Mr McGimpsey:

Mr Galway, you told me that the port of Larne had a turnover of £5 million and produced a profit of £2 million. Is a profit of 40% the norm for ports, or are you super-efficient?

Mr Galway:

We like to think that we are efficient, but we could always be more efficient. You have to keep improving. Once you stop, there is only one way to go and that is down. Some ports probably make more than that but quite a number would make less.

Mr McGimpsey:

Is 40% a reasonable target?

Mr Galway:

You would not want to achieve much less than 30% because of the cost of continuing development. Assets do not last as long as they used to. Quays which were built in the 1800s would last for 100 years or more. Nowadays, quays quickly become obsolete because of changes in shipping, and we have had to write off assets within 25 to 40 years.

Mr McGimpsey:

Your turnover is £5 million, and you are making a profit of £2 million. If your turnover were £50 million you would expect to be making a profit of about £20 million. Would that be a fair assumption?

Mr Galway:

I would love to think so. It depends on the cost of assets and what is needed to satisfactorily service the business.

Mr McGimpsey:

Would it be dangerous for the financial health of the port if your turnover were £50 million and you were turning in a profit of £5 million?

Mr Galway:

It would not be seen to be an adequate return in present commercial climates.

The Chairman:

What is the percentage level of depreciation per annum?

Mr Galway:

Depreciation varies according to the type of asset. The quays would perhaps be written off at 2% to 2·5%. In fact, the quays now have to be changed during their lifetime, so anything less than 2·5% is probably too low.

Other infrastructure will be written off between four and 16 years. Some become obsolete in a shorter period. Some land has been written off; some has not. It can be as low as 1%. We follow a depreciation policy that is probably not out of synchronisation with many other ports.

Mr Wilson:

What is the average percentage of depreciation?

Mr Galway:

It is probably 3% to 4%.

Mr Wilson:

Is that on the full assets?

Mr Galway:

It is something in that order. I would like the opportunity to check that one, but I would guess that it is 3% to 4%.

The Chairman:

What you are saying is without prejudice.

Mr Hutchinson:

I want to focus on the competition between Larne and Belfast. I understand that we are not comparing like with like, although that may be the case in terms of roll-on/roll-off and lift-on lift-off. Belfast has other facilities which the Port of Larne will not touch.

Assembly Members are very aware of the low tourism figures you mentioned. Our understanding is that most of the tourists who come to Northern Ireland enter through the airports or seaports in the Republic of Ireland. We need to do something about that. We need to try to encourage people to come through the ports in the Province. We are conscious of that and of the problem of how we increase the sort of competition needed to get them here and to get them to stay here rather than just visiting on day trips or overnights.

You have talked continually about privatisation in terms of the competition. I would like you to focus on the possibility of Belfast Harbour becoming a semi-state body. In terms of the competition, what effects would that have?

In response to Jane Morrice you said that you were not aware of what status the state body would give. However, you have already said that the port of Dublin is one of your major competitors, and that is a semi-state body.

There may be differences in terms of corporation tax and in the amount of money that could be made, but Belfast is probably more efficient that Dublin in the sense that it was rationalised some years ago. It cut its workforce from about 320 to 112. Our understanding is that Dublin will shortly follow suit and that this will considerably increase its profits.

I would like you to concentrate on the competition between Larne and Belfast. There are things that Belfast does that Larne would not touch. Perhaps you could tell us in which areas Belfast and Larne are competing.

Mr Galway:

You are correct in saying that Larne's speciality is the roll-on/roll-off business which we first entered in 1938-39. In 1948 we were also the first in the world in the business of lift-on lift-off. Larne's population is 32,000 to 33,000. It is relatively small compared with that of Belfast. Belfast has a much bigger population catchment area. Bulk and general cargoes which tend to come to large cities - oil, grain, coal, steel - are probably more suited to Belfast. We did handle some of that traffic but were advised by the Department of the Environment before the 1989-93 round that, unlike Belfast, we would not get funding from the European Regional Development Fund for any of those facilities.

Even if we had been interested in that sort of business we could not have developed it at a cost which would have enabled us to compete with other ports. However, it still would have meant that our main development would be the roll-on/roll-off business. I am not saying that we would have developed other types of business, but that put it entirely out of the equation.

In the case of semi-state bodies, we do not yet know what enhanced trust port status would mean in terms of borrowing powers, investment or what additional work could be done. Until such information is made public it is difficult to say exactly what, if any, changes there would be. In Great Britain they have published their review of trust ports. They have not done so in Northern Ireland.

One could surmise that they may place additional responsibilities on the trustees of ports to publish information and make it available. But one would be uncertain about borrowing powers and the right to invest in certain businesses, such as shipping companies and airports or property development.

Mr Hutchinson:

Mr Galway, are you saying that the competition between Belfast and Larne is really between two companies - Stena and P&O?

Mr Galway:

No.

Mr Hutchinson:

You are saying that it is only in roll-on/roll-off. The port of Belfast does not own the roll-on/roll-off facility. It only provides the facility for a private company, so you are really saying that the competition here is between two private companies - P & O and Stena.

Mr Galway:

No. On the Loch Ryan route - the short sea route - there are Stena, Sea Containers running Seacat and P & O European Ferries. But Larne is not limited to one route; it has routes to Lancashire and to further north in Scotland. The competition is Ireland-wide - Norse Irish Ferries, Belfast Freight Ferries, Seatruck from Warrenpoint, Irish Continental and Merchant Ferries.

Mr Hutchinson:

The point is that all those places which you have mentioned are owned by P & O. Fleetwood -

Mr Galway:

Fleetwood is not owned by P & O.

Mr Hutchinson:

Well, it is leased by P & O. Are we talking about the competition between two private companies or between two harbours?

Mr Galway:

It is not just a matter of two private companies. It is much broader because a large proportion of our freight traffic goes on routes to Lancashire which are not operated by Stena. We ship some 100,000 loads a year into Lancashire, competing head-on with the services to Heysham and Liverpool. There is a choice of services, and that is good for the customer.

Mr Morrow:

I want to ask you for some clarification, Mr Galway. At the start of your submission you stated that your catchment area was the whole of the island of Ireland. I was interested to hear the debate between you and Mr Hutchinson. It seemed from that that the competition is between Larne and Belfast. Am I right in assuming that you are subject to tax at 31%? Do you pay tax at the rate of 31% on your profits?

Mr Galway:

Yes.

Mr Morrow:

Do you accept then that from day one you are on a very uneven playing field? I understand, for instance, that Dublin does not pay any tax. I think that the gross amount that it is going to have to pay is either 12% or 12·5%. How do you see this unlevel playing field being changed to ensure that you are not always going to be at a disadvantage? Danny O'Connor said that you playing not just uphill but into the wind as well. It is infinitely worse than that - you are going to be playing into a gale-force wind. Do you accept that point?

Mr Galway:

It would be lovely to have tax at 12·5%. With our increased efficiency we can compete fairly effectively with Dublin. However, access to Dublin port is being vastly improved, with 85% Cohesion Fund assistance. Taking Northern Ireland as a whole, in 1990 the ports of Larne, Belfast and Warrenpoint handled 70% of all of Ireland's roll-on/roll-off freight. By 1995 the figure had reduced to 65%, and by 1997 it had gone down to 58% - all because the playing field had been levelled, indeed tilted slightly the other way.

Mr Morrow:

The figure has gone from 70% in 1990 to 58% in 1997. What about 1999 - is the trend continuing?

Mr Galway:

The figure for 1997 was 58%. While we know our own figures for 1998, not all the other ports have published theirs, particularly the southern ports. We guess that they are probably slightly lower still.

Mr Morrow:

You are on a falling trend.

Mr Galway:

Northern Ireland is on a falling trend, as a whole. Access to ports in the Republic is being improved rapidly. For example, people in the Industrial Development Authority in the South used to ring me frequently to ask whether they could bring customers up to Larne. They wanted to attract business to the South by taking advantage of the easy access to the North. Heinz established a base in Dundalk because of easy access to the North. I have not had a call from the IDA for a couple of years.

The ability of Northern Ireland industry to compete commercially is being eroded daily because of the lack of improvement to the infrastructure. The ports of Larne and Belfast could be super-efficient. Belfast is an efficient port, but unless all the infrastructure facilities are linked to the ports, they will be only as good as their weakest link.

The Chairman:

Obviously, everyone wants to pay less tax on profits, but how does taxation impact on your efficiency? Profits are the end of the process.

Mr Galway:

Higher taxation leaves us less money to reinvest, and it certainly forces us to sweat blood to make maximum use of our assets. Before we can acquire new assets, I have to justify them to our board and to our ultimate paymasters - the P & O Group. We have to show an acceptable rate of return on our assets, and obviously that ultimately depends on how much is left in the piggy bank. That is how we decide whether it is worth developing an asset.

Mr Morrow:

You referred to yesterday's Budget statement and to the fact that fuel costs will now be another factor to be taken into account. Will that accelerate the decline to a figure even below 58%?

Mr Galway:

Yes. I did a quick mental calculation on the way up in the car, and I reckon that diesel will cost about 73p per litre up here. In the South of Ireland it costs 50p per litre. When the exchange rate is taken into account, the differential is about 30p per litre - 40%. Even before the Budget, a truck driver could save £100 to £150 by filling up south of the border. A haulier I know in Ballymena has not bought fuel in the North of Ireland for two years. The situation is being dramatically distorted, and that is not related to the Belfast privatisation.

The Chairman:

Some members of the Committee still wish to ask questions. As time is running out, I ask them to be brief.

Mr Wilson:

You said that you did not think that the organisation of a private, semi-private or trust port was the most important factor. However, you said that a crucial factor in allowing a port to compete is the availability of funds for investment, and that in that context trust status is hampering Belfast port. What is Larne's experience of the proportion of money which was reinvested, whether it came from profits, from bank loans - which trust ports cannot obtain - or from shareholders?

Mr Galway:

Up to the moment, we have been able to develop from within our own funds. We have not had to seek bank loans.

Mr Wilson:

From re-investing profits?

Mr Galway:

Yes. In the mists of time - the '50s and '60s - things were slightly different. Then the company was totally locally owned, and developers had to go for loans and the like. But for more than 20 years we have not had to go for bank loans; we have been able to do all our development with our own funding.

Mr Wilson:

So, out of the 40% profit which you currently have on turnover, you are able to obtain enough funds to replace equipment, to upgrade the port without going for bank loans?

Mr Galway:

Yes.

Mr Wilson:

Are you saying that if Belfast, which is operating on the same kind of profit margin, were to re-invest its profits it should be able, from within its own funds, to replace worn-out capital to develop the port?

Mr Galway:

One would have thought so, but it would depend on what type of business they wished to go into. But certainly up until now we have been able to find the funds.

Mr Beggs:

My point is to do with the creation of fair competition, bearing in mind the existing trust status of the Belfast Harbour Commissioners and the various options which are being proposed. There is a 2,000-acre land bank, which is largely not related to port activity, and that creates unfair competition. That excess land could subsidise the port activity if the operators so wished.

Mr Galway:

Mr Beggs, I would love to have access to the level of rentals which Belfast enjoys - allegedly in excess of £15,000 per acre per annum. I would also love to have access to the rental income they are deriving from it, but they are in a different environment from us. They have a big population in Belfast, so certain developments may be more attractive there than they would be in Larne. In many ways we are not comparing like with like.

Mr O'Connor:

If the tax position in Dublin makes the situation unfair, could it not be classed as a Government subsidy and a case be taken to the European Court?

My second point relates to the Government's policy on fuel taxation. If you travel to London via Larne you have an increased road journey of 200 miles. You would save 200 miles by using the Belfast-Liverpool route. That would amount to a saving of 40 gallons of diesel on each trip - £240. Surely the Government policy on fuel taxation is also creating unfair competition by making Belfast more attractive than Larne. Do you think that is a reasonable statement? If so, how can we address it?

Mr Galway:

Mr O'Connor, I cannot advise you as to how you can best address it. We have already hammered out the fuel issue, and I think that the Chancellor needs to anticipate and appreciate that what is right for London is not necessarily right for the peripheral regions. It will disadvantage our industry.

As regards the Dublin tax and the European courts, I would love to see the 12·5% rate, but I very much doubt if that will happen. I am a member of the British Ports Association, and we are hoping to avoid having subsidies to the continental ports in other ways. I doubt that you would have any chance of taking the matter to a successful conclusion. I certainly could not advise you on that one.

Mr Neeson:

Mr Galway, you talked about access. Larne is very fortunate in that the railway goes straight into the port. If the Larne line were upgraded, as it urgently needs to be - indeed, if the rail network throughout Northern Ireland were upgraded to facilitate freight traffic as well as passenger traffic - could that have a positive impact on the port of Larne?

Mr Galway:

We are fortunate to have direct rail access. Even the most enthusiastic railwaymen reckon that, in Ireland, rail freight could account for a maximum of 3% or 4% of the total freight. We, along with Irish Rail, funded a study several years ago. We also did a practical test on rail freight from Larne, but that is a niche market. The infrastructure within Ireland is not big enough to be of practical use. When goods have to be put on the roads at one end of the journey, transfers are costly.

We hope that Irish Rail and Northern Ireland Railways can work together to maximise the tourist potential of the rail network. We see that as a bigger opportunity. Rail freight is relatively straightforward, but it may not be cost-effective. Much of Ireland's traffic is fresh agricultural produce. It has to get into and out of the country quickly, so railways are not applicable, and in many cases longer sea journeys do not suit.

Firms such as Desmonds in Derry, Moy Park, the mushroom firms, and supermarkets have to get their goods to the market quickly and on time. That is where the frequency of services and the short sea journeys to and from Larne can enable Northern Ireland industry to compete.

The Chairman:

I propose to draw the questions to a close. We are almost out of time. Would you like to make any concluding remarks, Mr Galway, or are you happy with what you have said?

Mr Galway:

I should like to thank you, Mr Chairman, and the other members of the Committee for inviting us. Should further information become available on the definitive proposals, we should like an opportunity to meet you again.

The Chairman:

We shall certainly consider that.

Thank you, Gentlemen, for coming.

---

AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 11 MARCH 1999 (Mr A Maginness in the Chair) Witnesses:
Mr F Cushnahan, Ms A McLaughlin
and Mr G Irwin
(Belfast Harbour Commissioners)

The Chairman:

Mr Cushnahan, Ms McLaughlin and Mr Irwin, you are welcome.

Mr Cushnahan, I understand that you intend to read a statement. We should like to put as many questions as possible, so could you confine your opening remarks to 10 minutes?

Mr Cushnahan:

As the Committee is aware, Belfast Harbour Commissioners have been presenting to political parties and other interested groups our preferred option for the way forward for the port of Belfast. We have termed that option the public/private partnership - otherwise known as the PPP. On 25 February the Ad Hoc Committee was the beneficiary of our presentation document. Our submission today is a follow-up to that presentation and additional to previous documentation that you received from us.

In our presentation to consultees, we highlighted the fact that the port of Belfast had reached a trading plateau. That was after substantial investment over the past decade via the utility of ERDF grant which we used to modernise and restructure the port's facilities. We consider that further ERDF grants are unlikely.

There is already competition pressure from other ports, particularly those outside Northern Ireland. Those ports are modernising and providing integrated transport services. We will have to respond to such developments if we are to remain competitive. That will require further investment. The status quo is no longer an option. If the port of Belfast is to play its full part in the economic growth of the Province, we must significantly modernise our constitution, and we need access to suitable financial facilities.

Integrated business is essential to our vision. If we are to direct our future business, it has to be vertically integrated. We consider it necessary for us to continue to manage the harbour estate, and we wish to maintain a head office in Northern Ireland. If we can achieve those objectives we will contribute significantly to the economy.

We have identified two main corporate structures that are necessary to move forward the port's business activity. The options are a trust port with extended powers and/or a semi-state body and a public/private partnership. Our preferred option is the public/private partnership.

I strongly emphasise that, whichever corporate structure is chosen, the associated commercial powers will have to cover the activities of this vertically integrated business. We have to encourage port activities such as transport, logistics and port property.

We had to decide which corporate structure represented the best prospect of creating a Northern Ireland-based company to operate in those business segments. We identified four key requirements.

First, we had to have access to appropriate types of finance. Secondly, and more critically, we had to ensure flexibility in our commercial dealings. Thirdly, we recognised that to achieve our vision we had to attract high-calibre executives with entrepreneurial skills for our management team. Most importantly, we did not want to engage in a process unless we could ensure that there were adequate safeguards that the port of Belfast would be operated in the best public interest.

To move that forward, we had to match our financial resources with our commercial objectives. All members of the Committee will know that the two forms of finance associated with that are equity and debt. Equity is obtained by the issue of shares, and also includes money retained from the port's earnings.

Debt finance is provided by lending institutions, which traditionally are risk-averse. This is usually cheaper, because the lending institutions require considerable assurances that the borrower has the capability to repay both the capital and the interest. Traditionally, lenders like to see an adequate equity base to support the borrowing.

The development of an integrated transport business will require significant capital investment and additional funding for the renewal of port facilities. As a public limited company operating within a public/private partnership, BHC would have access to the capital and debt equity markets to fund those developments.

 Two ports have been very successful in developing their core activities in a similar fashion.

Since 1992, Forth Ports has spent £195 million to acquire additional facilities and improve infrastructure. Of that amount, £87 million was provided by the equity shareholders, £57 million came from internally-generated earnings, and only £51 million was provided by lending institutions.

Since 1993, Mersey Docks and Harbour Company has spent £240 million. That is a substantial sum, of which the equity shareholders provided £99 million. Some £65 million came from retained earnings, and the banks provided the remaining £76 million.

As a trust port with extended powers or as a semi-state body the port could raise debt, but the gearing that lenders are willing to accept limits the amount that could be raised. In addition, irrespective of what the banks would do, we have to be sure that the repayment of capital and interest is possible within our profitability profile, otherwise our future could be threatened.

One way of increasing the availability of funding for Belfast harbour would be to have it remain as a trust port, or convert to a semi-state body, while encouraging the Government to provide guarantees. That, of course, would make the banks extremely comfortable - and I speak as an ex-banker. The question is whether the Government would be happy to provide such guarantees. I think not, because the provision of guarantees to the Belfast port would open a Pandora's box for organisations even larger than ours. Contingent liabilities are covered by the public sector borrowing requirement.

We would go further to say we believe that if the Government or, indeed, in this case the Northern Ireland Assembly were to provide us with the guarantee, that would, as a consequence of fiscal accountability, require the Government, prior to the issuance of the guarantees, to examine the risks and evaluate each proposed project. That would create an additional tier of management, which would have a number of undesirable consequences for the port.

First, Belfast Harbour Commissioners, we believe, would be at a disadvantage compared to their competitors, who would be able to respond with greater speed and effectiveness. Secondly, given that Government ratification could be questionable, with timescales being an imponderable, our counterparts, in their dealings with us, would have no confirmation that we could consummate any deal.

If you have those two factors, combined with the fact that you are looking for a high-quality executive team, will you be able to get that level of resource so that there is no impediment to the decision-making process? We suggest not. But that does not represent the modus operandi we see as moving the business forward.

Setting aside the commercial applications and the finance, one of the things we regard as essential to the future of the port is the containment of public safeguards. Therefore, in our public and private partnership, we would want to see a situation where a golden share was held by the Department of Regional Development. In addition, we would want the opportunity for the Department to hold a fairly substantial minority share - up to 20% of the equity.

We would like the golden share to contain certain rights, including the right to veto an unwanted takeover and to prevent any group of shareholders from exercising undue control or influence over the affairs of the company. For the users of our port, we would want safeguards concerning port charges, and, in recognition of its historical importance, the provision of safeguards for the harbour office and its artefacts.

We also recognise that the public and private partnership would have to comply with the existing legislation, which covers such matters as the maintenance of an open-port policy, the right of appeal against port charges and the preservation of the port infrastructure and public navigable waters.

I now turn to the harbour estate. In our consultation process, we have confirmed to all parties that within the port precincts there are only 85 acres left. All the other land is either port-operational or occupied on long-term leases. Therefore, from our perspective, the issue to be addressed is the estate management of the port. The Harbour Commissioners are firmly of the view that the public and private partnership represents the best way to carry out this function, in particular to ensure that the requirements of the port are kept to the forefront in land-use decisions.

Belfast Harbour Commissioners are of the view that liaison - the creation of a public and private partnership - is the only route that will enable them to achieve their vision of creating an integrated transport business. By doing this, they will, in our opinion, safeguard the port's long-term viability, realise its full potential and thereby enable it to play its full role in the development of the Northern Ireland economy. The golden share, which is integral to the public and private partnership, would adequately safeguard the public interest that exists under trust port status.

Finally, I am not ignoring the other two options - the trust port with the extended powers, and the semi state body. - but they do not provide the commercial, financial and managerial flexibility that the port requires to achieve its vision.

The Chairman:

Thank you very much, Mr Cushnahan. I would like to welcome your colleagues individually. Mr Gordon Irwin, who is the Chief Executive of the Port, and Ms Anne McLaughlin, Harbour Commissioner, you are very welcome here this morning.

Mr Wilson:

There are two or three issues that I want to take up. The first is a fundamental one. When the issue of privatisation was first raised, the Harbour Commissioners along with others ran a very successful campaign to enlist the support of the political parties in Northern Ireland against it. We have been told that you were unhappy with the nature of the privatisation at that particular stage. Having researched the matter, I find that there was no prescribed formula laid down by the Minister. Let me just quote the Minister from Hansard:

"While the guidelines will be concerned primarily with privatisation by trade sale, other methods are not ruled out."

Indeed he went on - after being pushed by Mr McNamara - to say that he wanted to ascertain the opinion of the Harbour Commissioners, saying that if they brought forward a view of their own he would be happy to look at it. He actually mentioned an opinion put forward by HSB Bank as being the most favoured option in a survey you commissioned. So why were you so opposed to privatisation then, yet happy to embrace a form of it now? That is the first thing.

Secondly, I notice you say at the end of this that neither the trust port with extended powers nor the semi-state body provide the port with commercial, financial and managerial flexibility. Larne said that to run a port one needed to be able to do deals quickly and to be able to make best use of one's assets. They did not feel that the managerial arrangements under trust port status affected that at all.

Thirdly, you mentioned the need to raise money. Larne said that they had a similar profit margin to your own and that they were able to finance, not just the replacement of their capital, but also improvements to the port. The director told me that this could be done purely with re-invested profits. You have told us that you need to have access to bank loans and that you also need to have access to shareholders funds. As a semi-state body, would you have the same powers as Dublin, which can raise loans worth up to 50% of its capital? Would a semi-state body not give you that flexibility, if that is what you needed?

Ms McLaughlin:

Let me take the issue of trade sale. As Mr Wilson quite rightly says, the Commissioners previously took the decision that they were not going to trade sale the port. At that stage they took the view that a trade sale would be the preferred option of a Tory Government. Certainly, from a Tory Government's point of view, it would have been a clean way of moving ports into the private sector.

There was a chance that it would realise the highest sale proceeds for the Government, and at that stage the Commissioners were firmly of the opinion that they would not sell the port of Belfast by auction. We have reiterated that view, and have confirmed it in our presentations.

We wrote to the Minister late last year telling him of our strong opposition to the trade sale of this port. We were adamant that we would not put the port up for auction, considering that we would have no idea of who the purchaser might be. It could be a major competitor, it could be an out-of-state port, and the Commissioners felt very strongly that this was not the best way forward for the port of Belfast. We are still adamantly against a trade sale.

Mr Irwin:

I was very much involved in that process. The first thing that the Committee needs to realise is that the Ports Act 1991 and the subsequent 1994 Order were drafted clearly for trade sales.

Mr Wilson:

That is not what the Minister said.

Mr Irwin:

There is a major complication that had to be overcome by Forth Ports, who insisted that they would not trade sale their port, but agreed that they would float it. The legislation provides for half the proceeds to be kept by the purchaser. If you translate that into a flotation it is very difficult to see how the shareholders can keep part of the money they paid for their shares. That is the problem with the legislation. It was a trade sale piece of legislation, and, as Ms McLaughlin said, the Commissioners were very much against it. She has given the reasons. The compulsory powers associated with it were well recognised and well promulgated.

The port of Ipswich was compulsorily privatised and put to the trade sale. The port of Tyne was nearly put to the trade sale but managed to filibuster until there was a change of Government.

Another important feature is that, in the past, European Union grant aid for a trust port was more generous than that for a private-sector company. We were involved in a major restructuring of the facilities at Belfast port, and it was not in our interests to support a mechanism which was financially to the detriment of Belfast port. This is why the port of Belfast Commissioners did not support that legislation.

Mr Cushnahan:

May I ask Mr Irwin to respond to the second question put by Mr Wilson.

Mr Irwin:

May I ask for the question to be repeated?

Mr Wilson:

It was in connection with managerial flexibility. Larne indicated that managers need to be able to do deals quickly and to make the best use of assets. A trust port did not rule out that kind of managerial flexibility, although your paper says that it does.

Mr Irwin:

The port of Larne is a subsidiary company of P&O and, from P&O's point of view, the business of Larne is that of running a ferry port in the Province. Decisions with regard to expansion plans or development plans for the port of Larne are all taken in P&O's head office in London. Local management in Larne do not have the final say in the future direction of the port.

For many years head office has been content to have the port of Larne maintain its infrastructure and to provide adequate facilities for P&O's shipping services to go to P&O-owned or leased ports across the water. It is a total vertical integration body in which final decision-making capability does not lie with the port of Larne. Port of Larne management have operational responsibility for the port. In terms of business strategy, the port of Larne is part of a totally vertically integrated business.

Mr Cushnahan:

May I deal with the question Mr Wilson raised regarding the financial applications. He referred to Larne and the semi-state body. Mr Irwin answered the question to a point when he stated that the port of Larne is a subsidiary of a plc. I honestly cannot speculate or comment as to how it is financing its particular investment. As Mr Irwin said, the head office sets out standard criteria on the return on capital employed, return on assets and necessary financial applications before permitting the port to make an expansion. This is only an external view. We have to deal with the Belfast Harbour issue in relation to the historical application of this. £150 million was spent on Belfast Harbour between 1985 and 1995. Effectively we no longer have the availability of aid from the European Regional Development Fund.

We were the beneficiaries of that to the extent of 50%. It follows from that sort of level - and I am talking about the substantive level - that we need to do the things we have addressed here under a vertical integrated business which would command those sort of sums. There must be availability. We do not have a plc head office - we are our own plc. The only way we can avail of those funds is through a structured finance arrangement which gives us accessibility to both equity and debt.

Mr Wilson mentioned the 50% debt-to-equity requirements of a semi-state body such as Dublin. I do not have Dublin's balance sheet in front of me, but I am fairly certain that 50% of the debt equity would not allow it to take too much debt on its balance sheet. It certainly would not be able to undertake to the level that we would consider necessary for the sort of vertical integrated business that we want. I am speaking purely on the basis of what is in the best interests of Northern Ireland, not the port of Dublin.

The Chairman:

Mr Roche is time-pressured, so I will invite him to speak next.

Mr Roche:

Thank you, Mr Chairman. I have to go at 12.20 pm, but I wish to raise three issues with Mr Cushnahan.

First, from your argument that the vertical integration proposals are crucial to how you see the port developing as a successful commercial enterprise and the statistics on the distribution of trade between ports in Ireland provided by the Larne delegation earlier today, it seems that it is absolutely imperative that we establish the commercial success in the future of Belfast as a port.

Perhaps the best way for you to raise the finance for the vertical integration and replace the existing capital to account for depreciation is through your own proposals. Will you clarify what precisely will be required in terms of vertical integration?

My second point is in relation to competition with other ports. The submission made earlier this morning mentioned competitive factors that are crucial to competition for any port, but it was not clear to me how, for example, the public and private partnership proposals - or, indeed, any other proposal for the future of Belfast harbour - would give rise to unfair competition in relation to any other port in Northern Ireland, or specifically Larne. That was not clear to me.

Access and the differential price of fuel were mentioned as being important competitive factors in relation to any port, and I gather that, in the past, you received a differential funding from the EU, although I understand that that would simply continue if it did give rise to some competitive advantage in any future scenario. It was not specifically related to the question of how, if you change your status now, it will affect competition - unfairly or otherwise.

My third point is on the use of the land around Belfast harbour. There seems to be a fear that this land could be used for purely speculative purposes and that the funding from that could help finance your activities all of which could enhance your competitive capacity. Some people would call that unfair competition, but my view is the more competition the better.

Mr Cushnahan:

There are three questions, and they are, in a sense, intertwined. The first asks about the extent of the vertical integration, the second about what the issues are for us in terms of the business activity and the third about whether I tend to look at the matter from a management perspective rather than from a financial one. Mr Irwin might like to respond?

Mr Irwin:

This is at the core of the issue. In our presentation we said that we, as a port utility, are at the crossroads. We wait for people to come and go. We are not active in the whole transport chain, which is basically from door-to-door. A lot of things happen to products between leaving the factory door - if I may use that example - and arriving at the customer's door. Ports are pivotal in the transport chain. Port utilities, who want to be bigger players in the world of transport, can decide on a forward-going strategy, which seeks to ensure the viability of their core ports through added-value activities.

Since the national supermarkets came to Northern Ireland we have developed a number of what they would call logistic centres and what we would call sophisticated warehouses. The reality of locating those warehouses at, and locking them into, the port of Belfast is that the supermarkets are more likely to use the port of Belfast's shipping services. The fact that the warehouses are close to the ferries means that we have an emerging vertical-integration operation.

A substantial amount of warehousing is being built at the moment, and for that reason there has been a significant movement of traffic from ferries that use Larne to ferries that use Belfast. That is a fact and an example of vertical integration.

There are other integration issues. As an island economy, do we always wish to be in control of only one end of the bridge? Northern Ireland ports have had opportunities to secure a foothold in Europe and a west-coast port in Great Britain. That is vertical integration, and that will add value. On the Great Britain side you could also have all the activities that centre round a port.

We had to forego becoming seriously involved in what we call the lift-on/lift-off - not roll-on/roll-off - movement of containers. Lift-on/lift-off requires a much more sophisticated terminal and provides a direct link to the continent. That in itself leads to added value.

It is interesting to note that people who are very closely tied into that facility have now extended their vertical operations to owning a direct European shipping service and to opening up logistics centres and warehousing in Rotterdam. If a factory in Northern Ireland wants to send something to a customer in Holland or wherever, one company can monitor it from door-to-door. It now has an office in Rotterdam, which I will have the pleasure of opening in about four weeks' time.

People in the transport game can either sit and do their own little thing or not and there is a range of things that they can do. Companies such as P&O are involved in warehousing and shipping. They are a major transport business and completely vertically-integrated. No matter where you go in the European Union, you will bump into P&O companies, and I take my hat off to them. They have developed a superb strategy in which their ports, shipping, haulage and warehousing are integral parts.

We are not inventing anything new. This is a well proven, strategic way forward for people in the transport business, and ports are pivotal to it, because they have the basic resources of water and quayage. They are a key link in the transport chain. They can either build on that or just simply provide the quayage.

If I understand correctly, Mr Chairman, Larne has said that we have obtained more grant-aid. I do not understand how that can be said as the Department of the Environment, which administers the European Regional Development Fund grant-aid, insists that all Northern Ireland trust ports receive only 50% grant-aid for roll-on/roll-off facilities and the reason for that is to maintain a level playing field. The port of Larne, as a private company, is only entitled to receive a 50% grant. So, where Larne competes with Warrenpoint or Belfast, the grant-aid, at Government insistence, is kept at 50%.

Interestingly, the other point is that the level of European Union grant aid over our period of investment also averaged out at 50%. Therefore, it is 50% in the sector where we compete with Larne. In the overall port sector - in which Larne is not very active - we also averaged out at 50%. From either perspective, I really do not understand that point.

The final point was about the use of land. Belfast Harbour Commissioners - as a port authority -is a different business from that of the Port of Larne. However, having said that, I am not clear about the statistics. The Port of Larne does have its own - what I would call - industrial or warehousing estate. Again, that is clearly another form of vertical integration within the overall P&O structure.

From our point of view there is income from non-port land. We identified that through ground rentals. There is, however, a cost to generating that income. Infrastructure in the harbour estate has to be provided and maintained. The land has to be decontaminated when the site is made available. So there is a return on an investment, although this should not be construed as a free gift - in a cross-subsidy sense - to the port. We have also said that the level of non-port rentals is about 10% of our turnover, so that is not a significant feature. I hope I have covered all Mr Roche's points - I am sure he will tell me if I have not.

The Chairman:

I think you have covered everything. I propose to move on to Assemblyman McGimpsey, and I have other people on the list.

Mr McGimpsey:

I want to ask you about the land, because that is something that has raised a great deal of public interest.

You have around 2,000 acres in your land holding, the non-port element now contributes 10% to your profit. You appear to be operating on an income and profit of roughly 40% on your port operation. It is comparable to Larne; is that right?. You are showing a turnover in one year of £18.8 million, and your profit after tax is £6.5 million. I assume that you are operating at around 40% on your gross, which is roughly comparable with Larne. Interestingly, despite what you have just said, we have discussed this matter with Larne Harbour and it manages to do this without the advantage of a large landbank and without the advantage of property development.

When you are talk about vertical integration such as warehousing, shipping, transport, investing in a west coast port and so on, surely that does not all have to be done by the Harbour Commissioners. You agree that P&O have a very good strategy and a good operation. However, if the land is not part of the harbour commissioners but is available and is tightly controlled - from a land-use planning strategy - these uses will come about anyway.

You will recall - and we have had this discussion at the city hall, and, Mr Chairman, I will make this documentation available to all members of the Committee - that you wrote to me in January 1998 saying that you had 2,000 acres in the harbour estate. There were 600 acres on the County Antrim side and approximately 1,400 acres on the County Down side. You then produced your brochure and, lo and behold, we discovered that those figures were not accurate.

Instead of having 600 acres on the County Antrim side, you had 440 - you had lost 160 acres. You told me previously that you had 1400 acres on the County Down side. That has now jumped to 1510 - you have managed to find an extra 110 acres in the year between producing this document, which went round members of the council and this other documentation.

We have been through this before. I have your letter saying that 440 acres on the County Antrim side and 1510 acres in the County Down side are the accurate figures, so I assume that the figures that I got from you the previous year should be discounted.

You say that a comprehensive exercise had never been undertaken by the Belfast Harbour Commissioners before, and, therefore, there are no earlier figures. It is a matter for the commissioners and your management to work out how you managed to lose so many acres - the excuse being that this was the first time a comprehensive exercise had been done.

You go on to say that the computed areas are intended as guidelines for comparison purposes rather than for definitive value. Can you give an indication of what the valuation of the land is? Presumably, since you have come this far and are now ready to make a recommendation, you know the definitive value of your land holdings. I would be interested to see that and the calculations.

You are also responsible for this brochure. Again, there are discrepancies in it. For example, you show "port" and "other users", but you are missing bits of land. You are showing all of this area as "Harland" when on this other map some of it appears as "port-related". You have left out D3 completely as far as I can see, and also, on this side, there seem to be mistakes. In the brochure all of this area has been shown as "port- related" which in this document it is a mixture of "port-related", "warehousing and distribution", and "nature conservation". There are also other discrepancies.

You seem to be developing a history of discrepancies in how you describe your land.

The Chairman:

I am very conscious of time, but, quite apart from that, Mr McGimpsey, you have introduced documents which you say that the Harbour Commissioners and Mr Irwin in particular, are aware of. The problem is that members of the Committee do not have these documents, and the Harbour Commissioners were not on notice that you were going to refer to them specifically. I think, in fairness to the witnesses, that it would be proper to proceed to a question.

However, it might be unfair to ask them to comment on the details you have referred to without their having had an opportunity to look at them and deal with any discrepancies that there might be. Could you ask a quick question? Your question relates to valuation.

Mr McGimpsey:

I appreciate that. All of this documentation will be made available to members of the Committee. This is not the first time that we have discussed the matter. I want to know -

The Chairman:

The problem is that other members are not aware of the documentation. The Harbour Commissioners have had notice of this at previous meetings but not specifically in relation to this meeting. It is a little unfair to raise the matter now, but they could come back to it later.

Mr McGimpsey:

These are vital questions.

The Chairman:

We should proceed with the question of valuation.

Mr McGimpsey:

You have given evidence - I heard you say it at your previous presentation - that the privatisation cannot go ahead unless the land is lumped in on 2,000 acres. That is what I heard you say.

How can Larne operate without this huge land bank and be profitable? It can operate on a similar profit level to yourselves. What level of valuation are you putting on the land, broken down by categories? It is vital that we know how, for example, you value land for port-related activities, land given over to the harbour airport and land used for Harland and Wolff, both on a long-term lease and leases that are due to expire over the next 20 years.

If we knew those sorts of values then we would have a rough notion of what you are asking for your port operation, an operation which produce a turnover of £18 million per annum, of which only 10% is land value and of which £6.5 million remains after tax.

Mr Cushnahan:

I appreciate the observations about the discrepancies which Mr McGimpsey has noted. May we respond formally to that?

The Chairman:

Yes, I would like you to address the valuation aspect.

Mr Irwin:

The process of moving the port into a public and private partnership would involve a significant independent land valuation exercise. That would be carried out by the Government, either by the Valuation and Lands Agency or by somebody else, and the Belfast Harbour Commissioners. It would be an extensive task, requiring independent professional assistance. We have not done that. The process of moving to a public and private partnership has stopped. All processes have stopped.

In the normal course of life, you would not obtain independent professional valuations of your land - you would ask for an independent valuation of your rents, or review them every five years. You do not keep assessing the capital value of your land, you review the income from your land. What Mr McGimpsey is talking about is the capital value. That is a valid point in the context of entering into a PPP, but it is a different exercise. If that information is needed, we could set about putting such an exercise in place, but it is not to hand.

I cannot understand how we can compare the ports of Larne and Belfast. Larne is, fundamentally, a ferry port. It operates ferry services. We operate a total port. We handle six or seven million tonnes of bulk cargoes, and are the seventh or eighth largest port in the United Kingdom. Larne is akin to a port like, Dun Laoghaire or Holyhead. For a proper comparison with the port of Belfast, you need to look at the Mersey, the Forth ports, Bristol or Hull. It is not valid to compare Larne with Belfast. We are a totally different business. Part of our business is the same as Larne's- our roll-on/roll-off ferry services - but that is not, by any stretch of the imagination, the total business of the port of Belfast.

Mr Hutchinson:

Are you saying that the competition between Larne and Belfast is between two private ferry companies?

Mr Irwin:

The competition between Larne and Belfast is the competition between P&O salesmen, Stena Line salesman and Belfast Freight Ferries salesmen. They go and knock doors and say "Will you put your container on my vessel?". Those men can adjust prices on their ships by sums of money which far exceed the charges as applied by the port authority to the shipping company. The competition is between the ferry companies operating on the Irish Sea.

Ms McLaughlin:

With regard to the land issue, I can confirm that Mr McGimpsey's understanding is correct. Our financial advisers have given us clear advice that, without the land, this public and private partnership will not work. Our business alone is not financially strong enough to float.

Mr Neeson:

I have just a couple of questions. I regret that I have to go to another meeting. When the Larne representatives were here they expressed concern about the fact that the review on the trust ports was not published in Northern Ireland. Do you agree that its publication here would have informed our debate? When Mr Irwin spoke about the impact of head office on the operations of Larne port, Mr Galway indicated dissent. When the record of our deliberations has been published, it would be helpful if those who have given evidence had a chance to express their views on other evidence.

My main concern is about the proposed flotation. Many people share my view that the valuation is greatly underestimated. If there is a surplus, do the Harbour Commissioners know whether that money can be reinvested in Northern Ireland, for example in the road infrastructure which everybody seems to be debating in relation to the port's development?

Is there anything within the terms of the flotation that could prevent one investor, let us say P&O, from taking the lion's share of the share flotation?

Mr Irwin:

The first question from Mr Neeson was about the failure to publish a report in Northern Ireland. The trust port review was published in Great Britain by the Department of the Environment, Transport and the Regions. My understanding is that the review was split between Northern Ireland and GB. I do not think the Northern Ireland body has produced a major report. I guess it was waiting for the one from GB. The issues arising from that are interesting.

The review recognises that trust ports have their place. The report deals primarily with very small ports because the only major trust ports are Dover port, which is primarily a ferry port, and the Port of Tyne, which is declining. The rest are small ports, but issues such as accountability and fiscal responsibility have arisen, and it is quite clear that on the Great Britain front, DETR intends to change the whole methodology by which trust ports operate.

Mr Neeson:

I think it would be helpful for the Committee to have a copy of the GB report.

Mr Wilson:

Perhaps I may help Mr Neeson. That report on Northern Ireland ports is in being, but the Department of the Environment refuses to make it available.

The Chairman:

I think that that is the issue Assemblyman Neeson raises. Perhaps we could return to it. Some members of the Committee told me some time ago that they wanted to ask questions. I regret that I may not be able to afford everyone an opportunity. Technically, we have five minutes left. I am prepared to sit until about 12.45 pm. After the next batch of questions I will take questions from as many members as possible, and they can be answered as fully as the allotted time allows.

Ms McLaughlin:

I will quickly respond to Mr Neeson's other two points. In relation to proceeds of the sale and to what will happen if the proceeds exceed the cost of the road infrastructure programme, the Government never discussed with the commissioners what was going to happen. When the Chancellor made his statement on 12 May we had no idea that he was going to link the proceeds of the harbour to the roads programme. We just do not know.

The second question was in relation to any proposed safeguards, which would ensure that no single shareholder, or group of shareholders, would, in effect, control this new public and private partnership. We are suggesting that a number of safeguards could and should be included in the golden share, and let me summarise them if I may. We are suggesting that the golden share should include a clause to the effect that no single shareholder may own more than 10% of the shares in the new business. The second safeguard would ensure no concert-party voting, if I can describe it as that. This would ensure that, collectively, no shareholding could exceed 10%.

The Chairman:

I think that that is everything in relation to Mr Neeson. Now I have Mr Hutchinson, Mr Morrow, Mr Beggs and Mr Tierney, who indicated much earlier.

Mr O'Connor:

I indicated half-an-hour ago.

The Chairman:

I am coming to everybody who indicated. Mr O'Connor and Mr Morrice, please be as succinct as possible when asking your questions. The panel will attempt to answer them as best it can, given the short period of time we have left. We have 10 minutes left.

Mr Hutchinson:

When Mr Wilson asked the first question it was interesting that Ms McLaughlin said that when they were considering the proposals, they thought that the Tory Government would pick trade sale as the best option. I want to ask about the golden share and the protection it would give in view of the fact that the Labour Government sold their golden share in North Sea oil. What I want to know is what safeguard there would be in the golden share to ensure that the port operated in a manner consistent with the best interests of Northern Ireland.

If the Government can sell the golden share, what protection is there? Parties like my own, the Progressive Unionist Party, who do not have many Members in the Assembly, will not be able to prevent the Department from actually selling it, if it so wishes. We believe that stopping this from happening would be in the best interests of the people.

The Chairman:

Assemblyman, that is a sufficient question. I will stop you and move to Mr Tierney.

Mr Tierney:

First, I do accept what you say about the land, and this land was one of the matters that I wanted to ask about. However, if we are going to have a formal reply to Mr McGimpsey's question, I would be satisfied. There is one point, however, I would ask you to clarify. You say that there are only 85 acres there, the rest being port-related or on long-term leases. However, other people seem to think that you have more land than you are telling us about. When you write to us formally, will you go into bit of detail on that?

Mine is a simple question, one which is important to a lot of members of the Committee, and you have not answered it in your submission today. Are you saying, as part of your proposal and your submission, that the proposals you are putting forward will not affect the other ports in Northern Ireland?

Mr Beggs:

I am concerned that the estate - the port and also the land - should be dealt with in the best interests of the people of Northern Ireland. Earlier, you talked about your income stream and the need to have all the land included. Given that the land only accounted for 10% of the almost £19 million income in 1997, I fail to understand why all the land has to be linked to the sale.

More particularly, with this huge land bank, do you not agree that there is a real possibility that in the long term, property deals will take place involving existing lessees and any new structure? Huge profits could be made by freeing up land for property development. That profit would not come to the public but would be made by private companies.

Mr O'Connor:

A reference has been made to Belfast's being a total port. However, to compare Larne with Belfast is unfair as Larne could not obtain the same level of grant for lift-on lift-off services.

On what do you base you assertion that, just because somebody has his warehouse next to your port, he will use it in spite of its being £100 dearer? I fail to see the logic behind that. People use the cheapest and most competitive service and, just because they are located in your area does not mean they will actually use your service.

It was said that P&O was directing the port of Larne. Are you telling me - and I want this put on record - that Denis Galway does not have commercial freedom to make decisions about the port of Larne? I may be wrong, but it seems that the whole focus of this presentation has been on Larne, that it has been used as a sledgehammer to beat the port of Larne. I suggest that there is a difference between seeking approval to do something and being directed to do something.

Mr Morrow:

I have two points to make. One has been raised by Billy Hutchinson and the other has been raised by Roy Beggs.

I would like to emphasise the point made by Roy Beggs about sitting tenants such as Shorts and Harland & Wolff. The sitting tenants are in control of a considerable land bank. Would it not be sensible, if they became shareholders in any new set-up, for them to release their leases - that would enhance further the value of the land.

My other point relates to what Sammy Wilson said earlier. The Minister said - and we are dealing here with a written reply, not hearsay - that

"while the guidelines will be concerned primarily with privatisation by trade sale, other methods are not ruled out."

This is not made up; it is there for anyone who wants to read it, and it was commented on earlier.

Secondly, if profits have reached a plateau, how do the commissioners envisage going forward from there? Diversification or development - what exactly do you have in mind?

Ms Morrice:

I will keep it simple. We have stated that we wish to act in the best interests of Northern Ireland. I assume that this is the view of everyone around this table, and not just of the politicians among us. Normally one believes that the Government act in the best interests of the people. Why would a public and private partnership be the best option?

The Chairman:

That concludes our questions. We will be as flexible - [Interruption]

Mr Cushnahan:

Mr Chairman, the land issue seems to be one of the main areas of concern. This has been evident throughout the discussions. I suggest that Gordon Irwin bundle together the various aspects of this issue in a manner that will allow him to be as helpful as possible in his answering. Would that be helpful to you, Mr Chairman?

The Chairman:

The land and the golden share issues are both important. Ms Morrice has also made the general point about acting in the people's best interests and how that is to be gauged.

Mr Irwin:

 If we take the land situation we will be able to clarify Mr Tierney's point about the amount of land not under lease or port operational. I will not go into the detail of that here.

I have been asked why it is important to include all the land in the harbour estate when rental income provides only 10% of turnover. As we seek to develop this business in a Public and Private Partnership (PPP) and put together a prospectus, we have to demonstrate how we will maximise the value of the assets. Clearly, there will be opportunities in the future to develop land in the harbour estate.

The current figure of £1·8 million in rental income will increase. Land regeneration is already happening. For example, Sydenham Business Park has 85 acres to develop. By the end of this week that will probably be down to 80 acres, because there is a tenant who wants to come in.

Land will continue to be available for lease. Business is going on in the harbour. I am not sure whether the harbour exchange development will proceed, but if the planning permission comes through, that will come on stream in a few years' time, and add to the attractiveness of the overall business.

Mr Beggs made the point, if I picked it up correctly, that Short's and Harland & Wolff could become shareholders and release their leases. I cannot believe that the boards of Short's and Harland's would give up such valuable documents. They have leases on serious amounts of land; I cannot imagine that they would give that up. Should they ever want to get out of the harbour estate, I can imagine that they might want to sell their leases or do other things with them. There is a claw-back provision in the legislation.

We have said in our submissions that if the Assembly were to allow the PPP to go ahead, it should seek to use that provision to punish any property speculation by the PPP - we totally agree with that - but should seek to encourage urban regeneration of the land.

I cannot go into the details here, but it is a basic point. Over the years, the port has been good at urban regeneration in those areas where land was not leased to other people. We cannot go into areas of land that are derelict - and we can all see them - if they are under lease to Harland's. We cannot trample over its property rights.

Somehow or other we are going to have to work out a deal on that. It does not matter whether we are the lessors or somebody else is. Harland and Wolff is the lessee, or Short's is the lessee, or somebody else is the lessee with a piece of paper saying "I have this land for 110 years and provided I pay my ground rent and comply with the covenants in the lease you will not trample over my property rights." You may want urban regeneration, you may want things for Belfast, you may want things for the Province, but if the lessee is not prepared to play ball, you cannot walk in and trample all over him.

There are three other ports to consider. If you are going to look at what can impact on ports in Northern Ireland, you must not stop at the border. You have to say "What is Drogheda doing? What is Dublin doing? What is Dún Laoghaire doing?" That is a fact of life.

In terms of the Northern Ireland ports, clearly there is a competitive scene with Larne between the ferry operators. They are in the marketplace competing. Londonderry is a substantial distance away from Belfast, and it has no unit load services. It is in the business of bulk cargoes, and the cost of moving bulk cargoes by road haulage far exceeds the cost of importing them by sea. In Londonderry, they are closer, obviously, to their natural marketplace. Road haulage and proximity to the customer are much more important than any cost reductions offered on port charges.

The port of Warrenpoint is in a slightly different position. It is on the eastern seaboard caught between Larne, Belfast, Drogheda, Dundalk, Dublin and Dún Laoghire. And which of those ports is going to have the hardest impact on it? Geographically, from the point of view of the port scene, it is in a very competitive part of Ireland.

By the way, we have all been in the competitive scene. I do not think we have all been lying sleeping. People should not assume that up to now it has been a cosy club which is suddenly going to be broken up.

We compete today, and we will continue to compete tomorrow. Most importantly, and this was on the news last night, one cannot act unfairly - the Competition Act 1998 does not permit that. One can be fined up to a level of 10% of annual turnover for doing that. Our particular view is that competition will continue. The fact of becoming a PPP will not alter that.

Mr Cushnahan:

Thank you, Mr Irwin. May I deal with the question from Mr Hutchinson about his concerns over the golden share and with Ms Morrice's comments on why a PPP is better and why we should support it.

Ms McLaughlin:

 Mr Hutchinson is quite right. In our scheme we have suggested that the Government or their nominee hold the golden share. We have presumed that that might be the new Department of Regional Development. He is also quite right in saying that while it is held by the Department, it can be released. That would be up to the Minister and the Department. When we considered the scheme we had to consider who might hold the golden share. In previous privatisations of ports the share has been held by a Government Department at Westminster. We ruled that out. We feel that there is a greater chance that it will be held on to if it is held locally. It will be in the hands of our new Minister.

I want to respond to the final question which Ms Morrice posed. That is the key question: why is what we are suggesting better than what we have now? Why do we feel that it is in the best interests of Northern Ireland? Sitting here today the commissioners are very clear that the PPP is not only in the best interests of the port of Belfast but in the best interests of the Northern Ireland economy.

As commissioners we have no vested interest in the port; our businesses are not in the port, and we have nothing to gain financially from suggesting that this scheme go forward. If anything other than what was in the best interest of Northern Ireland was being suggested, my colleagues and I would have left long ago.

Why is it better? It is better for a number of reasons. It would give the harbour a chance to develop and grow. It would give us a chance to build a very strong Northern Ireland based-company, and we need more of those here in the new climate. It would give business access to the capital which is needed over the next decade if there is to be continued growth and investment in Northern Ireland.

With the golden share held by the Department of Regional Development - the shareholding which we are suggesting - very strong safeguards would have to be put in place. We are suggesting that the Department of Regional Development hold 20% of the shares and have representation on the board. That would give local people a very clear input into the future direction of the business.

The golden share also offers protection for the Northern Ireland economy. We have mentioned, in answer to earlier questions, the issues of share-holding and limits on share-holding which would ensure that there was no concert-party voting and that no one party dominated the business. We also referred in our golden share to safeguards for the artefacts in the Harbour Office and to safeguards for port users on charges. If I may sum up by saying that we firmly believe that this PPP is the best way forward - in fact, we believe that it is the only way forward for this business.

The Chairman:

Mr Cushnahan do you want to say anything very very quickly?

Mr O'Connor:

My questions have not been answered.

The Chairman:

I am sorry. We really have run out of time - I have been as flexible as I can.

Mr O'Connor:

Mr Chairman, I want it recorded that the commissioners refused to answer my question.

Mr Cushnahan:

I am sorry, Mr Chairman, may I interject here? I cannot have that comment on record.

Mr O'Connor:

They had the opportunity, Mr Chairman, and they did not address them. I want that on record.

Mr Cushnahan:

If your Chairman gives us the opportunity, Mr O'Connor, we will address your questions.

The Chairman:

I will give you one minute to do that.

Mr Irwin:

If I remember correctly, Mr O'Connor, you suggested that people in logistics and warehousing are not tied in to the adjacent shipping services. You feel that they will move to other ports and shipping services to follow the money. They will move to Warrenpoint, or Dublin, or Larne, and that by having the logistic centre there -

Mr O'Connor:

Whatever is most commercially viable for them.

Mr Irwin:

Well, one of the things that is commercially viable for them is to be right beside the shipping services. We have proof from our own business that this is a fact of economic life. That is the reality for the people with whom we deal - it is a proven fact of business.

Those who are not doing this are not customers of ours, and I cannot comment on them. But it is what our customers are doing, and I am quite happy to have that recorded.

Mention was made of Larne investment decisions. I know of very few satellite companies or subsidiaries able to spend £10 million, for example, on a piece of port infrastructure. Will that decision be made totally, autonomously and independently in the town of Larne, or will it have to be referred to the head office of P&O?

Mr O'Connor:

With respect, that is not what you said at the time -

The Chairman:

I am not going to permit any further discussion on this issue. I am going to ask the Chairman of the Harbour Commissioners to make a succinct concluding remark. Thank you very much for your patience.

Mr Cushnahan:

Mr Chairman, from one Chairman to another I realise that you want to get this over and done with therefore I do not wish to add to what has been said. We are glad to have been here, and we have done our best in all sincerity to answer the questions put to us. If by any chance there is any other information which Mr Tierney would like, we would like to respond to him. We will deal of course with the issues raised by Mr McGimpsey. If there are others who would like to talk to us - and I mean any of the people here today - we will do our best Mr Chairman, to get in touch with them.

The Chairman:

Thank you very much, Mr Cushnahan, Ms McLoughlin and Mr Irwin. This has been a very useful session, and I am sorry that time has beaten us.

---

AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 25 MARCH 1999 [Mr P Roche in the Chair] Witnesses:
Mr M McAree, Mr L Murray and
Mr D Malseed
(Belfast Harbour Users Group)

The Chairman:

On behalf of the Committee, I welcome the representatives of Harbour Users Group. Mr McAree, perhaps you could give your presentation, after which members of the Committee will put questions to you.

Mr McAree:

I am Michael McAree, secretary of the Belfast Harbour Users Group. Our chairman, Mr Ian Webb, is unable to attend and has asked me to make this presentation of our group's views. My colleagues are Leslie Murray, the group's deputy chairman, and David Malseed, who is a committee member. We appreciate this opportunity to make a presentation to the Ad Hoc Committee. If we run out of time I shall be happy to respond to written questions from any member of the Committee.

Belfast Harbour Users Group has 24 paid-up members, more than 1,000 direct employees and over £135 million of fixed-asset investments in Belfast harbour. Belfast harbour development over the past two centuries has been based upon the dues paid by both harbour users and ship owners.

Apart from European Regional Development Fund grants, which came on stream in the 1980s, the port receives no public funding. Those grants go some way towards offsetting the considerable disadvantage inherent in not having a tunnel or bridge connection to Great Britain or to the continent. ERDF grants have been used in part to enable port charges to be set at levels which give the peripherally located industries of Northern Ireland some chance to compete in the single European market on a more level playing field.

Like every other interested party, Belfast Harbour Users Group feels that, as yet, insufficient detail has been put on the bones of the Harbour Commissioners' proposals. In particular, we are unclear about the fundamental rationale of the suggested public/private partnership scheme. The first question that needs to be answered is why does Belfast harbour need this change? It is reasonable to ask the Commissioners to make a clear and detailed statement about what they perceive to be the advantages that may accrue to current and future users from a public/private partnership scheme.

An obvious question that must be answered by anyone seeking to alter the status of Belfast port relates to its ownership. The sale of the port, by whatever means, will introduce shareholders into its affairs. That raises the likelihood of financial institutions in London making decisions about Belfast port in the interests of their shareholders rather than in the interests of the current and future port users or, indeed, of the Northern Ireland economy more generally.

The Ad Hoc Committee will need to consider the potential impact of the Harbour Commissioners' proposals on other local trust ports and, particularly, the possibility of a privatised Belfast harbour competing unfairly with Larne, Warrenpoint or Londonderry.

Our fundamental message to the Committee is that there are alternative options. The Harbour Commissioners' proposals are currently the only option on the table, but a discussion about the future of such a key economic asset should consider in some detail other possible ways forward.

In trying to examine the issues in the wider context of the Northern Ireland interest, the Belfast Harbour Users Group questions whether selling one of the primary assets that remains in public ownership in Northern Ireland sends the correct signal to outside investors.

The IDB is continuously looking for inward investment for Northern Ireland, yet the proposal suggests that the people of Northern Ireland have no faith in a commercial enterprise which is critical to the Northern Ireland economy. We must also be aware that the sale of Belfast harbour would be an irrevocable step which should be taken only after detailed analysis and comprehensive debate.

It is unlikely that the intrinsic value of the business will diminish over the next five years, and if it was still felt then that privatisation was the only way forward, the business could be sold at that later time.

One option is to allow Belfast harbour to continue developing as a trust port, but with wider powers. The Department of the Environment, Transport and the Regions review of ports in Great Britain makes it clear that trust ports can be as effective in economic generation as privatised ports.

Even if Belfast harbour were to continue as a trust port, it could still be given increased powers which would allow it to make a substantial one-off contribution towards generating the cash that is needed to fund some of the road schemes proposed by the Chancellor.

The Belfast Harbour Users Group opposes the separation of the port's operations from its landbank. However, in extremis, it would be preferable for the commissioners to mortgage or even sell part of their non-operational land rather than introduce shareholders whose interests would be very likely to conflict with the interests of the Northern Ireland economy.

If it were ultimately decided that a PPP scheme represented the best way forward for Belfast harbour, it would be appropriate to consider the extent to which a privatised port should be regulated.

The Belfast Harbour Commissioners have suggested that a golden share would be adequate to protect the interests of the port users and the wider Northern Ireland community. The Belfast Harbour Users Group is emphatic in not believing this to be the case. We would favour a regulator with responsibility for safeguarding the public interest.

In addition to being able to prevent a resale, a regulator could be empowered to require continued maintenance and improvement of the port, to set charges, to prevent the creation of new charges and to ensure fair competition between Belfast and other Northern Irish ports.

We welcome the Committee's inquiry and hope that it will consider options which have been rejected by the Harbour Commissioners. We suggest that it would be possible for Belfast to continue as a trust port and still generate the revenue needed for the Westlink over the next few years.

Except as a last resort, port operations must not be separated from the landbank as the harbour estate provides a vital commercial core for Belfast and Northern Ireland. If the Committee recommends the PPP proposals, those proposals must be modified to provide the effective regulation that is normal for privatised utilities.

I thank the Committee again for inviting us here. I hope that this brief oral statement has clarified what we regard as one of the most important issues. We suggest that the Committee re-examine the Harbour Commissioners and probe their proposals much more closely than it has been possible to do so far.

Mr Tierney:

You introduced yourself as the secretary of the users group. How many people does the users group represent?

Mr McAree:

The users group has 24 paid-up members, representing approximately two thirds of trade through the port. There is a list of the member companies at Appendix 1. These are the core businesses that operate within the confines of Belfast harbour, and they generate most of its revenue.

Mr Campbell:

I am interested in the users group's attitude to the suggested PPP scheme. I can understand your reservations about the port being put in the hands of financial institutions in the City of London. To get to the nub of this concern, what would the partial privatisation of the port mean? Is the users group concerned that there would be, ad nauseam, continual price hikes? Would that follow on from your concern about financial institutions?

Mr McAree:

Belfast harbour handles 60% of Northern Ireland trade by volume. It is a very important artery for the economy. If there were unfettered private ownership of what is really a quasi-public utility, we would run the risk of someone's deciding to increase the costs of using that port.

The costs of going through the port are borne by the companies who do business there, but eventually those costs are passed on to the consumers in Northern Ireland. It is like hiring a taxi: whatever the actual cost of a taxi, the price just gets added on. If the cost of using the port of Belfast increases, over a period of time those costs will filter down into the economy generally. Our key point is that the peripherality of Northern Ireland within the European Union puts us in a weak situation, and, as a result, industry in Northern Ireland cannot really bear any extra costs.

One of the reasons that the ERDF grant system was put in place - and a lot of that money was spent in the port of Belfast - was to reduce the extra costs of Northern Ireland's distance from European markets. If that were worn away over time, we would still be left with the peripherality of Northern Ireland, but we would no longer have the cost advantages that were envisaged in the grant system.

Mr Campbell:

I want to be clear on this. Is it the case that your concern about possible, you might say inevitable, cost increases for the port users lies behind your concern about partial privatisation? If that point were addressed in some way, would there still be an interest in partial privatisation?

Mr McAree:

This is a quasi-public utility and, therefore, as is the case with a public utility, some regulation would be appropriate.

Looking at the matter from another aspect, we have not seen any suggestion that the management of Belfast harbour have been doing a bad job; in fact, we think they have been doing a good job. We have a successful port - one of the most successful in the British Isles. It is a trust port; it is working well, and, so far, no one has told us that there is anything wrong with it. So, why do we need the change?

Belfast Harbour Commissioners are saying that they need shareholders and the services of financial institutions in order to obtain money for future investment, but this port has developed over 200 years without any of that. Investment in the Port of Belfast was based on the business going through the port and was paid for by the people who used it - whether land-based companies or merchant shipping. This has been successful for 200 years. We are not entirely sure what benefits would accrue by introducing a new class of "shareholders" who would have to be paid for the money which they would be putting into the business. They are not going to invest in Belfast harbour for altruistic reasons; they would be putting money in because they believed it would be a good investment.

Ms Morrice:

Thank you. That was a concise, interesting and useful presentation. I have three questions.

First, how much consultation was there between you, the users of the port, and the Harbour Commissioners before they decided to take this option forward? Secondly, you said that the sale of the port indicates a lack of confidence in Northern Ireland plc. Could you develop that point and explain why you think that that is so? The last question follows on from the one asked by Gregory Campbell. The harbour obviously needs cash; it has had major injections of European funding, but the aim is to replace that funding by other means such as shareholders. In the absence of European money can you suggest ways of getting additional cash for investment?

Mr McAree:

I will take the questions in order. There was no real consultation with the users - the customers who provide the revenue streams for Belfast harbour. We were not consulted as to whether privatisation was a good idea. Indeed, at one of our first meetings, my colleague Mr Malseed asked Belfast Harbour Commissioners to provide us with five good reasons why the port should be privatised. What was this going to do for us as users or customers of Belfast harbour and for the general population of Northern Ireland? After having had four meetings and one presentation we are not entirely sure what benefits will accrue to the users or the general population.

As to the sale indicating a lack of confidence, the point I was making is that we have a very successful, well-run business - as I have said, Belfast seems to be one of the more successful ports in the British Isles - and the trust port status can still work in the future. If you were thinking about selling a business, it would possibly be because you were intending to retire. If this had been our family business and we needed £75 million for some development - say a road or something else - we asked ourselves if selling the business was the only option or was there an alternative strategy? We do not, of course, own the business; the business is considered to be owned by the people of Northern Ireland, and, looking at it from that perspective, we thought that selling the business was an indication that there was no confidence in that at all.

As regards future investment we have had meetings with the Harbour Commissioners. We listened attentively to the presentation, but we were taken aback by the notion that the harbour is strapped for cash and would not be able to borrow money to fund future development. Obviously we are not privy to all the details the harbour commissioners have in mind, and we do not know what finances are available to them, but someone should be asking challenging questions about this concept that the only way forward is to introduce equity participation.

The Chairman:

Absolutely.

Mr Murray:

May I comment on that? The harbour users have been the main source of income for 200 years and the lifeblood of the harbour. Nothing has changed over the years and we have £135 million invested in the harbour. If the harbour fails, we all face a very difficult time as a lot of money is invested in its infrastructure. We, the harbour users, own all our infrastructure in the harbour - an infrastructure largely constructed with our money. We have a very large interest in the harbour, but our interest is also Northern Ireland plc's interest in the harbour. There should have been consultation much earlier than this. We had to press to be allowed to make representations. The Harbour Commissioners have probably spent a couple of years and a lot of money on consultancy agencies to provide them with a plan.

We have been presented with a copy, as I am sure you and others have, of that plan, but has there been any independent audit of what has been happening? What is the value of the landbank? What are the alternative methods of raising funding? I am not sure. We are told that this is the best way forward. We are not unintelligent people. Are there alternatives, and have they been properly examined? We are not saying a strident "No" to everything or "You must look after the harbour users". There is a lot at stake for Northern Ireland here and for the harbour users, and an independent audit is necessary. Again, what is the value of land?

Two houses were sold on the Malone Road yesterday for £1 million. According to the estate agent they were worth half a million. What is an acre of land on the harbour estate worth? I do not know. How would privatisation affect the value of the harbour? Are there other ways of generating funds and running the harbour? These are our prime concerns.

Mr McGimpsey:

There are one or two points that I would like to raise with you. The first of these concerns the land. I see from your submission that you think that the land and the port should not be broken up. According to the Harbour Commissioners, the 2,000 acres attached to the harbour would have to be included in any sell-off. However, they also told us that there are only 85 acres available for development and that the income from the land represents only 10% of their earnings. This seems to be a contradiction. I would like you to comment on your suggestion that the land and the harbour and the port should stay together. Dennis Galway of Larne Harbour was frankly incredulous that you said that you needed to have such a huge landbank to make the port work. I would like you to explain that first.

Secondly, you say that the golden share does not work. Many of us are a bit unclear about the golden share. You suggest having a regulator in the event of the port's being privatised. How would that work? Your third, and most interesting, suggestion is to develop the harbour as a trust port, but with wider powers. What would these wider powers be? How would they affect the port's ability to borrow money and to spend money where it was required? I understand that the Harbour Commissioners have over £20 million in the bank. They tell us that they cannot use this money, and yet they say that they are strapped for cash. This strikes me as a major contradiction. If you could address those points, I would be grateful.

Mr McAree:

Part of our reasoning and rationale is based on the fact that the port has been very successful. That success is partly due to not only traffic but the landbank, including the reclaimed land, that has built up. We see no real reason to naturally separate the landbank from the port operations unless that is seen as the only way forward. We say that we should not go down that route just yet but should first examine all the alternatives.

My colleague Leslie Murray spoke about current property values. If it was decided to sell the 85 acres at the harbour at auction next Wednesday, all that that would establish is the value of that land on that day. Its worth in two, five or 10 years time would remain unknown. My understanding is that the other parts of the landbank are on long lease - like Harland & Wolff - and that under current circumstances neither the tenant nor the landlord can make much use of that land. I further understand that if the port of Belfast were privatised there would be time-limited provisions for clawbacks if land were sold and windfall profits were to accrue. There might be a five- or 10-year time limit.

A commercial operator could ensure he did not sell any land and create windfalls until after the expiration of the time element. Under privatisation, the new landlord could approach the tenant, who could have a long lease on the land, and suggest a joint operation to develop the land and share the profits. If that is what a privatised entity might do, why not take that idea back into the trust set-up? My understanding is that Belfast, as a trust port, cannot develop property. If the powers of the trust port were widened to allow it to develop the property, that would avoid some of the land lying idle because of the tenant's restrictive lease and the fact that the landlord cannot do anything because the tenant is there. Widening the powers would enable the trust port to enter a partnership with the tenant to develop the land and release some of that value back into Belfast harbour. That is one of our reasons for saying that not separating the landbank would be the right approach.

My colleague Mr David Malseed will comment on golden shares because he has some experience of them.

Mr Malseed:

I am a director in a subsidiary of a major plc. I have spent all my working life in plcs. Rule 1 of a plc is to ensure that the shareholders are looked after. Everybody else is secondary and tertiary. That is a fact, and I live by that rule.

One of my current employers was a semi-state company but is now a plc. We introduced a golden share in 1991 to allay people's fears and assure them that all would be well in the future and that their jobs would be secure. The issue is highly complex and would be well above today's discussion. Most of the company's chief executives have gone. The golden share, and probably the fact that it exists, has been forgotten, and the bottom line is that the Government, who own it, could sell at any moment. People who get golden shares think that they know a lot about them, but they are highly complex, and the bottom line is that everything, including a golden share, has a market price.

Regulation is the better option, but no one should be falsely persuaded about the regulation of golden shares. They are very exposed.

Mr McAree:

I will give an example. One of the ideas contained in the PPP proposals and the golden share is to have price increases in Belfast harbour - whether we are talking about payment for ships coming in, for cargo, for passengers, or for renting space in the harbour - restrained to be not higher than the retail price index.

That sounds innocuous and very good. We are operating in the commercial world every day, and we would love to have a business in which we could raise our prices by the rate of inflation every year and thereby increase our profitability. Most straightforward commercial interests cannot do that.

There is a second point buried here and an illustration of it is Northern Ireland Electricity, that was privatised in 1993. It is a regulated public utility. If Northern Ireland Electricity had been allowed to adopt the same policy as the PPP is proposing, that is retail price index increases, electricity prices in Northern Ireland would have gone up over that period by 18·8%. That is the aggregate amount of inflation since 1993. In fact, what we have had with regulation is a reduction in the price of electricity from Northern Ireland Electricity, notwithstanding the very difficult situation with the power generation costs in Northern Ireland. In other words, allowing a quasi-public utility to raise its prices year-on-year has the ultimate effect of making industry in Northern Ireland uncompetitive.

Regarding the matters of wider powers and the borrowing of money, you have made one of the points yourself. Our understanding too is that Belfast harbour has £20 million. We also believe that some of the revenue that will come from the development of part of the land has not yet been put into the books. In other words, some of the property has not yet been properly developed. The development of the D5 area has not been completed, but when it is completed, the rents from that will increase the revenue stream for the harbour. Its amount will increase perhaps by 10% of its revenue. We are not sure what the exact increase will be. So the business will have good cash-generating facilities: it has £20 million sitting there, land that has not yet been utilised, and unrealised potential in the landbank.

If we decided that this was our family business and that we wanted to find £75 million to fund some road-building project, we might consider a mechanism to widen the powers of the harbour to allow it to borrow against its future income from part of the landbank to free up the money.

With regard to the road-building process, we recognise that an improvement in the transportation system into Belfast and the port would automatically improve the ability of the port of Belfast to compete and keep costs down. Time is money in the trucking business, and it costs money if a truck coming into Belfast gets delayed for an hour on the Westlink. Anything done to speed traffic up lowers the costs for everyone in Northern Ireland.

Mr McGimpsey:

Mr Chairman, may I come in here?

The Chairman:

Would you please wait until later.

Mr Kelly:

Your last observation has led into what I was going to ask. I represent a rural community in mid-Ulster, and we felt that we were on the periphery of the debate about the harbour until Lords Dubs informed us that the Toome bypass was contingent on the sale of the harbour. That changed our attitude, and that has created tensions between the rural and urban constituencies. A peripheral issue had become a central one. What are your observations on the proposition that the sale of the harbour would be contingent on road improvements, and in particular the Toomebridge bypass?

Mr McAree:

I understand. There is a very special set of circumstances here. The chance is being offered for a privatisation, the proceeds of which - or so we are being told - will be kept in Northern Ireland. They will be set aside, ring-fenced and used in Northern Ireland. That is a very laudable idea unless you consider that what we are really doing is selling ourselves cheap for the here and now and not protecting the future.

We have tried to address the problem from both angles. We have tried to say that Belfast harbour is a very useful entity to keep within the public domain, but we recognise that money has to be found to balance the books. If the port is not to be privatised there will be a shortfall which will need to be made up in order to build these roads.

What we are trying to do, in a sense, is let the money escape from Belfast harbour in order to produce the £75 million needed. We have not detailed exactly how this could be done. It may prove to be impossible, and we may find that a public and private partnership is the only route available. We do not know enough about this, and we want to make sure that all of the options have been examined.

If, by clever financial engineering, Belfast harbour can borrow £75 million - £20 million in cash and the rest by mortgaging some of the property - the future development of the port would not be dramatically hindered and the people of Northern Ireland would still own it. We were trying to come up with a win-win situation.

Mr Murray:

Belfast port is Northern Ireland. It does not seem right to make a wrong decision about Belfast port because of a one-off such as a road bypass. Have alternatives been examined? We do not see any evidence that that was the case.

Mr Cobain:

I would like to return to the issue of costs, which Mr Campbell raised earlier. The Harbour Commissioners expressed concern that they have now reached a plateau, and they do not see a great deal of development opportunity for the port.

The Commissioners said that they have had a relatively free ride up to now. Dublin was not that competitive as a port, and they have been able to grow continuously over a number of years. However, they are now facing greatly increased competition from Dublin as its port costs are dropping dramatically. Dublin is also in a position to get very favourable government financial assistance and would benefit from the building of the new tunnel.

When Mr Campbell talked about costs you said that one difficulty with a public-and-private-partnership arrangement is that costs could be allowed to grow. There could be no restriction on costs once the port became a private development. Such costs would automatically be passed on to the consumer.

Would you explain that further? We have a competitor, 100 miles down the road, who is becoming more and more aggressive and who is cutting costs dramatically. The difference between the cost of petrol or derv in Northern Ireland and the Republic is astronomical, and some Northern Ireland-based companies are talking about moving into Southern Ireland because it would be more cost-effective for them. What incentive would there be for a privatised company to go on increasing costs in such circumstances?

Is it not the opposite? In order to compete with Dublin, would the private companies not drive the cost down, not up?

Mr McAree:

It is a complicated situation. It depends on whether it is a business with very slim gross margins or one that is getting very little added value on its products. For example, if one of its customers were based within 20 miles of Belfast, and the road haulage cost from the port of Belfast to Lisburn was £2 a ton and the cost from Dublin to Lisburn was, possibly, £5 to £6 a ton, that customer would be unlikely to move his business centre to Dublin to execute his business with Lisburn.

There is a natural hinterland to Belfast. The volume that goes through Belfast has been increasing over the years. It has widened its circle of influence, and the business volume on the periphery of Belfast could swing towards Dublin. If Belfast harbour wants to float, it will be interesting to see how the business is presented. Shareholders may require assurances about higher charges if volumes are said to be static or falling.

The real problem is that in terms of tonnage, the port of Belfast has plateaued out. In terms of volume, it has nearly reached its pinnacle. Anyone running a public utility might be prepared to sacrifice some of Belfast's tonnage because it cannot compete with the midlands of Ireland, and one way of getting back some of the lost revenue would be to increase the charges to the people who need to come through the port.

But how can we go to the financiers in the City of London and say "Here is a port. Its tonnage has plateaued out. There will be no further grant funding for the port of Belfast, and Dublin will become more competitive. How will we sell this business?" It is not a business that you could really sell. There is an inconsistency somewhere.

Mr Cobain:

Mr Chairman, I wish to make a second point.

This still does not answer my question. If this is going to be a public and private partnership, your concern was that the Belfast Harbour Commissioners would actually drive costs up and that eventually - as they always do - those costs would percolate down to the consumer. This is not about the hinterland, not about Lisburn; it is further afield than that. As regards keeping the costs down, the harbour has been very successful in taking trade away from Dublin, but when the volume falls, because of the fixed costs, the price for using the port will obviously rise anyway. The volume is very important and the Harbour Commissioners have said that it has plateaued out with which you agree, but how can a commercial company survive against a competitor down the road when they keep increasing costs year after year?

Mr McAree:

It depends on your starting point. We are starting from the point of view that we agree that Belfast is a very competitive port. In general, by being very competitive, Belfast is not at the high end of the range of port costs in Ireland. At the moment, Dublin is more expensive, but it has not yet had the benefit of ERDF grants. It will build the tunnel. It has got government investment, it will get ERDF grants, and it will then reduce its charges. At the moment we have a very competitive port in Belfast. A public and private partnership has the opportunity - not the obligation of course - to raise charges up to the retail prices index under the scheme proposed. Meanwhile a competitor 100 miles away will be reducing charges. Somewhere between those two things it will balance out. There is a point at which Belfast harbour could increase charges without losing too much volume. Dublin's prices are currently above those in Belfast, but it is likely that Dublin's prices will be reduced in the next five years.

Mr Cobain:

Yes, but companies on the periphery of Belfast will be affected quicker than companies in places like Lisburn. If I had a company in Newry which was using Belfast port and costs were closing as quickly as described, I, with other peripheral traffic, would be attracted more quickly to Dublin. But if I lived in Lisburn it would be far harder to drive to Dublin. You are saying that there is going to be a happy medium in this and that a figure will be arrived at which both Dublin and Belfast will be happy with.

You work for a private company. If I were a private investor, aware that in five or six years we were going to have this happy medium, and someone was trying to sell me shares, I would not be rushing to buy those shares, and I do not think anybody else would.

Mr McAree:

There is a distinction between the people who have fixed assets in Belfast, who cannot really move, and those with mobile businesses. A mobile business could relocate to Dublin or elsewhere. At the moment it is more cost-effective for someone in Newry, Dundalk, Monaghan or parts of the midlands of Ireland to come to Belfast rather than Dublin. This is because of the costs of going through the port of Dublin and the time taken to get through the Dublin traffic. A tunnel in Dublin will become a key factor.

Mr Beggs:

Fixed assets invested in the port, and which are valued at over £135 million, were referred to in the presentation. Following on from what Fred Cobain was saying, it is obvious that these cannot be picked up and taken somewhere else. They represent a major investment in the port, and I see that as giving any new privatised company particular leverage to drive prices up. While in the very long term you may be able to think of moving, grain silos and oil tanks will not be moved, and any privatised company would want to pitch the price to maximise income.

In addition to that, the cost of land haulage to the nearest competitor makes it impractical to move bulky items from Dublin. If privatisation goes ahead, there must be a regulator.

Are you aware of how port charges have altered in ports that have moved from trust status? You may be able to demonstrate what I fear in that area.

In relation to the land bank and the possibility of property speculation, it is the port-leased land that is central to your business. The Belfast Harbour Commissioners have said that they want to keep everything together. Can you see why land leased for non-port use is considered to be essential to their core business?

Mr Malseed:

With regard to the first question, I work for a company which has ports in Britain, Ireland and all over the world. I do not have the details in front of me, but I will give you a written reply. The answer should be able to reflect whether the ports were in a poor state, if charges had been particularly high and were reduced following increased efficiency, et cetera. We are working from an efficient port so we have to obtain those details.

Mr Beggs:

I fear that prices will go up.

Mr Malseed:

As a managing director I would again stress that shareholders must be paid dividends - and better dividends - every year. If this does not happen, as has been seen with Marks & Spencer locally, shares are dumped and the price goes down. It is as sensitive as that. This is a successful business we are talking about, not an unsuccessful business, as the previous one, which needed that change. I will give you a written answer with as much detail as possible.

Mr McAree:

The rate of increase of charges in Belfast over the past five or six years has been about 1% per year. This has been below the rate of inflation and has helped to keep Belfast very competitive. It has been part of the success story.

If the philosophy that currently prevails were to continue under a PPP, we would not see any difficulty. It is the introduction of new shareholders, who would have a different agenda, which could place a strain on the existing set-up.

As for your question regarding the land bank, it is a matter of whether we should treat this as a complete package. We are aware that the Belfast Harbour Commissioners view the port operation and the landbank as mutually complementary. I suppose one could say that that part of the land bank which is not actually used for port operation is not necessarily required for Belfast harbour, but without having to hand the reason why it must remain part of Belfast harbour, it would be difficult to make a convincing counter-argument to that.

In terms of the day-to-day operation of our business, the sale of some of the 2,000 acres probably would not have a dramatic effect. We cannot really answer that question properly, because we do not have enough information.

The Chairman:

We have less than 10 minutes left, and there are three members still wishing to ask questions. We should be as brief as possible.

Mr Neeson:

I would like to comment on the make-up of the Belfast Harbour Users Group. Apart from Corry's, they all seem to have fixed assets. I am surprised that none of the shipping companies or agents - organisations such as Stena, Sea Containers or Norse Irish Ferries - is in your group. Stena is not on the list I have here.

The important thing about a port is that it should be used for trade. Clearly, the whole situation has become very blurred, because of the land bank which Belfast harbour holds. In recent years, I have been greatly concerned at the demise of small ports in Northern Ireland. The port of Carrickfergus - my own home town - was, at one stage, dealing with half a million tons of cargo a year and was able to compete with Belfast because it could fix its prices at a lower rate. The same thing applied to Coleraine and Bangor. My main concern - and it has already been partly addressed by Mr McAree - is about the matter of port charges. Harbour users have come to me and expressed the worry that privatisation - in whatever form - will mean an increase in port charges. I would like more clarification as to how you feel port charges would be affected.

My other question concerns the golden share. We expect that if there is to be a golden share, it will be held by the Assembly - if it gets off the ground, and I certainly hope that it does. If that were to be the case, would you still have the same worries?

Mr McAree:

Port charges may, or may not, be a major issue. That will depend on the restrictions placed on the privatised entity. The proposals that we have seen so far leave us feeling a little uncomfortable, because they are rather vague. There is the possibility that it might not be permissible to increase charges beyond the level dictated by the retail prices index. However, running a port is a very complicated business, and, while there may be no increase in charges, the owners, operating as a private entity, may decide to reduce the level of service being offered as another way of enhancing their profits. For harbour users, this would mean that, where we would have been paying a certain amount for a certain level of service, we would suddenly find ourselves paying the same amount, or more, for a reduced level of service. How can we ensure that the level of service that has been provided over the past 200 years will be maintained?

Belfast Harbour Commissioners, for example, say we can refer to the Harbours Act (1970), but, under that legislation, the maximum fine for an infringement is £100. So, you would have to go to court, spend £100,000 to fight your case - all for a £100 fine. Perhaps we are being unnecessarily gloomy, assuming that we will be dealing with an unscrupulous privatised entity, prepared to ride roughshod over the interests of people operating in the port and those in the wider community. Maybe it will not come to that.

The golden share would probably need stricter conditions. We have elaborated on that by saying that it might be simpler to have a Regulator, and that even if the cost of that resulted in the users of Belfast having to pay increased fees, that would probably be safer for them in the longer term.

A Regulator could make sure that the public/private partnership is profitable and gets a good return on its investment, but he would not allow it to abuse its dominant position to the detriment of smaller ports or to cross-subsidise by increasing the charges for trade that tends to be captive to the larger port and using some of that income to try to win back volume from smaller ports in Northern Ireland.

Mr Bradley:

My question stems from the fact that I come from Warrenpoint, but I also ask it out of curiosity. You expressed some concern that if Belfast went down the PPP route, it would damage the other three ports in Northern Ireland. As a Belfast harbour user, why are you concerned about that?

Mr McAree:

There is a need for other ports in Northern Ireland, and they need enough business to remain viable. In the long term, if those other ports were to go out of business, Belfast would have a complete stranglehold. We need other ports.

It would not be easy for us to relocate our business, but while other ports are operating, an attempt can be made to retain the competition and to keep prices in check. We need other viable ports. Obviously, a dominant port with much money behind it and unfettered could decide to make life difficult for the smaller ports. I am not saying that it would do that, but we are discussing a port that has been successful for 200 years and trying to look forward to the next 100 or 200 years.

We can perhaps give the Committee an idea of what might happen in the next five years, but who can tell what will happen in the year 2050? As a regulated port, Belfast would give Northern Ireland's smaller ports some room to breathe and to manoeuvre.

Mr Tierney:

May I put a supplementary question?

The Chairman:

Yes, but quickly please because we are running out of time. Mr McGimpsey may wish to speak and other members of the Committee may want to respond.

Mr Tierney:

The problem of increasing Belfast port charges was raised, and it was also said that if the proposals were implemented they would be detrimental to the other ports. The two statements seem contradictory.

Mr McAree:

In a privatised entity charges would not increase across the board. For example, if it was decided to increase charges to a mobile ferry operator, he would simply take his ship elsewhere because he has no investment in the port. He would go to Warrenpoint or to Larne, or he might go to Dublin. Trade within Belfast makes up part of the 15 million tonnes. For example, Belfast has grain silos and oil terminals, and that business has to go through the port almost regardless of port charges. It would be hard to take that business elsewhere. An extra burden could be placed on that business, and charges could be reduced for other operators.

Mr McGimpsey:

The discussion has been useful. Belfast Harbour Users Group represents those who contribute 80% of the volume of trade through the port and owns £130 million worth of the infrastructure. You said in your evidence that when the Harbour Commissioners produced their plan they did not talk to you, did not consult you and did not negotiate. You said that you knew nothing about it. Why was that? Was it simply arrogance on their part? Is that how they operate? Your group contributes 80% of the volume of trade, and has a huge investment in the port, yet the Harbour Commissioners propose to sell it out from under you and they will not even talk to you about it. That seems absolutely fantastic.

Mr McAree:

They did not exactly rush to give us the full details.

The Belfast Harbour Users Group was formed to bring together people who are interested in the development of the port and to allow them to have a unified voice. If we meet the commissioners as single companies we do not have the same clout that we have as a group of companies who represent the majority.

If one could wind the clock back it might have been better for Belfast Harbour Commissioners to convince the customers that this was a good idea. If we have concerns - and perhaps our concerns are not real or we are overstating them - then the very least that can be done is to make us feel more comfortable with the concerns that we have raised. We would probably have preferred a wider debate with the Harbour Commissioners, to say "Is this a good idea?" Some of the points that we have raised here go back to the very first meeting at which David Malseed asked the harbour side to give five good reasons why this was a good idea for the users. To date we have not received one good reason.

Mr Malseed:

In fact, we sent them a letter on that subject, which was never replied to.

The Chairman:

Mr McAree, maybe you would like to take a couple of moments to wind up in light of the questions that have been put to you.

Mr McAree:

Thank you, Mr Chairman. From our approach today you can take it that we think that this is a very serious step. Whatever happens to Belfast Harbour is of great significance to Northern Ireland. We hope that we have been able to give the Ad Hoc Committee more information - we recognise that this is a very specialised area. Even though we work every day within the port and are very familiar with some of the concepts, we do not have enough information to tell you what the right answer is. We can understand the great difficulties that the Committee would have in deciding where to go next. We hope that we have opened up the debate and given you some extra information. We hope that Belfast Harbour Commissioners may have to come back so that you can ask them more questions. We will be happy to come back to answer any further questions that you might have.

The Chairman:

Thank you, Mr McAree, Mr Murray and Mr Malseed.

---

AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 25 MARCH 1999

[Mr P Roche in the Chair] Witnesses:
Mr B Graham, Mr A Quirey
and Mr J Quinn
(Port of Belfast Harbour Trade Union Side)

The Chairman:

Mr Graham, welcome to the Ad Hoc Committee. I invite you to make your presentation.

Mr Graham:

Thank you, Mr Chairman, for the opportunity to address the Committee. I have with me Mr Quirey and Mr Quinn, representatives of the harbour's shop stewards from the trade union side.

The trade union has been involved in negotiations about the future of the port of Belfast for a long time - since 1994, or earlier, when the Tories brought forward their privatisation proposals - and our position has remained unchanged. In 1994 we were encouraged by the cross-party support for our opposition to the privatisation of the port of Belfast, and we are encouraged that that cross-party support seems to continue today.

The trade union side has always accepted that there is a case for change. Our proposal is that there should be a full commercialisation of the port, but the benefits should accrue to the Northern Ireland economy. Detailed proposals were set out in our submission to the Government as part of the consultation process on the trust port review in Northern Ireland, and copies of our submission were made available to Assembly Members.

Since our original submission as part of the trust port review there have been further developments in the harbour such as the D5 planning outcome, the Odyssey millennium project and other projects that the Harbour Commissioners have in the pipeline. So the harbour continues to develop and play an important and critical role in Northern Ireland's economy.

We believe that the port's role has become increasingly important for the Northern Ireland economy, and we hope that the economic benefits that should accrue from the Good Friday Agreement will be significant, and that the role of the port of Belfast, as identified in paragraphs 6-12 of our submission, will be essential in assisting the economic enhancement of the Province which will result from a lasting and durable peace process.

The economic role of the harbour is recognised by the Government also in chapters 12 to 14 of the Department of the Environment's report 'Shaping our Future'.

The previous Tory Government and, indeed, the new Labour Administration, have failed to recognise that the port of Belfast is not like the Mersey Docks and Harbour Company, Forth or Tilbury; it is the key port in a relatively small economy.

On an all-Ireland basis, there is competition that is not there for other British ports. We have seen significant developments in the Republic, which has restructured its ports as semi-state bodies. The Republic's decision to move into European monetary union, and Britain's to stay out, could have further serious implications for the Northern Ireland economy, and particularly for the port of Belfast, unless changes are made. We accept that commercial powers should be given to the port, but it is how those commercial powers are applied, who controls them and their accountability that are crucial.

We propose a publicly controlled body with full commercial powers and with a board made up of representatives of the social partners, in particular the Irish Congress of Trade Unions and the CBI, and also direct nominations under the Nolan and Peach arrangements. This would be a balanced board that would work in the interests not just of Belfast but of the whole of Northern Ireland and, indeed, parts of the Republic. It should be remembered that the port does a lot of trade with the Republic, particularly with the north-west counties and some of the other border counties as well.

In proposing the extension of the port's commercial powers, we have the support of others. The CBI's original submission to the trust port review did not favour privatisation but did favour extended powers. We also have the support of various trade unions as well as many individuals and other diverse interested groups such as historical societies and environmental groups who are worried about what might happen to the port if it were to go fully into the private sector.

In moving forward, the harbour must remain a single entity. There is a synergy between the harbour land bank and the functions of the harbour. If the harbour is allowed to extend its powers, it can increase that synergy and use its natural resources to further develop the economy within the harbour and the economy within Northern Ireland. The harbour should be allowed to benefit, not just from the leasing of its land, but also from putting buildings onto that land. Any profits generated from that should be used to keep port charges at a reasonable level and keep the port's charging regime competitive to provide for growth, both in direct employment by the Belfast Harbour Commissioners and also in spin-off areas within the harbour.

We want to co-operate closely with Government - in the form of the Executive and the Assembly - and with management to secure the benefits that we believe can be obtained by following the route that we propose. We believe that the Labour Government's proposals for selling off the harbour, which do not differ significantly from those of the Tories before them, would be a wrong move. What they are offering is a better deal than that on Northern Ireland's airport but considerably worse than what we believe should be available to the people of Northern Ireland.

If the harbour remains in public control, if it is allowed to grow, then it will make considerable profits. Through a business planning process, those profits should be looked at, in conjunction with the Government, to determine what moneys the harbour will need over a three- or five-year period to reclaim further land, to invest in new cranes and new machinery or to put in new roll-on/roll-off facilities. There will then be a balance of moneys and we believe that, on a regular basis, that balance should come to the Assembly for use in other Northern Ireland infrastructure programmes. That money should be additional to the block and not offset by London clawing it back.

With regard to benefits, there is a significant difference when our proposal is compared to that of the Labour Government. Gordon Brown proposes to give back to the people of Northern Ireland some of the money that would be generated from the sale of the port of Belfast on a once-off and once-only basis. The ultimate beneficiaries from the sale of the port of Belfast would be the Treasury in London and those privateers who purchased shares in the port.

I know that the Government and the Harbour Commissioners say that there are safeguards in their proposals; in particular they talk about the golden share. That is the key tenet of their position which seeks to give the impression that we will not end up in a Northern Ireland airport situation, that the future of the port of Belfast and the interests of Northern Ireland will be secure.

We have given papers to the Clerk which show that golden shares are now under attack from the European Commission. Commissioner Monti has determined that they are anti-competitive and has taken legal action in the European courts against a number of member states. That means that the golden share is not worth the paper it is printed on, in spite of civil servants from the Department of Finance, the Department of the Environment and London saying that this difficulty can be surmounted.

The British Government have an abysmal track record in Europe where it has lost case after case. Some have involved the trade union movement, for example the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE Regulations), which implement the Acquired Rights Directive of the European Community. So the golden share is not a safeguard; it will be blown apart by European Commission action. This raises a serious question for the Harbour Commissioners: if they do not have the golden share, what safeguards have they to offer the Northern Ireland economy and the workers employed at Belfast harbour?

One also has to look at the history of privatisation, in particular privatisation within the ports industry. I have copied to you a study of the matter by Saundry and Turnbull of Leeds University. The final sentence of their report reads

"Privatisation has not only proven costly, but unnecessary, ineffective, and in many respects counter-productive."

We endorse this view. One has only to look at how Northern Ireland has suffered as a consequence of the privatisation of the airports and the Northern Ireland Electricity debacle.

We believe that public/private partnership is a gloss. It is privatisation by another name, and especially dangerous given the developments on golden shares. Our proposals envisage changes in the scope, role and function of the harbour, but they do not differ substantially from the vision of the commissioners. The key difference between us concerns the control and the use of the profits. Our proposals are not geared towards fat cats or share dividends or benefiting the few. The trade union solution would provide for public ownership and control, the economic benefits of a competitive low-cost port operation and a continuous revenue stream to the Northern Ireland block, which would provide additional funding for infrastructure improvements. It would not be a one-off Gordon Brown package which would yield only partial returns to Northern Ireland of our assets with the remainder going to the Treasury in London.

In conclusion, we say that what you have heard, particularly from the Harbour Commissioners and the Government, gives a false impression of how things would be run, because due diligence has not been paid to developments in Europe such as the one on the golden-share issue. Not enough attention has been paid to the history of privatisation of ports in the United Kingdom even when academic papers are available. Not enough attention has been paid to the history of privatisation within Northern Ireland and, more importantly, not enough attention has been paid to the views of the public, the political parties, the trade unions and their own workforce. We do not need, nor do we want, privatisation of the port of Belfast.

Mr Hay:

I would like to deal with the trust port review. The trust ports have, in general, operated in a very narrow commercial field. There has always been a strong feeling that they should be allowed to operate in a wider field. That was certainly your opinion.

What effect, if any, would that have on the smaller ports in Northern Ireland? I believe that whatever happens to the port of Belfast will have an effect on the smaller ports in Northern Ireland. That is my first question. My second is this: have you met the users of the port to discuss your proposals and ideas with them?

Mr Graham:

I would like to deal with the first point. The original paper did seek to address, to some degree, the relationship with other ports, and we were of the opinion that the port of Belfast should not be allowed to become a monopoly; it should not be allowed to take over the other trust ports. As far as the trust ports are concerned someone should be appointed to oversee their roles and responsibilities so that all the trust ports operate together in the interests of the Northern Ireland economy, the Northern Ireland people and the areas in the Republic that they serve.

Our submission has been widely available during the time in which we have been fighting privatisation. A significant number of port users will have seen it, because it was made available to former commissioners, such as the former chairman and other members of the board, who have a substantial interest as port users.

Mr Hay:

You seem to be looking at new ways in which the port of Belfast could operate more commercially and on a wider field and saying that that is what the smaller ports should be doing as well. You are saying that the trust ports review should enable all ports to operate commercially.

Mr Graham:

I do not think that we in Northern Ireland should allow a situation to develop where there is not some form of public control to ensure that the best use is made of all our resources. We can only hope that the Assembly will be able to ensure better management of our resources than either the Tories or Labour have.

Mr Beggs:

We all wish to see Belfast Port continue to trade successfully in the interests of the trade unions, public representatives and, indeed, the people of Northern Ireland.

You feel it important that the land remain attached to the port, and you admitted that you think that it should be used to subsidise and replace equipment, for instance, in the port in the future. I represent East Antrim and I would like to see fair competition between all the ports in Northern Ireland. I realise that the main competition will be coming from Dublin, in terms of bulk-handling facilities and so on, but it is important that, whatever else happens, all the ports operate from a level playing field.

During a presentation from the Larne port a couple of weeks ago we were advised that it was trading off a port area or using a port land base of about 60 acres. The Belfast Harbour Commissioners say that they have 800 acres of port operational land and a further 50 acres for housing and distribution. I am concerned that the additional property of over 1000 acres, which is under the control of the Commission, may be used to create unfair competition within Northern Ireland in terms of the smaller ports - Londonderry, Warrenpoint and Larne. Whatever changes occur we have to recognise that we cannot create unfair competition. That would not be in the public interest. Would Mr Graham care to comment?

Mr Graham:

There are some misconceptions about land in the harbour. Much of it is on 125-year leases to Harland & Wolff and Shorts, who play an important role in employment in Northern Ireland and get the land leased to them very reasonably. Some might argue that they get the land at unfair rates because they are not charged its full economic worth.

While I accept your interest in your own constituency, the fundamental difference is that Larne is a private port and the money from Larne is going into the pockets of P&O's shareholders. Our proposals for the port of Belfast would put the money back into every citizen's pocket because the profits of the port would be used to improve the Northern Ireland economic infrastructure.

Mr Neeson:

The big concern here is the golden share. If the proposals for a public/private partnership are accepted, the golden share may well be held by the Assembly. What are Mr Graham's feelings on that?

I have received an assurance from Lord Dubs that any profits from the public/private partnership above the amount set aside for the roads programme will be invested in Northern Ireland. Would Mr Graham care to elaborate?

The port users suggested that, rather than have a golden share, a regulator should be brought in who could safeguard the interests of all concerned, the public and the harbour users.

Mr Graham:

As a public service trade union official, I have spent all of my working life dealing with the Government. One thing I have learned since I became involved in the union in 1978 is never to trust a Government Minister, no matter what political party he is from. If Mr Neeson feels comfortable with assurances from Lords Dubs, that is his prerogative.

I am more worried about the killing hand of the British Treasury and Gordon Brown. The Treasury in London will want whatever money it can get into its coffers. You might get money in one hand, but it will be taken away on the other.

We are well used to debates in Northern Ireland, particularly in terms of European money, about additionality. If we received an extra £10 million through this process, the Northern Ireland block would be cut by £10 million next year, and at the end of the day we would be no better off. I have considerable fears about the way in which the Treasury deals with Northern Ireland and additionality.

We still see a need for regulation, even within our proposals. There is a need to ensure that everyone who makes use of the port is dealt with fairly, and if anyone feels that he has been unfairly treated, he has access to the ombudsman. Certainly we would not be averse to looking at other regulatory powers.

The role of regulators may come under scrutiny from people in Europe who will want to see whether the regulatory bodies are infringing upon the European concept of freedom of movement of capital and commerce, et cetera. That takes us back to the point made about the golden share. If the golden share were there and could be guaranteed, it would be sensible for it to be operated by, and on behalf of, the Assembly. But the research that we have done, particularly since the recent decisions by Commissioner Monti, shows that golden shares are illegal. This blows out of the water not just this proposal, but the proposals that the British Government have for the likes of air traffic control as well. I have been talking to colleagues in other public service unions about this particular aspect.

Mr Hutchinson:

Mr Graham, the Labour Government gave a guarantee that the North Sea golden share would not be sold, and six weeks later it was away.

Mr Graham:

We are back to the point that if the Treasury thinks it is to its benefit at any time, it will cash in on it.

Mr Tierney:

Mr Graham, Mr Hay asked if you have met with the port users. I would like to know if you have had a meeting and full discussions with the commissioners.

You made the point that the money made from any sell-off of land should go back into the port. Do you accept that the money proposed for the roads would benefit the port as well because of the improved road infrastructure? If the money made by any sell-off of land were to go back into the port to up-grade it, would any profits come back to the Assembly in five years' time?

I agree with what you have said about the trust administrators, and particularly the one whom you are talking about - if this is set up, he will not be here that long to answer to it. However, the infrastructure of the roads is as important to the port as the buildings in the port, yet it may take five years for the money to be available for the roads. Are you saying that the £75 million needed for the roads should come out of the block grant and not from the sale of land or anything else?

Mr Graham:

I am a commissioner. I have the Irish Congress of Trade Union's seat on the board, but I am the lone voice that opposed the other commissioners' proposals and therefore, because of a conflict of interest, I am no longer permitted - and rightly so - to sit on the ad hoc committee of the Belfast Harbour Commissioners.

We have had full and frank discussions with the commissioners throughout, going back to the time of the original proposals on privatisation under the Tory Government. They are well aware of our proposals, and they accept that there is only one difference between us and that is on the issue of control and ownership - we want public-sector control and ownership, and they want private-sector control and ownership.

We are not advocating the sale of land. The land is a necessary part of the harbour and should be used to maximum capacity to provide further commercialisation of the port and generate more profit. Taxpayers would benefit in two ways from that: further profits would add to the £3 million plus per annum that the harbour pays to the Treasury in corporation tax, and excess profits would be raised as a result of that.

Members, from the point of view either of a Department or of the Assembly as a whole, should look at the needs of the Harbour Commissioners over a three- or a five-year period in order to provide for re-investment in the harbour infrastructure. The balance left could then be used for roads, et cetera.

That would produce a re-occurring amount of money, whereas, as I said earlier, the Labour proposals are for a one-off amount of money. The money is not going to come immediately. Even if the commissioners' proposals are given the green light, it will probably be at least two years before the money is generated. The £75 million proposed as part of Brown's package was a clever con and nothing more.

Mr McGimpsey:

I received a letter from Mr Irwin dated January 1998 in my capacity as a member of Belfast City Council. In that letter, which I know you have not seen, and which is now being circulated to members of the Committee, Mr Irwin detailed the amount of land which was under the control of the Harbour Commissioners. The letter states that they have 600 acres on the Co Antrim side of the port and 1,400 acres on the Co Down side. Mr Irwin gave a breakdown of the Co Down land holdings, stating that there are 330 acres of port operational land under the control of the Belfast Harbour Commissioners.

Mr Irwin, in his oral evidence to the Committee, said that he has 440 acres on Co Antrim side- not the 600 acres given in his letter. Also, in his oral evidence, Mr Irwin said that he had 1,510 acres on the Co Down side - not the 1,400 acres given in his letter. There are major discrepancies here.

My point is that Mr Irwin said in his letter that the area of port operational land on the Co Down side is 330 acres, yet, in his oral evidence, that figure jumped to 435 acres. That represents a 33% increase in the area of land used by the port directly for port operations.

From your knowledge - and you represent the workforce - have the Harbour Commissioners acquired an extra 130-odd acres of land on the Co Down side as part of their port operations? Has the area under port control on the Co Down side suddenly increased by a third? It is perhaps unfair to ask you that question.

Mr Graham:

I would much prefer Mr Irwin to answer for his own inadequacies.

Mr McGimpsey:

My reason for asking you this question is that Mr Irwin has a difficulty with it.

Mr Irwin, in his oral evidence, said that he has 440 acres on the Co Antrim side, 420 acres for port operation and only 20 acres for non-port operations. That seems fairly clear to me, but it contradicts the figure of 600 acres given in his letter. The differences are vast, and they are not the sort of things you could make a wee mistake over. I therefore assume that the Harbour Commissioners have increased the port operation business on the Co Down side by one third.

I was astonished when the Belfast Harbour Users Group told us that they represent 80% of business volume in the port and own infrastructure worth £130million yet were not consulted when the Harbour Commissioners were producing their plan. They were merely told about it afterwards and got a presentation. Were you consulted as a representative of the port's workforce, and did you have any input into the preparation of the Harbour Commissioners's plan for privatisation?

Mr Graham:

I will deal with the last question first. The trade union side did not have any input into the Harbour Commissioners' proposals. I, in my capacity as the Irish Congress of Trade Unions's nominee on the board, sought to dissuade the Harbour Commissioners from their proposals. I wanted them to follow the route that is in the trade union submission.

The trade union side, like others, was involved in the consultation process, as the Harbour Commissioners call it, inasmuch as we were invited to the Harbour Office for the glossy presentation of the proposals that they feel represent the best way forward.

At times the port users can be somewhat economical with the truth. The previous board, which was in place until October last, had more key port users on it than trade union representatives. They have had a more indirect route in than others. There have also been meetings between the Port Users Committee and the Harbour Commissioners - many more than were afforded to us.

On the question of land, there are glaring inconsistencies in the evidence that was presented in the earlier document to the Committee and, indeed, to us. I cannot explain all of that. From the trade union perspective, the Co Antrim side is almost exclusively port operational land, and we welcome the progress that has been made between the Harbour Commissioners and the Government in trying to reclaim more of the seabed. It is helpful to get further downstream into deeper water and to increase the amount of land for port operations.

There is a mixed use of land on the Co Down side - port operations; long-term lease to Harland & Wolff and Short's; on-stream developments such as the D5 project and the Odyssey project. That is playing an important role in the functioning of and relationships in the harbour. Most of the land is reclaimed land. The Harbour Commissioners have been responsible for that since the inception of the harbour and there is no reason for the fruits of that not continuing to be used in the total functioning of the harbour.

The Chairman:

I wish to ask a question that perhaps follows on from the previous one. In presenting your submission you are representing the interests and the views of your members. However, the Belfast Harbour Commissioners have actually balloted the staff about their proposals. The result from 131 ballots was: 74 for; 2 against; and 1 for the other proposal. Will you comment on that result?

Mr Graham:

We were not consulted about this. I was away last week when it took place. I have already had a serious word with the chief executive. It is disgraceful. They did not consult the trade union movement about their proposals, and they did not consult us about this ballot. It was a ballot of the workers in the harbour, not solely a ballot of trade union members. It includes the management team and the police, who are denied the right to be members of the trade union movement. The management side has also spent thousands of pounds in bringing in PR consultants and consultancy firms and on presenting their vision to every member of staff. They have been economical with the truth not just about the golden share but about what has happened with other privatisations.

The trade union represents not just the interests of the direct employees but also the wider interests of the trade union movement, including the thousands of other people that work in the harbour estate. We believe that our proposals represent the best interests of our members in terms of job security, growth in direct employment in Belfast harbour and indirect employment in the harbour estate. In any situation involving the balloting of members, the employer should sit down with the unions and agree the process and the information to be placed in front of people. That did not happen. I suspect that they took advantage of my absence from Northern Ireland last week, coupled with the fact that they knew we were coming here today.

It was a shoddy attempt to undermine the role of the trade union movement within the port of Belfast, and I hope the members of this Committee will recognise it as such.

Mr McGimpsey:

Mr Chairman, you mentioned that 74 were in favour of privatisation. Was that 74%?

The Chairman:

No. 74 members out of 130.

Mr McGimpsey:

I thought that there were thousands working in the port.

Mr Graham:

There are.

Mr McGimpsey:

These are people who actually work for Gordon Irwin?

Mr Graham:

Yes.

Mr McGimpsey:

All right. So secretaries and so on are included?

The Chairman:

I do not wish to use my position as Chairman to supplement my question - that would probably be inappropriate - so Mr Tierney will ask the supplementary question.

Mr Tierney:

Mr Graham, are you asking us to ignore the findings, or are you asking for a new ballot which the trade union movement will be involved in?

Mr Graham:

Balloting the workforce is not the way forward on this one. People have been subjected to management's views, which were backed by pressure, money, media people, bankers and specialist consultants from London. There is no way that the trade union movement could compete with that type of approach. We have carefully researched this issue over the years, and we have an alternative set of proposals which we believe are in the best interests of our members directly employed by the Belfast Harbour Commissioners. They are also in the interests of all the members of our unions and the other unions involved in the harbour estate. More importantly, they are in the interests of all workers and families in Northern Ireland and the border counties.

Mr Tierney:

I accept the point.

The Chairman:

In relation to my question and in light of the outcome of this ballot, are you sure that you have the backing of your members? Also, I understand that the ballot was conducted with shop steward agreement. Are you saying that, without the guidance of the trade unions, the employees - the people who are directly employed by the harbour commissioners - could not assess the proposals put to them in terms of job security and their own self-interests?

Mr Graham:

Let me put it like this. In an election, how would you like to go to the polling booth on election day to find that all the other political parties were allowed to sell their wares, but you had been prevented from selling yours? That is what happened, and the harbour authorities spent considerable amounts of money in the process. Such resources are not available to us. The Irish Congress of Trade Unions has debated this point over the years. Independent unions, such as those represented round this table, have debated it. My union, the Northern Ireland Public Service Alliance, has had motions at its annual conference virtually every year. Another motion will be going in front of conference this year. Those are the democratic means by which independent free trade unions operate. We are not in some sweetheart deal with employers.

Ms Morrice:

I am interested in the idea that some of the profits should come to the Assembly. On the one hand, there was the view that there might be a problem finding money without privatisation or transfer, but you seem to be suggesting that so much profit could be made that there would be enough for reinvestment in the port with some left over for a dividend to hand over to the Assembly - a dividend which could be passed on to the people of Northern Ireland. I am surprised that you think that so much money could be made without recourse to the equity market - without borrowing, without funding from Government or EU sources. How could that be done?

Mr Graham:

The Harbour Commissioners' submission to the Committee showed a pre-tax profit for 1997 of £8·7 million on a turnover of £18·8 million. That is a very substantial profit margin. The submission also showed their profits from 1985 to 1997. Profit represents a very high proportion of income - somewhere in the region of 40% - and that is on the basis of the limited commercial activity currently ongoing at the harbour: it would increase considerably if there were unlimited commercial activity. There would be an increase in both turnover and profit.

Our belief, based on the historical profits that the harbour management has made and been able to reinvest without drawing down money from the Government - the only money it has received is European grant aid, which is available to any port, and is still available, though access to European grants is becoming more difficult - is that the harbour would continue to be in a high-profit position. The management of the port could look at the profits for any three- or five-year period, assess what would be needed for, say, the replacement of cranes or the improvement of the harbour's road structure but would still enjoy substantial profits. The benefits of this would be twofold: corporation tax would be paid directly to the Treasury and a residual amount - which we believe would be quite healthy - would be available for economic infrastructure proposals.

Ms Morrice:

How much would that be?

Mr Graham:

It is difficult to say, because we do not know what additional scope there would be, but, if the harbour commissioners are relying on the big profits envisaged in their proposal to convince the financial institutions, then our proposals should generate those same profits, while using them in the interests of the public.

Mr Beggs:

I want to go back to the vote - or consultation, I should say - about which we were informed for the first time today. Although the views of employees should be considered, I do not think that 74 people should be determining what happens to the port of Belfast. It is a much bigger issue than that. It involves huge amounts of money and is of considerable significance to a great number of people, including harbour users, workers elsewhere on the estate and, indeed, the entire population of Northern Ireland. I would like to emphasise that. It is clear that some of your members do not support the views contained in your submission. Can you tell us how you consulted your members before drawing up this submission, so that we know how much support it has?

Mr Graham:

Since it was first agreed, our position has been refined over the years. It goes back to before 1994, when we were dealing with the direct threat of privatisation. Our policies are determined by union members at annual delegate conferences. That is where we get our policies from, and we follow them, both as individual unions and together in the Irish Congress of Trade Unions.

Over the past four or five years at three of the five conferences that I have attended with my union, motions opposing privatisation were discussed and passed. Not just the 60 NIPSA members who are directly employed at Belfast Harbour but all 35,000 members of the union recognise the port's valuable role. The employment that is provided in the harbour estate benefits the Northern Ireland economy as a whole and leads to the employment of others throughout the Province and beyond.

Mr Beggs:

Is that the ICTU view rather than the view of the port unions?

Mr Graham:

No. In the strategy against privatisation, the response to the Trust Ports Review came from the Port of Belfast trade union side and has been endorsed by the Irish Congress of Trade Unions.

Mr Hay:

I am slightly worried about the ballot that has been mentioned. Roy Beggs is right. We should not be dictated to by 74 people as to what might happen in Belfast port. The Harbour Commissioners will use it in their PR exercise. They would be foolish if they did not. Joe Public will probably hear all sorts of stories. Does the union have plans to address what is happening? It is obvious that the commissioners have taken the advantage of the unions being "out of town". You need to look at the figure of 74, or whatever it is. Have you any plans to address that again? If you were asked by the Harbour Commissioners to sit down with them and look at a ballot in which you and they would be involved would you accept the invitation?

Mr Graham:

Trade unions have an obligation to consult and to keep in touch with their members. We obviously have to address that point, but the issue goes beyond that. That has been correctly identified this morning. It is not, nor should it be, within the gift of Gordon Irwin and every member of staff in the Belfast Harbour to determine the future of a key economic asset of Northern Ireland. I suspect that there was a hard sell in which people were told about the wonderful benefits that would flow from the opportunity to be preferential shareholders and so on.

Mr Hay:

Do you have any plans to counter or address that?

Mr Graham:

We shall certainly have to look at that, discuss it in the joint trade union forum and take it forward from there.

Mr Tierney:

It is important to recognise that the Committee is being presented with a trade union submission. We shall take on board what the trade union is saying when making our minds up.

The Chairman:

As there are no more questions, perhaps you would like to make a winding-up submission in the light of the questions that have been put to you, Mr Graham.

Mr Graham:

I again thank the Committee for the opportunity to make the presentation on behalf of members. We are available if you require additional information. We shall obviously have to follow up some issues, including the one that has just been mentioned. We shall also carefully follow the progress of the EC move against golden shares, not just in respect of Belfast harbour but also because of the implications of that for many other privatisations, both past and planned.

Our key interest in this is protecting our members' terms and conditions of employment and, more importantly, their job security. We could have been as narrow as that. However, we decided from the outset of our program of action to concentrate not just on the small limited numbers of direct employees of Belfast harbour but to focus on the economic role of the harbour in Northern Ireland's economy, the job security and jobs spin-off from its role. We want to try to ensure that the harbour is utilised properly and fairly for port users in the interests of the Province. Our solution is one that is innovative, one that operates in many other countries. A semi-state body with full commercial powers is in the interests of our members, directly employed, other workers within the harbour estate and all other workers and families in the Province.

We believe that the privatisation route has failed and will fail again. We are not in the position of having potential investors out there saying "Well, what could we do for the good of the port of Belfast? What can we do for the good of Northern Ireland?" Potential investors out there are saying "Give us a chance to get in and get more profits to put into share dividends and into the hands of the corporate management teams". We would see again what has happened everywhere else. Initially Northern Ireland institutions or individuals may hold the bulk of the shares, but over a period they will become part of a multinational-type organisation. The benefits from the port would haemorrhage out of Northern Ireland into city institutions and into the hands of one or two individuals who would benefit considerably from it.

Our proposals are in the interests of every citizen of Northern Ireland and we hope that in your deliberations you would take that on board.

The Chairman:

Thank you very much, Mr Graham, for a very informative report.

---

AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 1 APRIL 1999

(Mr S Wilson in the Chair) Witnesses:
Mr N Dodds, Ms C McAuley
Ms M T McGivern, Mr B Hanna
and Mr R Stoker
(Belfast City Council)

The Chairman:

I would like to welcome you all to the Committee. I apologise for the delay as we have had some difficulty in reaching a quorum. I am sure you will understand that people have other things to do today. It was touch-and-go as to whether we were going to convene the Committee at all, but we decided to go ahead.

A lot of Committee members are absent, so we had to press-gang some people who may not be au fait with the subject, as they have not been at previous meetings. Rather than bring you here for no purpose, we thought that you might like to make a formal presentation to us and then answer some questions. Afterwards, we would like to adjourn and, if possible, come back for a longer question session on Thursday 22 April. I am sure that there are many members who would have liked to have been here this morning to put some fairly rigorous questions, but who have been detained by previous commitments. I know this is not a very satisfactory arrangement, but if it is acceptable to you, we will proceed on that basis.

Mr Dodds:

We understand the difficulties facing Assembly Members today and we are glad that the Committee is able to proceed. All the members of the Committee should have received a copy of the paper prepared by the development committee of Belfast City Council. I should say that I am speaking in my capacity as chairman of that Committee and I am accompanied by Cllr Stoker, Cllr McAuley, the chief executive of Belfast City Council, Mr Brian Hanna, and the director of development, Marie-Thérèse McGivern.

The development committee is a relatively new committee of the council which has been set up to look after economic development, tourism and the promotion of Belfast and the arts. We see ourselves as having a strategic role in the development of Belfast, and since the formation of the new committee and the new department we have made a considerable impact on development issues in Belfast; we certainly intend to build on that work.

The views that we express today are the views of the development committee. Belfast City Council has not yet had the opportunity to come to definite conclusions on the proposals of the Harbour Commissioners, though the development committee has discussed these at length. We have met with the Minister responsible, and with the Harbour Commissioners, and have received presentations from them and from others. The views that we express are therefore the views unanimously agreed by the members of the Committee.

I do not intend to go through this whole paper but instead to highlight some of the main points. You may question us about any issues at this stage, but we would be very happy to come back on another occasion to answer questions in detail.

We see Belfast port as being integral to the development of the City of Belfast. Belfast was built around the port, and the port has, and will continue to have, major importance in relation to the economic and strategic development of the city. One cannot divorce the future of Belfast port, and the land in it that is the responsibility of the Harbour Commissioners, from the well-being of the city and the people of Belfast and greater Belfast. One must take into account the economic importance of the port to Belfast and to the whole of Northern Ireland.

I am sure you are aware that 60% of the entire seaborne trade of Northern Ireland goes through Belfast. It is the biggest port on the island of Ireland; it takes one quarter of the entire trade coming into and out of the island of Ireland; and we have been pleased about the phenomenal growth in passenger traffic through Belfast, much of which used to go through Larne. You have all the facts and figures about how important the port is and about the great strides that have been made in recent years to make the port a very efficient and effective harbour, thanks in large part to European funding.

I now turn to some of the issues of real concern to us. There are nearly 2000 acres of land in the harbour - 1950 to be precise - 855 acres of which are directly related to port activities while the remaining 1095 acres are not. This is something that the Committee must focus on: the large amount of land that is the responsibility of the Harbour Commissioners yet not at all directly related to port activities. Clearly, what happens to that land and how it is developed will have a major impact upon Belfast and the whole of Northern Ireland.

Our primary concern is to ensure that that land is developed in the interests of all the people and the economy and not merely in the interests of a few. Inevitably we are concerned that if the port is privatised, it will be the interests of the shareholders' private capital which will be to the fore and not the interests of the wider economic concerns of the people of Belfast and Northern Ireland.

Of the 1095 acres of land that is not directly port-related, 760 acres are held on long leases by Bombardier Aerospace Short Brothers plc and Harland & Wolff. Shorts Bombardier holds 460 acres and Harland & Wolff holds 300 acres. The land is held on 125 year-long leases which were negotiated on generally favourable terms when those companies were privatised - low rents and so on. The important thing is that that land can only be used in relation to the core activities of those businesses. Any profits yielded have to be shared with the Harbour Commissioners, and development has to be agreed with them.

We would vehemently oppose any suggestion that the land should pass into private ownership. It is a large swathe of land and in the case of Harland & Wolff, who own a lot of land right on the waterfront, there would be the potential for a port within a port. Another 160 acres is leased to tenants such as Laganside and the Odyssey project and 90 acres which is given over to conservation purposes. That leaves about 85 acres available for development.

The Belfast Harbour Commissioners are very keen to stress that there are only 85 acres available for development. Do not get sidetracked by the issue of how much land could be used for non-port activities. There is currently a large amount of land which is held on long leases by Harland & Wolff and Bombardier Aerospace Short Brothers, and there is the potential for that land to be released for non-port activity and development purposes if those leases were renegotiated under some new regime or if those companies managed to get hold of that land in freehold themselves.

We have to look very carefully at the Belfast Harbour Commissioners' claim that there is only a small amount of land left for development. They have pointed out that they can reclaim land and thereby make more land available. The Harbour Commissioners Annual Report for 1997 states

"Development of the Commissioners' land resources continued during the year with due attention being given, as always, to land required or likely to be required for port operational uses, particularly irreplaceable deep water frontage".

Furthermore, the commissioners plan to

"reclaim additional land north of the Victoria Terminals, which will accommodate a further 40,000 sq m of transit warehousing".

Therefore it is impossible, in our view, on the current information from Belfast Harbour Commissioners, to accurately estimate the amount of land available for development in the future. Those issues need to be looked at very carefully before decisions are made which are based purely on this information.

We have a number of other concerns. We believe that the consultation process has been woefully inadequate so far. There are a number of stakeholders who have not been properly consulted - the Freight Forwarders Association, the Confederation of British Industry, Belfast Shipping Agents Association and the Port Users Committee. There also has not been adequate consultation with Belfast City Council.

I remind the Committee that a member of Belfast City Council is a commissioner and is appointed to the Belfast Harbour Commissioners' board. Therefore, under the present regime, the importance of the council and the people it represents is recognised by the Belfast Harbour Commissioners in the making of their decisions, yet throughout this consultation process, so-called, we do not believe as a council that we have been adequately and properly consulted in terms of having a proper and effective input.

We have been told that the flotation is expected to yield some £100 million and the Department of the Environment has already anticipated that the proceeds will finance a series of major infrastructure and road projects across Northern Ireland. In our view, the announcement that was made by the Chancellor, Gordon Brown, when he came to Northern Ireland last spring was an attempt at blackmail. It was put to elected representatives that they would not get money for road developments such as the Toomebridge bypass, the development of the Loughbrickland/Newry road as a dual carriageway and improvements to the Londonderry/Ballygawley road unless the privatisation went ahead.

Many people, including members of Belfast City Council and others elected representatives, very much resented that pre-emptive strike. We in Belfast City Council feel that it is not right that the proceeds from the sale of the port should already be accounted for in this way. It is an attempt to set elected representative against elected representative, community against community, constituency against constituency and council against council. We have very strong views on that. We have no objection to roads and infrastructure projects going ahead; we would welcome that. However, regardless of whether the privatisation of Belfast port is a good idea, we do not feel that it is right for the Government to influence the issue in this way.

Belfast City Council believes that it has played a major role in terms of the developments that have taken place in Belfast. Lanyon Place, the gasworks site, the renovation of St George's market and the north foreshore are all examples of major developments in which Belfast City Council has played a leading role in partnership with other bodies both public and private.

We believe that, given our track record and our electoral mandate to represent the people of Belfast, we have the right to be fully consulted, in a real and effective way, about what is going to happen to our port. That right must be taken into account in relation to the privatisation process. We hope that locally elected representatives will take the decision on the port's future. We would welcome that.

However, we urge the Assembly, when taking that decision, not to repeat the mistakes of the present Government and previous Governments; nor should it adopt the attitude of the Harbour Commissioners. We urge the Assembly to keep Belfast City Council, as the elected body in Belfast, fully involved in the decision-making process concerning the port's future.

Belfast City Council fully recognises that the port has operated under certain constraints and that there are certain changes which need to be made in order to face the challenges of the coming years.

We recognise what the Harbour Commissioners have said in relation to European funding. They have been very assertive in their view that no more European funding will be available. However, given the changes which are taking place in relation to structural funding, it remains an open question as to whether the harbour may be able to call down urban regeneration funds, for instance. That is an area which should not be closed off. Belfast City Council thinks that the wider context of the new structural funding apparatus and changes needs to be borne in mind in relation to the future.

The Port of Belfast is a substantial local employer. It is the largest landlord in Belfast. Previous examples of privatisation in Northern Ireland have not benefited the people. They have benefited some fat cats, and we do not want to see some more fat cats being created from the privatisation of Belfast port.

The Harbour Commissioners are saying that, in relation to the public and private partnership proposal, a golden share should be retained by the Department - whatever it is to be called. Given its important role in representing the people of Belfast - it is represented on the Harbour Commissioners - the council's concerns about the golden share should be recognised. I am sure that the new Minister will want to look closely at that. We would not like that to go by default.

There has not been proper consultation, and further consultation is needed. The preferred option that has emerged has come without the necessary detailed analysis and consultation. Further work needs to be done - for instance in relation to the concept of a semi-state body - and the council can help with those deliberations. We should not sacrifice a set-up that is in the public good and in the wider interests of Belfast and Northern Ireland for the sake of advancing a few shareholders' profits in a private company.

Mr Tierney:

I wish to ask about your summary. There are about four or five different options and most of those who have already given evidence have favoured one or another of them. I am surprised that your written submission does not contain Belfast City Council's preferred option. I accept the point about discussion and consultation. Some other witnesses have agreed that there has not been enough discussion and consultation on the matter.

I should like Belfast Council to give the Committee its preferred option or rule out other options. If it does not have a preferred option, I would be interested in its views on other options. Perhaps it will have had a full discussion with the Belfast Harbour Commissioners by the next meeting and we could look at this at that stage. I agree that Belfast City Council is an important wheel in this whole exercise, and I should like to know which options it is for and against.

Mr Kelly:

I apologise for the absence of colleagues who are engaged, as are many others, in meetings elsewhere. We are fairly up to speed on the situation surrounding Belfast harbour.

At the last meeting, I said that Belfast harbour did not really affect people in rural constituencies. Those on the periphery did not pay much attention to it until Lord Dubs came to a meeting of Magherafelt District Council and said that the Toome bypass project was contingent on the sale of Belfast harbour. Cllr Dodds has rightly said that that has created tension between rural and urban constituencies.

People who live outside Belfast are ignorant about what is going on at Belfast harbour. They were not even aware that Belfast City Council had set up a committee to deal with the harbour. It would be useful for that committee to arrange to visit areas such as Magherafelt and others west of the Bann. It would help to put people in the picture and would enable them to air concerns about how the future standing of Belfast harbour might affect or disadvantage those areas.

The Chairman:

A few more questions can be taken, and then they can be responded to as a block.

Mr Maginness:

What distinguishes Belfast from other ports is the fact that there is a substantial amount of land attached to the port. Does Belfast City Council have a definitive view on how that land could be developed in the public interest? The question that many people are now asking, leaving aside the port and its operations, is "How can that land be developed in the public interest, and under public control, if that is necessary to protect the public interest?"

The Chairman:

Mr Dodds, you have three comments there. Two or three members still want to speak. To avoid forgetting some of the points that have been made, do you want to deal with those before taking the next few questions?

Mr Dodds:

Yes, Mr Chairman, and I am happy for colleagues to come in on this.

The first point was about the council having a definite view on the matter. Certainly the council and the committee will look at this issue in considerable detail. We did not want to do what is sometimes the easiest thing to do, which is to pass a resolution after a cursory hour or hour and a half of debate and adopt it as the council's position. The committee has tried, and will continue to try, to reach decisions that are based on full consultation, discussion and looking at the options, thus preparing our views before submitting them to the full council. We are doing that in relation to a whole range of issues.

Individual councillors have their views on preferred options, but it would be wrong for me to advise on any particular option in advance of the council reaching a decision. We will come to a view on this. However, I can say that the options of doing nothing, undertaking a simple trade sale - as was done in relation to the airport - or perhaps remaining as a trust port would not find much support.

Much work should be done in considering whether the port should become some sort of semi-state body as opposed to simply opting for public/private partnership. We do not think that enough work has yet been done in exploring that option, and that issue could be developed further when we come back.

The views expressed on the proceeds of the sale are echoed by all parties across the Province. I do not want to make a political point and there is no particular edge to what I am about to say, which is that when Chancellor Gordon Brown came to the Province, his announcement about all the money that was to be made available for infrastructure projects got many headlines just in advance of a certain very significant vote.

Some of us in Belfast were busily trying to publicise the fact that it was at the cost of Belfast port. That somehow seemed to get buried in the detail, and we were trying to point out that there is no such thing as a free lunch and that something would have to be sold off to pay for it.

The Council's job is to take these issues on board. We shall talk to people in Belfast and in government, and we should also talk to local government colleagues throughout the Province. We should deal with concerns and inform people of our views and of Belfast City Council's role in relation to the port. We must follow up such matters.

With regard to the final point about the development of the land, the guiding principle should clearly be that the land be developed as part of a wider, strategic plan for Belfast and Northern Ireland. Our concern is that the land will be developed, without reference to what is going on elsewhere, in Belfast and in the Greater Belfast area, in the interests of private companies who will be selling off or developing land in a piecemeal fashion. We have already seen this happening at the harbour in the case of the D5 area, which is being used for supermarket development and so on.

The unanimous view of Belfast City Council's planning committee, which includes representatives of all parties - and the Chairman knows this, as he has been heavily involved in the work of that committee - was that this was a bad development for Belfast because it would take shops and customers out of the city centre and increase traffic in that part of the city. This was not in keeping with the overall plan for the city - and, yet, it went ahead.

We want to see that land being developed as part of a strategic plan for all of Belfast, and not just as a sort of island where things happen without regard to what is being done elsewhere. It is right in the heart of the city, and, as Alban Maginness has already said, represents a massive amount of land, the majority of which is not used for port-related activity. That is what we must bear in mind when we are discussing the privatisation of the port, and we have to be very careful about who has control of the land and the implications of that for the future of the city and of Northern Ireland as a whole.

Mr Stoker:

We tried to arrange meetings with the Harbour Commissioners and with Lord Dubs, and the first time we succeeded in meeting them was in February of this year. So, for two or three years, they put us off, before, eventually, coming along with their own proposals. We do not believe that that is true consultation.

We will be taking a different approach. We will actually be consulting the people, rather than just giving them a list of options from which to pick. We will listen to all their views and come up with a proposal which will suit not only the people of Belfast but the people of Northern Ireland as a whole. We are talking about the future of the port and not just about its future for the next five or ten years. This is a long-term issue, and we have to get it right this time for the benefit of all the people. There must be proper consultation with the people about their wishes for the future of the port.

Ms McAuley:

There is a need for a more comprehensive options analysis and appraisal, and - as we have just heard, with regard to the Toome bypass - that should be done alongside consultation with the local council. We need to consider examples of successful practice elsewhere, including the port of Dublin, and we need to understand that there is a broader picture.

We would fully support an extension to the consultation process to ensure that all interested parties have their say. We felt that the council had been snubbed and our views on this issue ignored. It took a long time to get Lord Dubs to meet the council to discuss its proposals, and, in general, the process has not been sufficiently transparent.

We need wider consultation. This Committee should consider afresh the views of Belfast City Council, which take into account the overall context of sustainable, economic development for the city and for the rest of the North of Ireland and beyond.

The Chairman:

I want to take two more questions because, although we will be returning to this issue on 22 April, some people have expressed a wish to speak today.

Mr Roche:

I will be very brief. I may be reiterating some of the concerns of Mr Tierney, but he will keep me right if I am not. It seems to me that, in general, your presentation fails to address, first of all, the commercial considerations that have given rise to the consideration of the future of the port. I think that those commercial considerations are threefold.

First of all, in terms of commercial activity, as indicated by its profitability levels, the port has reached a plateau after a considerable rise associated with very considerable amounts of European Union funding, which under any future possible scenario - and whatever possible scenario exists should be utilised for the future - would simply not be available. The third consideration is that we have within a small island the potential for very considerable competition from Dublin.

All of those factors give an imperative and an urgency to the consideration of the commercial structures that will guarantee the future of the port. As has been quite rightly said, this is integral to the future prosperity of Belfast and, indeed, to Northern Ireland as a whole. However, having established all that, legitimate concern has been expressed about the issue of the land and how that land might properly be developed in the interests of Belfast. You have suggested that it should be done in terms of an overall strategy for the development of the city - I am not aware that such an overall strategy exists. As well as that, when it comes to a consideration of the PPP option, that is somewhat dismissed on the basis of a fairly low-level argument involving resorting to the concepts of fat cats and feeding shareholders.

The simple fact is that any commercial business will not, in some irresponsible way, feed its shareholders. First of all, to feed its shareholders, it has got to make a profit. Secondly, it has to retain out of that profit some of the resources for future capital investment, replacement of capital, and so on. If it does not do that, it will go bust. The market will destroy it.

The golden share option also needs to be considered. Can it just be dismissed as of no significance? The PPP option is seen as a sort of fat cat option. That is, I think, not taking the PPP proposal seriously. The final difficulty with your presentation, as has already been mentioned, is that, despite your emphasis on the urgency of the situation, it is quite obvious that you have no options and very little idea about what options you might favour. You talked about further consultation. There is not an unlimited amount of time available for all of this. A responsible council, which I consider yours to be, might at least have been expected to come up with some sort of prima facie position that it might want to support without committing itself to any given option.

Mr McClelland:

I was going to preface my comments by saying, like Paddy Roche, "I will be brief". I would concur very much with what Mr Roche said and with what my colleague John Tierney said earlier, that there is very little in the presentation that I could disagree with. However, I am very concerned that on one hand we have this sense of urgency and on the other hand, while you have dismissed the five proposals, you have not been very forthcoming in bringing forward your own proposals, although Cllr Stoker has said that the wider available options will be considered. So I agree with what has been said. There is a sense of urgency but there has also been a failure to look at other options.

I have one specific question. Could Cllr Dodds or the chief executive, Mr Hanna, advise me if there is a precedent of other cities buying out ports and if that is a possible option that you might look at?

Mr Stoker:

May I deal with this. The sense of urgency arose, in our view, because the Harbour Commissioners wanted to complete this privatisation before the Assembly was up and running. There was no sense of urgency on our part. The sense of urgency has all been generated by the Harbour Commissioners. The profit is £6·5 million a year after tax, so, in my mind, there is no sense of urgency. It has been generated by the Harbour Commissioners themselves.

Mr McClelland:

If there is a precedent for a city buying out the port, will you look at that option?

Mr Hanna:

I know of none in the United Kingdom. I understand that Dublin Corporation has been involved in the arrangements for the port in the Irish Republic. However, given the arrangements for ports in the United Kingdom- trust ports and various others- I am not aware of any local authority having a direct ownership arrangement. Obviously this is something that we could look into.

Mr Stoker:

The port of Dover is a trust port with extended powers, but the council does not own it. That is probably the closest to such an arrangement, and it operates very successfully.

Mr Dodds:

The Committee should be aware that the first time that Belfast Council was briefed by the Harbour Commissioners on their proposals was 8 February. Lord Dubs only came to see us after that and in spite of the fact that we have been asking for meetings and briefings for a long time. There was no lack of attention or diligence on our part, unlike the Harbour Commissioners. We, as elected representatives, will be doing everything in our power to deliver in the best interests of the people we represent.

I will pick up on a number of points that were made. Mr McClelland alleged that we had dismissed the five proposals. We made it very clear that we have not done that at all. Mr Roche surprisingly, given his enthusiasm for the privatisation approach, has not mentioned the golden share. I thought that he would want rid of that, because it is clearly a drawback to the tremendous profits that could be made by privatisation. The Harbour Commissioners have said that the tension of a golden share, 25% et cetera, would actually be a brake on the commercial success of the port. It would not allow a totally free hand. I did not hear him say anything about that but he may have on other occasions.

He said that we should remind ourselves of the success of Dublin port but that is not a privatised port, it is a semi-state port, and when we talk about a semi-state port, we do have some substance to what we say. He should look carefully at how Dublin is actually set up.

His sweeping comment about EU funding is entirely the line of the Harbour Commissioners.

They say we will get no more funding from Europe under any circumstances. I do not know how they can say that. Certainly they will not receive any under this single programming document. We have pointed out in our document - and I hope that Committee members have read it - that the European Commission has published a framework for action for 'Sustainable Urban Development in the European Union'. This framework aims at better co-ordinated and targeted community action for urban problems.

Consideration should be given to this document as there are many issues to do with the proposed privatisation of Belfast port and things associated with that which fall under its remit. We cannot say definitely that the port of Belfast will get European funding, but neither can we say that it never will.

Mr Roche said that he was not aware of an overall strategy. The strategy is made clear in the Government's paper 'Shaping our Future' and in the follow-up to that as well. A Belfast metropolitan strategy is to be developed, and it will be the overall strategy.

Mr Roche:

Mr Dodds has come as near to misrepresenting my position totally as anybody possibly could, and I will take this up on a future occasion.

Mr Morrow:

The Harbour Commissioners stated in their verbal submission that, in future, there would be no European funding. However, in their written executive submission, they provided a slightly different slant, because they claimed that no further grants were likely.

Section 7.3 of Belfast City Council's written submission states

"Furthermore, the European Commission have published a framework for action for 'Sustainable urban development in the European Union'."

Section 7.4 states

"The issue of urban development will receive much higher priority in the new Structural Funds Agenda 2000. It is therefore important that the future considerations for the Port take these issues on board so that potential resourcing can be maximised."

According to Belfast City Council, European funding will be available. Please explain how one comes to this conclusion.

I read in one of this week's national papers that the golden share will not be recognised in European law. However, Belfast City Council claims that there will be no objection to the golden share under European law. It seems that in future the golden share will have a different status under European law. We shall need to look carefully at that anomaly.

I should also like further clarification on Mr Dodds's submission regarding the sale of Belfast port.

Ms McGivern:

The document which Cllr Dodds showed to the Committee - and copies will be made available to committee members - clearly states that, when considering applications for the next structural funds round, the European Union will give a significantly higher priority to the concept of sustainable urban development than had been the case in previous rounds. The Harbour Commissioners have always assumed that there would be no further European funding.

However, the document shows that there will be many opportunities to attract and maximise European funding for the port and, in particular, to develop the land around it, under the framework of sustainable urban development. That funding opportunity, which the Harbour Commissioners dismissed, should be considered, regardless of the port's future structure. If the port were privatised, the new private developer would seek European funding. To say different would be nonsense.

The document details the European Commission's plans for the new structural funds and the elements that it will be looking for in any application for a single programming document for Northern Ireland. Ultimately it will be for the Assembly to shape that new single programming document.

Dr McDonnell:

I apologise to our visitors for the brutal onslaught by our colleague Mr Roche. I hope that it will not prejudice our search for the subtleties of the details.

I am at a disadvantage in that, like some other members of the Committee, I have a foot in both camps. The rumoured valuation of the Belfast port at £100 million seems ridiculous. I should like to have the port valued. Perhaps the council could comment that.

Two issues emerged from Mr Dodds's presentation. The functioning of the port - which is perceived by many as the primary issue - is the lesser issue when compared with the use of the land bank. Perhaps Mr Hanna could outline the implications for Belfast of the port's privatisation.

Mr Dodds also spoke about the golden share. Like Mr Morrow, I think that the golden share is of no value as it can be removed at a stroke.

Is there a case, or are you making a case, for Belfast to have a meaningful equity stake in the port in future? My main point relates to the valuation of the port. What happens if this land is allowed to go? Are you saying that the use of the land is a more important issue for Belfast than the functioning of the port?

Mr Dodds:

There is no doubt that the use of the non-port land is the crucial issue for many people. The golden share certainly merits further exploration. One of the great selling points of the preferred option is the protection that will be provided by the golden share. If a golden share is not available, or if it is not worth much, that would raise questions about that option. That will have to be explored. If an effective golden share were to proceed, there would be a role for the council in relation to its ownership or management.

Mr Hanna:

When we discuss Belfast, we tend to mean the metropolitan area. Belfast is almost surrounded by hills, and it has a lough in front of it and a fairly tight boundary. There is little development land in the city outside the port. For some years, out-of-town developments have been causing considerable difficulties. There are proposed developments at Knocknagoney, Castlereagh and Newtownabbey, and the city centre is undoubtedly beginning to creak at the seams, certainly in terms of retailing.

In other areas of the city development is proving beneficial, but developments such as the Waterfront Hall and the Odyssey project are not so much in the retailing area. It will be for the Assembly to decide the matter, but whatever its decision the question of land development is crucial to the future development of Belfast City Council.

The 'Shaping Our Future' document is not yet in its final form. It is still the subject of discussion and consultation, and we made substantial submissions about it through our consultants, Building Design Partnership. The authors of that document rightly take the view that the city is the heart of the region and that the region needs a healthy, vibrant city.

We have lost 25% of our population since 1973. Some of that was to be expected; people are better housed than they used to be. Like many other cities, Belfast has the problems of out-of-town development and the associated increase in traffic. At a meeting yesterday, the Department of the Environment's Roads Service again proposed driving a new road through the city centre. That road would cross the gasworks site, potentially ruining a development site which could have been of major assistance to people from both sides of the community in Donegall Pass, the Markets, Lower Ormeau and other parts of the city.

The port and the development land are crucial. We have not come to a final view, which is hardly surprising given the way we have been consulted. The city council will continue to try to come to a rational view. It affects other people as well, and they will also have to adopt a view. You have only to walk around Belfast to realise that, unlike other cities, it does not have the development sites, outside the port, that it needs. Liverpool, for example, which has, in many ways, been struggling in recent times, has plenty of land available for development. Other cities have that benefit too; we do not.

I want to emphasise what has already been said: this issue must be taken seriously, and we must not be left a hostage to fortune in terms of future land development.

Mr Tierney:

When we referred to the urgency of the matter, we were not criticising your committee - we appreciate that you were not consulted in a way which enabled you to reach a decision - but the urgency lies with this Committee. We have to present a case to the Assembly and make a recommendation on the way forward. When we have heard all the evidence and there is no final decision from Belfast City Council - a major player in the port - then it will become urgent. We must know your final decision.

Mr Hanna:

It is important for us to know how urgent urgent is. There is a difference between what is urgent and what is important. We do not know how quickly the decision will be taken. Let us be honest: we were being bounced on the basis that if this were not done, roads around the Province were not going to be improved.

Wearing another hat, I could say that there may be a substantial argument for saying that bypasses on the Westlink are a good thing, but normally, if you go to hospital for a bypass, it is not because your circulation is good, you go because you have a problem with it. We should reduce the amount of traffic, get people to use public transport; we should not continue to swathe roads through the city destroying inner-city communities; we should provide adequate development that will create jobs.

Mr Dodds:

We appreciate what has been said, and we look forward to speaking to the Committee again. If and when there is a new Minister we hope he will not just come in and make a decision. Your Committee has an agenda, and we would also need to talk to the new Minister or the existing one about this issue in some detail so that he and the Assembly can take fully informed decisions. It is an issue for us, and, much to our anger as a council, we have not been involved as we should have been until recently. We will now be working hard and diligently to take the matter forward.

The Chairman:

Thank you for the submission. We have had a good session; we did not expect it to last quite so long. Some very important questions have been asked and have been well answered. There will be another opportunity to talk to you on 22 April when you will, perhaps, elaborate on the responses you have given today. Thank you very much.

Mr Stoker:

Have members received this framework document which relates to sustainable urban development in the European Union?

The Chairman:

If it is left with the Committee Clerk I will make sure it is copied and distributed. Again, thank you all very much.

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AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 29 APRIL 1999

(Mr S Wilson in the Chair) Witnesses:
Mr C Doherty, Mrs M Breslin
Mr S McIlvenny and Mr S Gillespie
(Londonderry Port and Harbour Commissioners)

The Chairman:

Welcome to the Committee. We have all received your very comprehensive document. We would like you to take about 10 minutes for a presentation and then we will ask you some questions.

Mr Doherty:

The Londonderry Port and Harbour Commissioners are grateful for the opportunity to appear before the Committee. We wish you every success as you undertake the difficult task of shouldering the burden of political direction for us at the dawn of a new millennium.

We wish to state from the outset that the Londonderry Port and Harbour Commissioners are opposed to the transfer of the port of Belfast to the private sector. Such an important and profitable transport infrastructure, well managed and operated, should remain in the public sector where its assets and profits may be a source of investment and an economic catalyst for the benefit of the stakeholders, who are not only the harbour employees and its customers but the people of the Province and beyond.

The Londonderry Port and Harbour Commissioners are charged with operating at all times in the best interest of our port. We have therefore considered the options for changing our status. The option to transfer the undertaking into the private sector has only recently become available by way of legislation enacted under the previous Administration.

It is our view that social performance is just as important as economic performance. As a trust port we have a unique relationship with the Government, our customers and our community. We are a part of the city that we work in, of the lives of the people we employ and of the country and island that we live in. It would be short-sighted to pretend otherwise. Adherence to an ideology is not sufficient ground for contemplating a change of status: any change must demonstrate life-cycle benefits to all interests. However, as one would expect of a board charged with good corporate governance, we regularly give the issue an airing. Currently, there is a consensus among the Commissioners that we should continue the existing system of ownership.

Both Warrenpoint and Londonderry have elected to remain trust ports. It is widely recognised both by the Government and by our customers, the port users, that the Northern Ireland ports are efficient, cost-effective and flexible insofar as they operate within restrictive legislation. The Government have acknowledged that the trust port has an important part to play in regional regeneration. Indeed, Warrenpoint was expressly set up for that purpose in 1971. The Government and ports both now recognise the importance of public facilities being strategically located in the south-east and north-west of the Province. They can be catalysts for inward investment, underpinning existing indigenous business and, therefore, jobs, and they can, if unshackled from restrictive legislation, become regional and economic dynamos while retaining their assets within the public sector.

To this end the Warrenpoint Harbour Authority and the Londonderry Port and Harbour Commissioners have undertaken to produce new model legislation to prevent this from happening. Many months of discussions and consultation have produced the documentation which is enclosed with our submission. You will see from that documentation that it is counsel's opinion that such powers might be conferred by way of a Harbour Revision Order using the 1970 Act as a vehicle - in other words, simple secondary legislation. It is our opinion that this is the road that the port of Belfast should follow.

Mr Tierney:

You have told us, Mr Doherty, what Derry port is doing and what you are pushing forward, and you have said that the port of Belfast is in a similar situation. Can you give us an assessment of the detrimental effects on Derry, Warrenpoint and other ports should what is proposed for Belfast actually happen?

Mr McIlvenny:

This is a grey area, and it is difficult to give an answer. You will notice that in trying to be extremely honest we included in our submission a report from ERM Economics, a firm that was contracted by the Department of the Environment to analyse the impact of a privatised port of Belfast upon the ports of Larne, Derry and Warrenpoint. This report suggests that the impact on Derry would be negligible, but it was written without any consultation with Derry, and I understand that Larne and Warrenpoint were not consulted either. We have the opinion of London-based consultants, although they have some knowledge of Northern Ireland since they have done work for many ports here.

Recently we tried to redress the balance by suggesting to the Department that another report be produced, again using ERM Economics, but this time with consultation with the ports. In my opinion that report, if it is published - and I sincerely hope that it will be - will suggest that the effect on Derry would be significant.

Derry is particularly peculiar in that it is geographically isolated in the north-west, and that would protect some of its business. I have no doubt, however, that a privatised port which was answerable to shareholders and institutional investors would be compelled to develop its business. Its profitability to shareholders, to investors, would come about by its developing the business. Now if you, as a rough rule of thumb, consider the gross domestic product (GDP) in Northern Ireland to be between 2% and 2½%, if nothing unexpected happened in the ports, you would expect growth to be at about the same level. But if the port of Belfast were to grow significantly, it could only grow at the expense of those other ports which are closest to it - Warrenpoint and Derry.

So, to answer your question directly, it would not take very much business to be removed from the north-west or the south-east for that to have a serious impact upon those ports. Derry, for instance, is unique in that it is an "effective-bulk" destination, and if you remove one of the major bulk customers, the impact is severe.

Derry is a new port. To anyone from Derry I ask forgiveness - I know that there has been a port there for 1,000 years. But we like to think that it is a new port, five years old, in that it was relocated from inner-city Derry to Lisahally. Thus it is brand new and in that sense under-infrastructured. We carry a significant amount of current debt because we are trying to develop the business and act as the engine of economic regeneration for the north-west, one of the things that we were set up to do by Act of Parliament.

I am sorry if I sound a bit vague, but in our opinion the impact would be severe simply because a privatised port of Belfast would have to reward its shareholders by developing its business, and it could only grow above the level of GDP by taking business from us.

Mr Campbell:

Mr McIlvenny's comments lead me on to my question. This discussion is about Belfast port's possible change of status and whether that will have a knock-on effect. You obviously feel strongly that it would have an effect on Londonderry, and I am sure that Warrenpoint feels similarly. You will be aware of the rationale behind the possible change of status and the amount of money that would be tied up in capital roads programmes should that change in status take place. Given the fact that both Londonderry and Warrenpoint have a particular niche market at either end of the Province - albeit one that could be eaten into by a radical change in Belfast - if we were faced with Belfast's status quo not being tenable, we would obviously want to see what safeguards could be built in, not only for Belfast but for Northern Ireland.

Have you looked at what possible options might safeguard not only Londonderry port but the whole of Northern Ireland - quite apart from the Belfast submission in relation to a public and private partnership? If there were sufficient safeguards, if Londonderry and Warrenpoint ports were safeguarded, and there was a move to enhance Belfast and help it to grow - but not at the expense of Londonderry or Warrenpoint - is that something that you would be prepared to contemplate? Or are you saying that maintaining the status quo is the best option for Belfast as well as the rest of Northern Ireland?

Mr McIlvenny:

It is our view that the assets should be retained in the public sector. Belfast, along with Warrenpoint and Derry, should be allowed to act more commercially. The outcome of our own review process and that of the Department of the Environment, Transport and the Regions (DETR) in London suggests that trust ports are doing a magnificent job. For the most part they are well-run, well-managed, very efficient and cost-effective, but they are restricted by the legislation under which they operate.

What we are saying is that Belfast port should be allowed to act more commercially, and, in order to do that, it could, perhaps, acquire powers similar to those Warrenpoint and Derry wish to achieve. This would enable them to act as commercially as they like but also retain the assets and profits to be reinvested in the business.

For instance, representatives from Belfast port will tell you - and may already have told you - that the current restrictions on the Westlink are a major impediment to doing business with the port of Belfast. I understand that they have tried to do something about that in the past but were restricted by the legislation under which they have to operate. They should be unfettered and unshackled from restrictive legislation and permitted to operate under legislation similar to that which we have proposed. This, we believe, would not have to be primary legislation but could be done by simple harbour provision order, which lies before Parliament for six weeks. If it is supported by the Government, of course, there is no difficulty. With such legislation they could double the size of the Westlink if they so wished; they could dual the carriageway from Belfast to Warrenpoint if they thought it was an imperative that would allow their business to grow.

I hope I have answered your question. What we are suggesting is that if the appropriate legislation were in place, they could act as commercially as they wished and could ensure that everything that the general public in Northern Ireland and you, the elected Assembly, want to happen did happen.

Mr Campbell:

I have a brief question. Mr McIlvenny, you said in your submission that Belfast growth could only come about at the expense of the other ports'port-related activity.

Mr McIlvenny:

That is the case.

Mr Campbell:

Paragraph 2.4.1 of your submission is about the move to Lisahally and the growth in throughput there. Between 1993 and 1996 there was - admittedly from a small base - a 40% growth in throughput. The Belfast port has seen low growth in the past three or four years. Presumably Londonderry's growth was not at the expense of anyone else; it was just intrinsic growth in the north-west. Do you see that growth continuing?

Mr McIlvenny:

It was because customers realised the benefits of the reduction in unit costs from allowing bigger ships to come in - that was the rationale for moving to Lisahally. There is a limit to how big Derry port can grow because it is a bulk-import destination and its principal commodities are animal feed and coal. The coal business is declining in most of the Province yet consolidating in the north-west, although there is some decline taking place there, and that will probably accelerate if other issues come into play.

Because we serve a rural and agricultural community we do not have a vast industrial base like Belfast has. Animal feed was a major component for our port, but BSE and the strong pound have put paid to that. Now we are diversifying, and developing the ability to diversify, to create the unitised business which is lo/lo and ro/ro. As our report says, that probably would not happen if Belfast went into the private sector.

The Chairman:

I have a question on your porposals for restructuring or for changing the port status as described, for instance, in section 6 of your document. On the financing aspect your stated that the trust should be able to borrow and raise money in any manner to secure the repayment of the money borrowed et cetera.

The Belfast Harbour Commissioners have said that if you were to diversify in all of the other ways that you have talked about in previous sections of the submission, the power to borrow would simply not be sufficient. There needs to be access to equity capital. That was the rationale behind their proposal for the public/private partnership, that there would be proper gearing and leverage of funds. Your idea of diversification would be more modest than Belfast port's. Are you satisfied that those extra financing powers would be sufficient to enable any trust port to fulfil the kind of diversification aspirations which are outlined in sections 1, 2 and 10 of your proposed changes?

Mr McIlvenny:

Forgive me if I hesitate to comment on Belfast specifically, but this is probably best demonstrated by giving an example. Our borrowing powers in Derry are restricted to about £300,000 yet we have just come through a period during which we have spent £30 million on constructing a new port. Clearly you could not do that with a bank overdraft of £300,000.

Although restrictive, there is provision in the current legislation to allow us to approach the Minister. We could simply write to him and say that the port was going through a phase of expansion and that we needed him to lift our borrowing requirement to £4 million. The Minister has done that on several occasions in the past and I sincerely hope that he will do it in the future. So the matter is controlled by the Minister although we have not found that very restrictive in the past. We have had sufficient funds to allow us to do what we wanted.

Dover Harbour Board, which runs one of the most successful trust ports in the United Kingdom, invests tens of millions of pounds and is controlled by similar legislation. They do not find it in any way restrictive. However, one wonders how much more finance you would need if you had £20 million cash in the bank.

The Chairman:

Your submission is somewhat similar to the view given by Belfast Harbour Commissioners though it is at variance with some of the evidence we have received from other people in respect of EC or EU grants. Paragraph 6.2 of your submission states

"it is most unlikely that EC funds will be available to ports in the next, and subsequent, EC programmes".

Later in the submission there is a reference to the fact that you had discussions with the Department of the Environment and with another organisation whose name I cannot recall. The reference refers mostly to Objective 1 status. Did you specifically raise the question of the availability of infrastructure funds from the funding with the Department of the Environment, and was that the information you were given?

Mr McIlvenny:

There is a great reluctance to allow the ports to access any more funds from Europe in the structural funding programme post-1999. We put it to the Department of Finance and Personnel, during the consultation process, that we were a special case. We were a brand new port, we were under-infrastructured, and we asked that it not let us swim by ourselves just yet.

There will be a change in emphasis in the new peace and reconciliation funding, which I understand has been secured in Europe. It will be economic-regeneration based, and we hope to tap into some of those resources.

We are about to go through a major expansion programme without the benefit of structural funding. It is a major challenge for the port of Londonderry, and we will be borrowing very significant sums of money to put the infrastructure in place. We believe it is right and proper to do this to allow not only the port but the north-west of the Province to benefit from the new economic order which we hope is round the corner.

The Chairman:

Let us be clear. You have been given no clear indication by the Department that funding will not be available from the EU towards this?

Mr McIlvenny:

There is a suggestion that no funding will be available post-1999 for the ports, but we have not heard anything definitive on that.

The Chairman:

What you are saying is similar to what the Belfast Harbour Commissioners were saying though it is at variance with what other people have said.

Mr Cobain:

I have a number of questions. I think the three ports have argued that extending the legislation in some way would assist them. Belfast Harbour Commissioners said it would free them up to a certain extent. It would cover some, but not all, of their difficulties. You have referred to the possibility that there is sufficient scope within the present legislation for borrowing and for ensuring that a more commercial aspect is brought into the whole thinking of the ports in Northern Ireland.

There are a number of issues that people have not really looked at. We do not want to ensure that the public sector is a cover for uncommercial operations. People, even those in the public sector, have commercial targets. It seems to me that the Belfast Harbour Commissioners were saying - and I think Mr Campbell mentioned it before - that as far as they were concerned they had really reached a plateau, and they did not expect any growth in the field within the foreseeable future.

There is a dark cloud on the horizon in the shape of Dublin port. Over the last two or three years Dublin has become more commercially active, and this will increase in the next three or four years with the help of the Government down there, the opening of the new tunnel and the reduction in the number of people working in the port. These factors are driving costs down to such an extent that it will become as commercially attractive to people in Northern Ireland as some of the ports here.

In the future, with the restrictions in the EU grants to ports, it is likely that some of the trade going through the ports here will move south to Dublin. The derv issue is an additional difficulty, with enormous benefits being generated south of the border. Indeed, some companies are thinking about relocating in or near Dublin because of the enormous savings to be made in that field.

If we are talking about making ports more commercially active, then why not be totally commercial, come out of the public sector altogether and compete? What is the difficulty in saying that we have a product that cannot compete and that therefore we should remove all public interference and go totally commercial?

Mr McIlvenny:

There are merits in that. There is already intense competition among the ports in Northern Ireland and the ports on the island of Ireland. Belfast does compete with Dublin, but it is not necessarily the port itself which determines where the traffic goes. Most of the competition is not necessarily among the ports per se but among the shipping companies. That is what drives competition.

The port provides the infrastructure and, in Northern Ireland terms, provides a liberal charging regime. It is largely the ferry companies that create the competition, and the ports' primary function is to create the necessary infrastructure. Port charges are not necessarily a major portion of the cost of shipping. For example, there is the cost of getting a box from the middle of Ireland through one of the ports to Great Britain. The major factor is the shipping cost, and the competition lies within the shipping industry.

Mr Cobain:

That is one of the costs. The other costs are in getting the box to the port.

Mr McIlvenny:

Yes, transport costs.

Mr Cobain:

The point that I am trying to make involves the differences in the commercial cost of fuel for taking the box from here to the port. The differential between here and Dublin is so massive that I am sure it is going to affect commercial operators - even ferry companies - once it reaches the point where it is cheaper to ship a box through Dublin than Belfast. People are looking at this from a commercial aspect.

Mr McIlvenny:

It is difficult to understand how a privatised Belfast port would operate any differently from a Belfast port in the public sector to alleviate haulage costs. It is something that the port has no influence over.

Perhaps I could return to the question of difference. If Derry and the other ports had more modern legislation to allow them to act almost as commercially as a privatised company and Belfast port went into the private sector, the difference would be that the profits of Belfast port would be distributed among its shareholders but the profits in Derry would be retained for further investment in the port. That is the only difference - it is private profit and public loss.

Mr Cobain:

That is not the question that I am asking. You are talking about driving this to almost the point of commercialisation but still within the public sector. What would the benefit be of those companies going totally commercial? The benefit to people who live in Northern Ireland is that there would be no public subvention at all, yet corporation tax and income tax would have to be paid.

There seems to be a belief - and I am not saying that it is necessarily wrong - that everything, including in this instance all the ports, must be kept within the public sector because that is the only way to ensure a benefit for all the people of Northern Ireland. Might it not be the case that it would be more beneficial to the people of Northern Ireland if all the ports were privatised?

Mr McIlvenny:

I suppose it could be the case. All commercial judgements include an element of choice.

Mr Beggs:

The size of the landbank at Belfast has been a major issue. Can you tell us what size of landbank the Londonderry Commissioners control, and whether you consider that the 2,000-acre landbank controlled by the Belfast Harbour Commissioners creates an unfair advantage with regard to any private development of that port, given the potential of that land for development and for the subsequent generation of what could be substantial profits?

Mr McIlvenny:

With regard to the first part of your question, in the city of Derry we retain an area of about 14 acres which is on long-term lease to the Ministry of Defence. At Lisahally, we have contracted to buy 10 acres, subject to planning; and we have another area of approximately 16 acres situated just slightly above the port, although its topography is not awfully good, and it would be quite difficult to develop.

The landbank at Belfast has been acquired by the port over the years, and one can see the benefits to the city of developments such as Laganside. There is, without doubt, a significant and valuable landbank there. We hope, however, that, if Belfast port were to transfer to the private sector, any extraordinary profits that might be made from that land would not be used to reduce charges and undermine the ability of other ports to compete. Nevertheless, that landbank has grown up around them - they have reclaimed it, and it is part of their complex.

Mr Hutchinson:

I should like to change tack, because, so far, we have talked only about privatisation. What would your view be if it were to become a semi-state body or a trust port with extended powers. I should not want you to get the impression that we have already taken a decision to privatise it. Other things could happen, and we need to explore those as well. If it were to become a semi-state body or a trust with extended powers, what would that mean for the Province as a whole, and what effect would that have on competition with other ports?

Mr Doherty:

We wish the port of Derry to remain a trust port. We believe it brings particular benefits, the principal one being that we can retain our profits for reinvestment. We operate as a trust port, and those profits are not our money. They belong to our customers and, under the legislation, there is an expectation that they will be reinvested for the benefit of our customers and of the public.

We favour the option of a trust port with extended powers. This is not because of the impending privatisation of Belfast port, but because of the new legislation enacted in the Republic which gives extremely wide powers of discretion as regards commercial activity to their ports, which were essentially trust ports, albeit with semi-state sector status. The legislation in the Republic grants these ports freedom to act commercially. They may be semi-state bodies, and they may have to cope with the heavy hand of the relevant Minister, but they have the ability to do just about anything they wish. It is similar to what we are proposing for the draft legislation to allow us to act commercially.

Our draft legislation is framed in a style that is not normally used by parliamentary draftsmen. In the report that was published by the Department of the Environment, Transport and the Regions, Glenda Jackson says quite specifically that trust ports have operated round the legislation. An examination of some of the activities in which we get involved shows that we do that, and such a practice is not good for a modern business. We agonised over whether we should frame the draft legislation in a way that only parliamentary draftsmen would understand, but elected to draft it in a style that everyone would understand so that there would be no doubt as to what we could or could not do.

The Chairman:

I have a question which relates to a comment by Mr Beggs. One of the matters that we have had difficulty in establishing is the value that would attach to the port if it were privatised. You have included a useful public profit and loss account paper. It startled me to learn that the profitability of some private companies is lower than the profitability of some of those that have remained in public ownership. Your figures show that within a year of privatisation the value of some concerns had increased because they were sold again for about 100% more than the amount received on privatisation. Why it is difficult to attach a value to a port? Belfast Harbour Commissioners could not specifically state the value of Belfast port. We have had wide variations, ranging from £100 million to well over £200 million. Why should there be difficulty over such valuations?

Mr Doherty:

Historically, because of the restrictions under which we were working, we operated strictly as a port on port-related business. A private investor has a much wider vision of assets. Within our legislation there is a sort of community care factor, and that would disappear with a private investor who would simply assess each asset and estimate its maximum value. The people who are involved in takeovers or privatisations are experts. There are examples of public companies that are not exposed to the wider world.

The value of Belfast port is anybody's guess. It could be based on rental income, but whatever criteria are used, the private investor who buys it would certainly look at its potential rather than at its current earnings. A private company would have the ability to close the port if it did not work. That is an extreme case, but if it had trust port status it could not close. Perhaps that answers your question to some extent.

Mr McIlvenny:

My chairman says that I also have a vision. We also have entrepreneurial skills, but what restricts us is the legislation under which we operate. The port should be seen simply as a facility, a place to which ships come and go. That is what we are about, and that is the core of our business. However, all ports, including those in Belfast, Warrenpoint and Derry have assets that are utilised for other purposes.

Mr Cobain:

You spoke about the need to expand the business. It is clear that not all your energies are devoted to the port. People in Belfast say that if the port is to survive, we need to look at it as a whole and not just at the facilities. Is that what you are saying?

Mr McIlvenny:

I think that vertical integration was mentioned in connection with Belfast.

Mr Cobain:

Are you saying that for these ports to survive, not just port facilities but other linkages into the port need to be looked at?

Mr McIlvenny:

I can speak only for Derry. Ports have to act more commercially and there will always be restrictions on what can be done. We had a massive injection of public funds, albeit European structural funding, to produce a new port after many years of decline. It was an old inner-city trust port, and there will always be a conflict between civic aspiration and port activities. It was right to move the port. If we are not to be a drain on the public purse, whether it be a European purse or a local one, it would be better to allow us to act more commercially so that we could replenish our assets over the years.

Mr Cobain:

Could you expand on the impact of Dublin continuing to grow as it has grown over the past three or four years. Will ports north of the border be completely isolated or insulated against the commercial drive in Dublin, or will Dublin be bound to take some business away from ports here?

Mr McIlvenny:

The renaissance of Dublin port probably stems from the reorganisation of its labour force under Noel Shandley about seven years ago. Dublin port is also shackled by the appalling traffic problems around Dublin, but those may be alleviated by the tunnel. It has managed to bring its costs down quite significantly over recent years and has become more entrepreneurial.

Mr Cobain:

Will it be a threat?

Mr McIlvenny:

I do not see it being any more of a threat in the future than it is now. Part of Dublin's success is due to the "Irish tiger" economy, which has grown by 8% to 10% per annum over the past five or six years. That in itself gives massive impetus to transport. Added to those factors are lower costs. There will always be competition. There is currently intense competition between Dublin and Belfast, and the business of both ports continues to grow. The acid test may be if the Irish economy, north and south, declines in future years. One might then see a better picture of which port the hauliers prefer to take their business through. I do not see Dublin as a particular threat. It is certainly not a major threat to Derry. I can see Belfast, Warrenpoint and Drogheda and perhaps Waterford and Cork having difficulty with the port of Dublin. In terms of Belfast, I really cannot answer the question as I do not honestly know. There is intense competition between them now and they hold their own. I do not see any reason why Belfast port should lose out significantly to the port of Dublin.

Mr Cobain:

Even though the transport costs are enormous?

Mr McIlvenny:

Even though the haulage costs, currently, are significantly higher.

The Chairman:

That is the important point. Varying fuel prices and the changing value of the pound come into play. Much significance has been attached to the current position without the recognition that such values can fluctuate very rapidly. Not so long ago the benefits operated in the other direction.

Mr McIlvenny:

It was the opposite a few years ago. Most haulage companies have taken steps to avail of cheaper fuel in the Republic. That is certainly the case in the north-west and the south-east. I suspect that some of the larger hauliers in Belfast have put some infrastructure in place to allow them to avail of fuel in the Republic.

The Chairman:

Let us say that privatisation of the port of Belfast does not go ahead. The Government have placed a sword of Damocles over our heads because a lot of the changes in the infrastructure, such as the Toome bypass, et cetera, hinge on money being made available from privatisation. Would that have any impact on the port of Londonderry? Would the building of a bypass around Toome have an impact on the port?

Mr McIlvenny:

The recent changes at Toome have greatly alleviated the situation there. There are roads in the Province with traffic difficulties. But on the infrequent occasions when I am caught in the massive traffic jams on the M25, on which millions of people conduct their business daily, I wonder how they get their goods from A to B. From time to time there are difficulties with the road at Toomebridge and with other roads in the north-west, but it is hard to quantify the impact of these difficulties on the port - all I can say is that it would be awfully nice to have them fixed.

Mr Maginness:

The potential extension of natural gas to the north-west and the drop in demand for animal feed are fixed factors that seem to affect adversely the port of Derry. These two bulk cargoes represent a fairly significant part of your port's tonnage. The port of Derry is going to be adversely affected by the predicted decrease in the tonnage of these two cargoes whether or not the port of Belfast is privatised or its powers extended. These factors are going to affect your port adversely, and, on looking at ERM's analysis, these factors seem to be constant and inescapable. How do you react to these predictions?

Mr McIlvenny:

Like any other manager I have to find ways of enabling our business to go on in the face of competition from other ports. I do not think that we face a fait accompli.

With regard to animal feed, our port serves a rural and agricultural community, and it is expected that some level of animal feed will continue to come through the port- particularly since the port serves the west coast of Ireland as opposed to south Derry or the rest of Northern Ireland. This remains our expectation. Coolkeeragh power station will finish anyway - it has a generation contract until 2002 with a possible extension to the year 2004. We have recognised this fact in our long-term corporate plan. These are threats, and we may have to face them, but we will have to manage the process as best we can.

Mr Maginness:

Looking at the ERM report I could not see where the actual decrease in the use of the port would occur as a result of the port of Belfast being privatised. Can you clarify this for me, leaving aside animal feed and coal which we have already discussed?

Mr McIlvenny:

We would worry about unfair predatory competition, the sweetheart deals which are not unheard of in industry and business. Rather than discussing specific matters, it is these deals that would concern us generally as they could result in a complete commodity, rather than part of a cargo, being lifted out of the jurisdiction of the port.

Mr Maginness:

ERM talked about a decrease in the business of the port of about 5% over a number of years and said that if the port were not privatised there would be an increase in business in the port of Derry of about 16%. What I cannot understand is, leaving aside coal and animal feed, what is the factor that would cause the decrease?

Mr McIlvenny:

The ERM report was compiled without any input from us, and I too wonder where some of the figures came from. It would have been nice to have been approached by them.

Mr Maginness:

That seems to be a serious flaw in the compilation of the report. If Belfast port were privatised or, indeed, if its powers were extended and Belfast was able to compete - to use your term - "more aggressively", and given a situation where you also had extended powers, do you not think that you would be able to compete with Belfast on a level playing field?

Mr McIlvenny:

I have no difficulty whatsoever with a level playing field. However, it is the redirection of resources - and I have to choose my words very carefully - that might, perhaps, encourage the lifting of a complete commodity out of one port and placing it into another.

Mr Maginness:

If there were no predatory deals or activities on the part of Belfast port and if legislation and controls were in place to prevent that happening in any event, would you then be in a position to compete with Belfast port in whatever new form it had adopted?

Mr McIlvenny:

Yes, that is right. However, perhaps I could add one thing.

We do not consider that the Competition Act is sufficient in itself. A person who has been mugged will feel gratified when the mugger is subsequently apprehended and sent down, but he will still have been mugged. For example, Volkswagen was recently fined $64 million - or Deutschmarks - for anti-competitive practices. They had no difficulty paying the $64 million, because they had already acquired the business anyway. The Competition Act can, in our opinion, only be used after the fact, and that is too late.

The Chairman:

Thank you all for the presentation. The written and oral evidence has helped with our deliberations. We will be hearing further evidence from others and will be making a report at the end of the process.

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AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE THURSDAY 29 APRIL 1999 (Mr S Wilson in the Chair) Witnesses:
Mr D Connolly, Mr Q Goldie
and Mr E Curtis
(Warrenpoint Harbour Authority)

The Chairman:

Mr Connolly, Mr Goldie and Mr Curtis, I welcome you to the Committee. You were present during the previous session, so you will be aware of the format. Perhaps you would give a brief summary of your views for five or ten minutes, after which members of the Committee will, no doubt, have some questions for you.

Mr Connolly:

As chairman of Warrenpoint Harbour Authority, I wish to thank you for the opportunity to address the Committee about the proposed privatisation of the port of Belfast. May I introduce Mr Quintin Goldie, our chief executive, and Mr Edwin Curtis, who is the enterprise development officer for Newry and Mourne District Council and an expert on economic conditions in our area. We also have in our team Mr Jim McCart, a member of the board and the council.

The board of Warrenpoint Harbour Authority is opposed to the privatisation of Belfast harbour. We believe that such a course of action would not be in the best interests of Northern Ireland for the following reasons.

First, it is our opinion that such action would be detrimental to regional economic development within Northern Ireland and would impose additional financial burdens on businesses in the south-east and the north-west of the Province.

Warrenpoint Harbour Authority was established by parliamentary Order in 1971, and the port of Warrenpoint was reconstructed by the Department of the Environment for Northern Ireland during the period 1972-74. The construction of the port was intended to be a catalyst for economic regeneration in an area which was, and remains, one of the most socially-deprived areas, not only in United Kingdom but in Northern Ireland terms. Mindful of this, the authority has adopted a mission statement consistent with our objectives. It states

"Warrenpoint harbour will seek to operate profitably within fair and competitive tariff arrangements so that the port is economically sustainable. Its aim is to contribute as much as possible to the generation of economic wealth in the port and its regional hinterland. Consequently, profit optimisation to achieve its primary mission rather than profit maximisation will be pursued."

That is, or should be, the essence of trust port activity.

Over the past 25 years the port of Warrenpoint has played a key role in facilitating the economic regeneration of south Down and the border counties. Currently, 200 people are directly employed within the harbour complex, and these jobs are supported by more than 800 others in transport and related service industries. The fact that the port contributes to an efficient cost base for the area is of great importance. This facilitates local business keeping overall supply costs as low as practicable. This effect is difficult to measure accurately, but what is certain is that it is important to local business, as the economic agencies can confirm. Any action which places in jeopardy these jobs and the significant contribution which the port of Warrenpoint makes to keeping the supply-chain costs of local business as low as possible is to be deprecated.

Our second main objection is that Northern Ireland as a whole may be better served by the retention of Belfast harbour as a trust port with additional powers, as recommended for trust ports following the recently completed review of trust ports. Mr Goldie will explain further our reasons for some of our statements.

Mr Goldie:

It is widely recognised that a network of modern and efficient ports is a key element in the promotion and facilitation of the creation of economic wealth in any region. Nowhere is this so important as in an island economy such as our own. The key element of economic development strategy at European Union national and local level has been the development of such a network in Northern Ireland and substantial investment in the ports of Belfast, Larne, Derry and Warrenpoint.

Warrenpoint operates profitably and provides local companies with access to Great Britain via the daily roll-on/roll-off service. Access to continental Europe is facilitated through a twice weekly container service to Rotterdam, a weekly service to Norway, Sweden and Denmark, and a scheduled service to Finland. The management of Warrenpoint port is concerned that the port's viability would be irretrievably damaged by a privatised Belfast port.

An independent report, which is enclosed in your papers at section 9, was prepared by ERM Economics for the Department of the Environment in Northern Ireland. It indicates the following potentially critical impacts that could threaten the survival of Warrenpoint harbour were Belfast to be privatised.

First, the planned privatisation of Belfast port would pose a considerable threat to the commercial viability of Warrenpoint, and that would have an impact on the cost base of local businesses with consequent danger to fragile economies. Secondly, the privatisation of Belfast and its consequent competitive behaviour, notwithstanding the protection that will be afforded by the Competition Bill, would adversely affect Warrenpoint's current price advantage with implications for port throughput. ERM estimates that 25% of Warrenpoint's traffic could be displaced within a 10-year period.

Thirdly, Warrenpoint will consequently be increasingly restricted to niche markets serving local hinterlands, and its ability to offer a comprehensive range of port services is likely to be adversely affected.

Fourthly, if as the result of the privatisation of Belfast a number of shipping services relocate from Londonderry and, in particular, from Warrenpoint to Belfast, existing users of those ports will suffer longer road haulage distances than previously. For users of Warrenpoint those additional costs are estimated to amount to some £2·5 million per annum less any net reduction that is implicit in the relocation. In reality, if Warrenpoint harbour were to lose 25% of its revenue, the port would no longer be economically viable in the long term. It is Warrenpoint Harbour Authority's view that the future of the port and its ability to act as a catalyst and contribute to the economic regeneration of south Down and the border counties will be seriously jeopardised by the privatisation of Belfast harbour.

So that the port could continue to contribute fully to the economic welfare of Northern Ireland while remaining a trust port, Warrenpoint would seek the commercial powers and the increased borrowing capacity that were recommended following the review of trust ports in GB and Northern Ireland. That matter is addressed in detail in sections 7 and 8 of our submission.

To protect the existing traffic and provide the facilities that are necessary to meet future demands, Warrenpoint port has spent two years in the conduct of studies aimed at creating a deeper berth and additional half standing, and at reducing ongoing dredging requirements at the harbour. Projected costs of the project, which is currently at the planning stage, will be about £6·5 million for which we will seek grant aid. We are convinced that if Northern Ireland is to continue its economic growth and benefit from membership of the European Union, it is essential that regional ports receive the Government support that is necessary for the developments that are needed to meet current and future business requirements.

For all those reasons, Warrenpoint Harbour Authority opposes the privatisation of Belfast harbour and asks for your support in enabling us to fulfil the role for which the authority was created.

The Chairman:

You referred to the ERM report in your submission. It says

"a privatised Belfast harbour due to its size, resources post privatisation, and revenues derived from non port activities would be in a position to distort competition within the Ports sector and effectively assume a monopolistic position."

The ERM report states that at present your port has an advantage in that your charges are lower and that enables you to operate in your niche of the market.

Is it possible that, whether you have privatisation or not, if the port of Belfast, as a trust port, a private port, or a semi-private port, wished to engage in aggressive marketing, it could take trade away from your port? Is your complaint not really about the size of Belfast port rather than about the kind of legal status that it might have?

Mr Goldie:

It is more involved than that. There are various aspects, as was indicated by the chief executive of Derry port, and I have made the observation in our report. The protections offered by the Competition Act are illusory. They are post-fact events in that a company can be fined 10% of turnover, irrespective of whether the competition is no longer in existence.

Port charges are one aspect. The service offered by the port is another - certainly the overall cost package. Belfast harbour does market aggressively. However, there are constraints which are imposed upon trust ports which do not apply in the private sector. First of all, they can be judicially reviewed, and, secondly, they are not subject to the demands of shareholders for a commercial return. As they are in the public sector they can be expected to adopt a course of action which is in the best interest of the public as a whole, as opposed to the commercial interest of shareholders. Also, the board is appointed by the Minister and is subject to reappointment every three years. So there is an element of control which can be exercised and under the remedies which are available would not be available to other ports transferred to the private sector.

The Chairman:

So, in your view, if Belfast port decided to adopt a really aggressive commercial approach to its activities it could do much more damage than at present?

Mr Goldie:

An unfair aggressive commercial approach would not be in the public's interest.

The Chairman:

And you feel that its present state constrains it from doing that?

Mr Goldie:

Yes.

Mr Murphy:

What effect would European funding have? Also, with regard to cross-border trade with Dublin, if Belfast were privatised and the road structure were upgraded - for example, we have discussed the Toomebridge bypass and the Newry bypass through Banbridge - would that help the haulage companies in the area?

Mr Goldie:

Well, let us look first at European funding. At section 4 I have indicated the funding which has been made available to the various ports since 1989, and the source of these figures was the Department of the Environment for Northern Ireland.

There appears to be a disproportionate amount of investment in the port of Belfast. With regard to development, it is difficult to see what they want to develop in terms of port facilities. They have new ro-ro facilities, new container facilities, new coal facilities, and so on, and there is a finite market to be served. Also, the European funding which has been made available could distort the issue if a transfer takes place into the private sector.

At the end of December 1997 the port of Belfast had on its balance sheet approximately £60 million in European grant aid, which was being released into its profit and loss account at the rate of over £3 million a year. If the port is privatised that £60 million will not go away. A private company will transfer it into its profit and loss account at the rate of £3 million a year for perhaps the next 15 to 18 years. The ports of Derry and Warrenpoint do not jointly make a profit of £3 million. In our opinion it is wrong that that level of European funding should be transferred to the benefit, substantially, of private shareholders.

The Chairman:

When you talk about funds being released do you mean when the return on the £60 million of EU money invested is released?

Mr Goldie:

No. If a company were to purchase an asset at £10 million and it got 75% grant aid it would receive £7.5 million. If the asset had a life of 10 years then the £10 million would depreciate at £1 million per annum, and that would be a cost of the business. However, if, over that same 10-year period, the company released the £7.5 million of grant aid at the rate of £750,000 per annum, the depreciation in charge over the 10 years would be one quarter of the real value of the asset.

This would mean that a private shareholder's depreciation charge over the life of the assets of the port of Belfast, to which the £60 million refers, would be substantially reduced with a consequent increase in profitability.

The other question asked was on the issue of roads. The difficulty of road improvements from a port's viewpoint is that roads have two ends, and traffic flows in two directions. The benefit of improving roads between Belfast and Dublin would, in fact, be of equal benefit to everyone. We could get traffic to Dublin more easily, we could get traffic to Belfast more easily and, equally, they could withdraw traffic from our region more easily. The Toome bypass would probably enable Belfast to access Derry traffic more so than it can at the moment.

Mr Campbell:

I welcome the deputation. I am interested in teasing out the opinions of the various harbour authorities about possible changes in Belfast. People have taken a particular view of what should, or should not, happen, but obviously no decision has been reached as yet.

Warrenpoint, like Londonderry, has created a particular niche market. Although they are small ports they have become vital to the economic regeneration of their own areas. However, if some sort of change in the status of Belfast port is to be contemplated, there is a fear that a radical change may allow Belfast to become so aggressive, so competitive that Warrenpoint will be hit dramatically.

Do you think that a change in the status of the port of Belfast, even one restricted by a safeguard which would allow it greater commercial freedom but which would not allow it to become a private entity and do the things that you are concerned it may do which would impact upon Warrenpoint, would impinge upon the niche market that you have? Do you think that even a limited change in status is something that would jeopardise Warrenpoint?

Mr Goldie:

No. We advocate a change in status. All trust ports should be allowed to operate commercially. However, the size of asset that would be created were Belfast Harbour to be privatised in its present form - and I appreciate what the Committee has said on the difficulties of evaluating this asset - and the potentials for development would be such that it would become the major economic determinant in Northern Ireland.

Belfast should have additional commercial powers, but it is currently making profits of £10 million to £11 million per annum, which will end up being distributed to shareholders as opposed to being retained for the benefit of the people in Northern Ireland. With commercial powers it will be able to grow and develop as desired. The major element of potential damage is the sheer scale of the operation as it exists at present, particularly with the land asset, which appears to be grossly undervalued.

Mr Connolly:

Further to that, my board's view is that while it is reasonable to expect changes, the landbank is a major factor. The landbank has a huge potential value, and we would respectfully suggest that it should be isolated and privatised. The money realised from that sale could go a long way to solving some of the problems regarding the road infrastructure. The port of Belfast should be retained as a trust port with enhanced powers. We are therefore suggesting a variation as a solution to the overall long-term problem.

The landbank would be difficult to value, but it could be done by independent valuers. Currently, the values of commercial sites in Belfast, as I think everybody knows, are on the rise, with no sign of abating. Private property and commercial sites are reaching colossal values.

Mr Campbell:

There are a number of factors in relation to any change in status for Belfast, not least the roads infrastructure and the increasing competitiveness of the Dublin port. Obviously Warrenpoint is in a very invidious position - probably more so than any other port in Northern Ireland - but these factors may or may not open the door for a change of status for Belfast port, allowing it to become increasingly competitive. Do you believe that there is any way of restricting Belfast's appetite, which could impinge on Warrenpoint, or of curtailing the sort of open-ended privatisation which might eat into Warrenpoint's share of the market, but which would, at the same time, allow Belfast to develop a greater competitive edge to try to stave off Dublin's advances?

Mr Goldie:

I know of no legal mechanism, in terms of Companies' Act legislation or trust port legislation, which would guarantee these safeguards.

Mr Campbell:

At the moment.

Mr Goldie:

At the moment. In terms of benefits, the great difficulty is that companies seek limited liability status, and shareholders can invest in them in the knowledge that they have certain protections and powers established by the Memorandum and Articles of Association.

It would be difficult to isolate Derry and Warrenpoint or the trust ports. I do not see how legislation that allowed for the privatisation of the port of Belfast - or of any other port, apart from a trust port - could be framed in such a way that it would stick.

Mr Tierney:

In your response to Mr Campbell's questions, you seemed to suggest that you would be looking for extra powers for all the ports.

Mr Goldie:

Yes.

Mr Tierney:

That would be your preferred option. Are you saying that, even with the extra powers that would be given to all ports, including Warrenpoint and Derry, you would still be looking for extra safeguards?

Mr Goldie:

Irrespective of the extra powers, our view is that the port of Belfast should not be privatised, and, if it is, this will have such an impact that it will threaten the trust ports.

Mr Tierney:

And what would be your view if Belfast were to be given extended power status, along with yourselves?

Mr Goldie:

If Belfast, along with the other ports, were given extended powers then we would be in a situation similar to that in which we currently find ourselves - we would be able to compete. We are currently competing, but I would like to give you two reasons for seeking additional powers.

First, Warrenpoint Harbour Authority's current borrowing powers are limited to £10,000. I cannot buy computer software for £10,000.

Secondly, we are very aware of the competitiveness of the ports of Belfast and Dublin. A few years ago, we lost our ro-ro service, operated by Merchant Ferries. That caused a dramatic drop in our tonnage from about 2.5 million tonnes to one million tonnes. Fortunately, although we lost a lot of our tonnage, we did not lose much of our profitable tonnage. This made a difference, and the port's profitability continued to increase.

More recently we lost our coal business to Belfast, following the construction of their new coal facility and their conclusion of a lease agreement - which included shortfall arrangements - with the company that had been our importer. In view of the falling market, this company was anxious to concentrate its coal imports in Belfast. I can understand that.

After we lost the ro-ro service we sought to get another company up and running, and we took counsel's opinion. The port authority was prepared to make an initial investment to attract other monies - in a public and private partnership - in order to move things forward and get a replacement service in. Counsel's opinion was that we did not have the powers to do this. This is how you lose two thirds of your traffic overnight. The management of a trust port does not have the power to invest in a shipping company and must just hope that another company comes along. Fortunately, thanks to some very aggressive marketing, we found a replacement service within six months, and the tonnage of the port has continued to grow annually since that happened.

Mr Bradley:

I welcome the delegation from Warrenpoint. My question will be of interest to members of the Committee who may, one day, have to take major decisions - and it is addressed to the economic development officer. Looking beyond the question of the future of the port itself, I would like Mr Curtis to tell us about the importance of the survival of Warrenpoint harbour in terms of the district council's economic development strategy for the area.

Mr Curtis:

The council's economic action plan, which runs for the period from 1995 until the end of 1999, includes a section which states the importance of the harbour for the future of the Newry and Mourne area. It currently supports at least 1,000 jobs in the area, and we are concerned that, if the port of Belfast gets the status that it is looking for, that will have a significant detrimental effect on the Newry and Mourne area.

The ERM report states that the tonnage moving into the port or harbour inside our area would be reduced by approximately 25% over a five-year period. That would dramatically reduce the number of actual jobs being supported there at present and would also have a major effect on the large number of small and medium-sized enterprises that have set up in and around the harbour since its inception in 1971.

It would also have a major effect in respect of the council's efforts to secure inward investment. We are currently negotiating with two large organisations from the USA who have stated that one of the reasons they are prepared to look at the Newry and Mourne area is the fact that we have a port and that there is land available in and around the area. I must point out that the overall effect would be serious and would cause immediate hardship in and around an area that has had reasonable success since about 1971.

Mr Maginness:

Who is your greater threat - Dublin or Belfast?

Mr Goldie:

It is very difficult to look at two lions and say which is the more dangerous.

Mr Campbell:

Which has the bigger appetite?

The Chairman:

You did say lions, did you not?

Mr Goldie:

The scale of both is similar. As a commercialised port, Dublin received extremely wide-ranging commercial powers - powers which are so extensive that commercialised ports in the Republic of Ireland can invest outwith Ireland. They have the powers which would be available to a privatised harbour - including a privatised Belfast - although they are subject to some ministerial control. One took our ro-ro traffic, the other took our coal traffic. I have got them surrounded, however, and I am going to do my best.

Mr Maginness:

You are in a very vulnerable position: you are being squeezed between Belfast and Dublin. History, even recent history - indicates that Dublin has damaged you, and could damage you in the future. If Belfast is privatised or develops a sort of semi-state status, it could still damage you. Does that not have more to do with your geographic position rather than the status or the nature of the competing ports? Whether you like it or not, you are slap bang in the middle of two major ports, and you are going to suffer because of their relative successes.

Mr Goldie:

If you examine the figures which we have provided, you will find that as the ports of Dublin and Belfast have become more aggressive and have grown, the profitability of Warrenpoint Harbour Authority has increased year in, year out. That is not based solely on the fact that our prices are more competitive. The level of service that we offer is superior as well. We have grown a number of commodities very successfully and profitably.

Equally, it has to be very clearly stated that Warrenpoint will never become either a Belfast or a Dublin - you cannot do that with 33 acres of land and 700 metres of quay - but in terms of the economic status and well-being of south Down and the border counties area, it is absolutely essential that the port of Warrenpoint continue in existence; and it will.

Another important factor is that the port of Warrenpoint has been in existence for 25 years and has never had a strike. Although it has not happened all that often, we have benefited from strikes in Dublin and Belfast.

Mr Connolly:

I will add one final point to that. There is a natural hinterland to Warrenpoint that extends north and south of the border. If we could be assured of a level playing field - and that is all we are asking for - Warrenpoint will continue to trade and trade handsomely.

Mr Maginness:

There are plans for a deep-water quay, but they are still in the pipeline. They have not been fully approved yet.

Mr Goldie:

A planning application is in process at the moment along with a submission for funding. The deep-water quay is needed due to the increased size of vessels being used by a company which has been operating out of Warrenpoint for 24 years. The company provides the service to Rotterdam.

Mr Maginness:

You would be in great difficulty if you did not obtain this.

Mr Goldie:

We would not achieve our full potential.

Mr Maginness:

In the long term it would be a very serious situation?

Mr Goldie:

Yes.

Mr Beggs:

In your submissions one of the reasons you cite for opposing the privatisation of Belfast port is the revenue it derives from non-port activities. You say that this could distort competition from other ports. What revenues, if any, do you generate from non-port activity?

Secondly, what prevents unfair competition currently? All the ports have said that there is intense competition. What failings are there in the current mechanisms to ensure fair competition and what would you deem necessary, in the future, to ensure that there is fair competition between all ports?

Mr Goldie:

We derive no revenue from non-port activities - absolutely none. Unlike the other ports, we are involved in stevedoring, which I regard as a port activity - the dischargeof cargo from the ships. The ports of Belfast, Larne and Londonderry all license stevedores. That is a historical thing. The port of Warrenpoint has no non-port revenues.

The ports have been looking, over the past 10 to 15 years, to the receipt of European funding. If you are going to get involved in uncompetitive or unfair trading, there is the possibility that you will be obliged to forego, or lose, that level of grant aid. That would certainly give one cause for concern.

The Competition Act is not a reasonable future safeguard - it is too little, too late. There is the potential, which did not exist with private corporations, for either control of board membership or judicial review.

Mr Beggs:

What revenue does the port of Belfast receive from non-port activities?

Mr Goldie:

It receives substantial rents, and an examination of the last two sets of published accounts will show that just under £2 million was derived from trading in the port's land holding. The value of this land was considered to be minimal, yet the port appears to have made some £2 million from the sale. I do not know what money would be derived from the sale of land that the balance sheets argue is worth £15 million.

These are major factors. However, there could be other factors. A privatised port of Belfast could decide to invest in west coast Great Britain ports. Many of the trust ports in Great Britain which privatised have grown as a result of the acquisition of other businesses, including other port businesses. If the port of Belfast were to exercise control on the west coast of Great Britain, it could impact on the direction of traffic to Ireland.

Mr Beggs:

What effect would that have on your port, and how would such an acquisition be considered unfair competition?

Mr Goldie:

In order to suggest that there would be unfair competition one would have to examine the purpose of trust ports. If the trust ports in Northern Ireland have been set up as economic regeneration catalysts, then the Assembly will have to consider whether it wants that to continue.

For example, the privatisation of the port of Belfast could have an immediate and direct effect on the port of Heysham. Warrenpoint's roll-on/roll-off service operates to Heysham, and other services from Belfast and Dublin also go there. If the port of Belfast were privatised, it might decide to buy the port of Heysham. That could affect the service to Warrenpoint, and it could equally affect the service to Dublin.

When Warrenpoint lost the roll-on/roll-off service to the port of Dublin - to an EU-funded new terminal - many of the haulage companies in the south Down and border areas came close to going out of business, because the owner-drivers could not handle the incremental costs of having to drive to Dublin or Belfast and perhaps having to stay overnight. Had we not found a replacement service in less than six months, many of these companies would probably have gone to the wall.

The Chairman:

I have two questions concerning the letter you received from the Department of the Environment on 8 April. One is to do with your request for a harbour order that would enhance your powers. I notice that for such a legislative change the Department of the Environment requires you to submit a policy and commercial case to justify the full commercial powers that are reflected in the draft harbour order. Are they looking for further submissions from yourselves or from other ports, or is this an assessment that is being done by the Department?

I also notice that the Department produced a report - and the letter refers to it - following its review of trust ports. The Department indicates that the report is not being published and that it is not being made available because it contains information of a commercial nature. Are you aware of what information in relation to your port is contained in this report, and would the release of this information be damaging to you?

Mr Goldie:

The full content of our submission to the trust ports review has been given to the Committee in the papers. I understand that the Committee has been given the full submission from Derry, so that only leaves Coleraine and Belfast. I do not think that it will damage Coleraine - as it has only a limited commercial operation. Therefore, I do not know who will be damaged by the release of the information.

The Chairman:

You have no difficulty because you released the information yourselves?

Mr Goldie:

We have put our information into the public domain.

With reference to your question regarding additional powers, notwithstanding the DETR report and the Secretary of State's statement, the feeling is that trust ports should have full commercial powers. It has been the Department of the Environment's position that both Derry and ourselves should give full reasons for wanting individual and particular powers. If I knew what the circumstances would be at Warrenpoint Harbour Authority in 30 years time, I would probably be able to do that.

The Chairman:

Do you see this as a delaying tactic on the part of the Department?

Mr Connolly:

Very much, Mr Chairman.

Mr Maginness:

Did ERM consult you before it issued its report?

Mr Goldie:

 I was here during the Derry session and am aware of the concerns.

ERM did not consult us during the preparation or prior to the preparation of the report for the Department of the Environment. However, I should make it very clear that ERM has been involved in the evaluation of Warrenpoint Harbour Authority's capital investment programmes for the past eight years and is, therefore, intimately familiar with our business traffic.

ERM has also been involved with Londonderry and has carried out considerable economic development work for the Department of the Environment, so it is intimately familiar with that too. That being said, Belfast harbour has submitted a report by Transmodal, which said that there would be no impact on the other trust ports. This is a fascinating document - I have never had any conversation with Transmodal. Transmodal has no knowledge of the background of Londonderry port or Warrenpoint harbour yet appears to be qualified to say that there would be no impact, whereas ERM has had an intimate knowledge of the development status of both ports for a considerable time.

Mr Beggs:

Does ERM have an intimate knowledge of the Belfast port?

Mr Goldie:

Yes, ERM has been used by the Department of the Environment to draft the transportation programmes for Northern Ireland for the past few years. That cannot be done without gaining knowledge of Belfast harbour.

Mr Beggs:

It is curious that it was not used as a vehicle for creating a view on Belfast port; perhaps there are other reasons?

Mr Goldie:

Mr McIlvenny said that the Department has asked ERM to re-examine this. I am obliged to say that this is not the full ERM report. During other discussions with DOE I became aware that this report had been commissioned and insisted on seeing it. In fairness, ERM was instructed that I should see the report insofar as it related to Warrenpoint, although obviously in the conclusions there are cross-references. The heading at section 9 is "Privatisation of Belfast Port: Strategic Issues (WHA)". It is, however, a report that has been signed by one of the directors of ERM and therefore has some status. Derry included the report in its submission to the Committee and if it had not been for that, I would not have seen its section. I do not know what is said about Larne and Belfast.

Mr Morrow:

According to the report, coal tonnage dropped dramatically in 1996 to 87,000 tonnes. But the table that you have provided shows that it got even worse, because it fell to 70,000 and then plummeted to 18,000. Will that worsen in 1999?

Mr Goldie:

We budgeted for no coal in 1999, so it can get worse. Unfortunately, the figure will not rise. To date we have handled one cargo of about 4,000 tonnes, but I have no expectations of any more.

Mr Morrow:

Is this having an adverse effect overall?

Mr Goldie:

We have been able to deal with this catastrophic decline. We have been actively involved in the investments undertaken in the port in the last few years. The tonnage increase in other cargoes has been significant, and these are cargoes which might provide more revenue.

Mr Morrow:

I am aware that the section that I refer to has a health warning on it: it says that the report contains confidential commercial information. How many people do you employ?

Mr Goldie:

Warrenpoint harbour has about 44 full-time employees at the moment, and we employ about another 20 people on a part-time basis.

Mr Morrow:

According to your report there are 48 employees, 20 of whom you employ directly.

Mr Goldie:

I am sorry, on which page is that?

Mr Morrow:

On page 2 the number of employees is given as 48. In section 5, page 7, it states that you directly employ 20 people.

Mr Goldie:

They are stevedores. Of the 48 employees, 20 are employed as stevedores, crane drivers, dockers and so on.

Mr Morrow:

I read on page 17 that Warrenpoint harbour found a site on which Hayes Chemical Distribution Ltd constructed a bulk liquid chemical reception and storage facility at a cost of approximately £1·5 million. Did you receive £1·5 million?

Mr Goldie:

No, the construction cost Hayes £1·5 million.

Mr Morrow:

Could you clarify the following for me? Question 21: Do you plan to undertake any investments jointly with the private sector? The answer is yes. Question 23: Do you have any plans to use or sell your surplus land? The answer is no?

Mr Goldie:

We do not have surplus land. The investments in the joint venture arrangements which we are considering would be very similar to those with Hayes. The purpose of providing a site for Hayes to build on was so that Hayes would send the ships to Warrenpoint; we would handle the cargo and get the ships to use the dues on the goods. The other developments that we are considering are of a similar nature: to get involved with a company which is moving a product and needs a port facility. We can provide a site in order to get its cargo through the port, but we are not interested in supermarket manufacturing set-ups. We are interested in cargo-related business.

Mr Morrow:

Have you no surplus land?

Mr Goldie:

We have only 33 acres in total.

Mr Morrow:

Are they being fully used?

Mr Goldie:

Yes.

Mr Morrow:

You cannot expand?

Mr Goldie:

That is part of the project that we have in mind. We want to create additional land immediately behind the quay for port-related purposes.

Mr Morrow:

How much land?

Mr Goldie:

About six acres.

Mr Campbell:

I have a question about the figures. Mr Morrow mentioned the confidentiality "health warning"; does that apply to table 2 at the beginning?

Mr Goldie:

Those figures are from our audited, published accounts, so they are already in the public domain.

Mr Campbell:

I see from table 2 that Warrenpoint has a turnover of £2·75 million, making a profit before tax of £750,000. You also state that the company is valued at about £12 million. Did you also say that you have an overdraft facility of £10,000?

Mr Goldie:

Yes. At the moment I have about £2·6 million in cash.

Mr Morrow:

You are a good risk for £10,000, then.

Mr Connolly:

To put that in perspective, if we had to replace a gantry crane on the dockside tomorrow, it could cost us between £2·5 million and £3 million.

The Chairman:

Thank you for your submissions and for answering our questions here today. Your answers have been very helpful to us.

Mr Goldie:

Thank you, Mr Chairman, and good luck in your deliberations.

---

MINUTES OF EVIDENCE WEDNESDAY 5 MAY 1999

(Mr A Maginness in the Chair) Witnesses:
The Parliamentary Under-Secretary of State
(Lord Dubs),
Mr R McMinnis and Mrs B Faloona
(Department of the Environment)

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.

---

AD HOC COMMITTEE
(PORT OF BELFAST)

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.

Mr Bryne:

How quick and efficient is Warrenpoint in actually handling the import and export of cargo in comparison with other ports in Ireland?

Mr Thornton:

We have container facilities in each of the five ports in Ireland - from Belfast right through to Cork- and Warrenpoint, truthfully, is the most efficient. A vehicle picking up a container in Belfast can wait for three to four hours to get loaded. Someone in Dungannon can be waiting for a container that could come through either port, but in Belfast the driver has to spend his time traipsing across the Westlink.

The average turn-around time in Warrenpoint is 25. In Dublin, it takes four to five hours for the truck, never mind trying to get through the traffic onto the main roads. In Cork it takes about 35 to 40 minutes, and in Waterford it takes about 20 minutes. That is similar to Warrenpoint, but it is a smaller port than Dublin or Belfast. Those times are because of port and traffic congestion.

I endorse what Mr McGovern said. Because of the buoyancy in the Republic of Ireland's construction industry, timber and steel are growth tonnages, as is the container business. There is still tremendous growth in those areas, and they are probably the three main segments. There is also grain.

Mr McGovern:

The bulk of quality paper coming into Ireland comes through the port of Warrenpoint. I spoke about the timescales for freight or goods from Northern Ireland to Europe. Much of the paper that comes through Warrenpoint is high quality newsprint. It arrives in Warrenpoint one day and is ready for use by the press the following day. That is a reflection of the economies and efficiencies of Warrenpoint. It is probably the prime receiver of paper into Ireland.

Mr Neeson:

I wish to ask about the impact of the demise of smaller commercial ports on Northern Ireland. I am thinking particularly the ports of Carrickfergus and Coleraine, which is now almost extinct. I was chairman of Carrickfergus harbour committee for some time. The port was successful because the pricing structures could be set lower than those at Belfast. Warrenpoint has benefited from that; Hays Chemicals has relocated within the area of the port. Mr McGovern spoke about the impact of pricing.

The other issue is in relation to Merchant Ferries and its relocation to Dublin. Seatruck Ferries is a locally-owned company. Is that an advantage or a disadvantage, bearing in mind that it does not have the resource benefits of multinational companies, and that the roll-on/roll-off business is one of the targeted areas of growth within your business?

Mr McGovern:

Merchant Ferries decided to move to Dublin for its own reasons. I am sure that we are all aware of the economies that result from running a roll-on/roll-off business. We are talking about large-scale economies and investment, and Seatruck is making money while operating through Warrenpoint. Mr Neeson asks about local interest. Should we simply step aside and let the multinationals dictate business locations? I do not think that it is a secret that Seatruck is controlled by local people but also financed by international money. People could see that it was a viable proposition because of the congestion in Dublin and, to a lesser extent, in Belfast.

Seatruck is now a stand-alone profit-making company offering two sailings a day to Great Britain and working very well. >From out point of view it is great to see it and we have to take our hats off to the company. If it were not for the initiative and drive of some local people that business would not be there.

Mr Thornton:

With regard to Seatruck you are right in a sense. However, on the negative side it is a niche company. Seatruck is operating within an area, the border counties, which, traditionally and historically, has spawned many haulage companies. It is the truck driver, quite often, who decides which ferry he is going to use based on his hours and the cost. Seatruck has succeeded in the area because of the preponderance of trucking companies but should have moved to Dublin as well as staying in Warrenpoint. Staying only in Warrenpoint is a potential weakness, but the strength of Seatruck is that it is serving its niche so well that it is able to maintain merchant ferries.

Your point about Carrickfergus and Coleraine relates to the earlier question about small ports. It comes down to size. The cost per tonne of bringing small coasters into Carrickfergus would beat the pants of everyone else. However, in terms of handling and port costs and the charter cost of hire from the port of loading to Carrickfergus, the most economic type of vessel in use today cannot access small ports like Carrickfergus and Coleraine. Thus we have the unfortunate demise of these ports. A similar fate awaits Warrenpoint it things do not evolve properly.

Mr McGovern:

Mr Neeson would be very aware of the impact on the local economy and local morale when ports like Carrickfergus and Coleraine close down. It is important to let factories locating in Newry and Banbridge know that Warrenpoint and its facilities are there. Is all the industry going to be located within a 50-mile radius of Belfast if Warrenpoint closes?

Mr Neeson:

May I say that I appreciate how the port authority has adapted to change. I can remember when everything at Warrenpoint was dominated by Cawoods.

Mr Roche:

I arrived late and you may have already dealt with my question. If so, I apologise. In your submission you state that it is the firm belief of your association that the privatisation of Belfast port would have a dramatic negative effect on the viability and cost-effectiveness of the port of Warrenpoint. Two things are not clear to me. First, why, in detail, do you believe that? The second point, and here I must declare my own hand, is that if you are saying that the privatisation of Belfast would enhance its competitiveness to the extent of putting Warrenpoint out of business, that, in itself, is not an argument against the privatisation of the port of Belfast. What you would have to establish, concretely, to sustain an argument against privatisation is that such action would lead to an unfair advantage for Belfast. In the long-term interests of the Northern Ireland economy we cannot be opposed to the increased competitiveness of a major port because it would lead to the closure of small ports.

Mr McGovern:

With respect, we have covered that issue. To some extent we are unsure, but while the port is in Government control - Warrenpoint is a trust port - the trust and the Government should act as honest brokers.

On the issue of competitiveness, Belfast, because of its landbank and the revenues that it can derive therefrom, is able to subsidise its port activities unfairly. Warrenpoint cannot do that. It is not a case of Belfast being more competitive than Warrenpoint.

Belfast's revenues allow it to operate a predatory policy, and if it achieves overall control, income from the landbank will enable it to reduce shipping and handling costs to levels that would be unrealistic for Warrenpoint. Warrenpoint does not have a landbank and is therefore limited to the tonnage through the port each day. Belfast is not dependent on tonnage as its landbank income subsidises port activities. As a businessman I accept the principle that the cheapest price should win, but this is not a level playing field.

Other aspects to be considered include the effect on the local economy and the fact that if Warrenpoint port ceased to operate, £12 million per year would be lost to the Treasury. Other factors are involved - it is not simply a matter of comparing the costs of shipping a tonne of cargo through Belfast and through Warrenpoint.

Mr Campbell:

The concept of Northern Ireland plc, mentioned in the response to Jane Morrice and me is interesting, as is Warrenpoint's geographical location in relation to the Southern trade and the problems in Dublin. A five-year "window", or thereabouts, exists, before Dublin can make significant progress on its roads infrastructure - which may or may not affect Warrenpoint's traffic - to promote the Northern Ireland plc concept.

It is unlikely that the three main ports, given their competitive nature, would join such an arrangement. However, in relation to the concept, is there merit, from a user's point of view, in looking at the advantages of Warrenpoint, if its deep water, road and space problems could be addressed, in looking at Belfast's wanting to compete with Dublin, and in looking at Londonderry, which could have, and does have, a sizeable market in Donegal? Is there merit in looking at greater flexibility which would allow the main ports to market themselves - together or separately - in that context over the next five years, before intense competition arises from Dublin's problems being solved?

Mr McGovern:

Yes, I hope that that will be the case and that one of the consequences of debating the privatisation of the port of Belfast is that people like you will get to know a lot more about the shipping industry, the port activity and how important the ports of Northern Ireland are to the local economy. That is where the honest broker comes in again. Let us be honest: what local politicians have we had controlling Belfast port? I may be speaking out of ignorance, but as far as I am aware, Belfast port is run by the Belfast Harbour Commissioners and civil servants. Assembly Members are local politicians and should think in terms of Northern Ireland plc - surely that is the way forward. The Assembly should be asking how Warrenpoint port, Londonderry port and Belfast port compete with Dublin.

The privatisation of Belfast would go in the opposite direction because that would be predatory. Belfast would feel that if it got all of Northern Ireland's business, it would be happy enough for Dublin to get the South of Ireland's business. The long-term interest of Northern Ireland plc is not the short-term gain of people sitting in banks or whatever and increasing profits and stacks of money for some.

Mr Thorton:

That is a very pragmatic viewpoint. I can understand that it is black and white from your perspective, a sort of business decision. If there is a loss here and a gain there, how do we juggle it, and what is the bottom line?

There is huge competitiveness, if you like friction, between the users of Warrenpoint and the users of Belfast. The big concern - and maybe this did not come across strongly enough at the presentation - is this predatory pricing and the discrimination towards the smaller port. For example, today there are business moves from a factory 2kms away from the port of Warrenpoint via container into Germany through the port of Belfast. Why can Warrenpoint not do it; why does the guy in Belfast handle it?

Local competitiveness could be eroded because there could be massive savings from working on the continent -you would be gaining a larger area for travelling in yet saving money. Let us come back to the Mersey port and dock situation. There is a land bank there, a huge amount of money, and a certain limited element of control on the port. There a climate can be created in which, no matter how hard we try, no matter what cost measures we take, we cannot win. We are coerced, for example, into taking the hard decision of maybe moving to Belfast against our will, because that is the only way in which we can survive in the long-term.

Mr McGovern:

If Belfast port is privatised to the detriment of Derry and Warrenpoint, it does not take a genius to work out that Belfast will not have to worry about competing with Warrenpoint and Londonderry in five year's time. It is guaranteed that the price of a tonne of cargo going through Belfast will be much dearer then than it is now.

The Chairman:

Thank you for your presentation and for answering the questions. Would you like a couple of minutes to sum up, or are you happy enough?

Mr McGovern:

No. We really appreciate this opportunity to give the Committee our views. Obviously we think that this is a very serious issue. We have mentioned our own businesses; we have mentioned the port of Warrenpoint; we have mentioned the surrounding area of Warrenpoint; and we have mentioned Northern Ireland plc. We are simply asking that Belfast is not privatised.

The Chairman:

I thank you all very much.

---

AD HOC COMMITTEE
(PORT OF BELFAST)

MINUTES OF EVIDENCE WEDNESDAY 19 MAY 1999

(Mr A Maginness in the Chair) Witnesses:
The Parliamentary Under-Secretary of State
(Lord Dubs),
Mr R McMinnis and Mrs B Faloona
(Department of the Environment)

The Chairman:

Good morning, Minister. You and your two colleagues, Mrs Barbara Faloona and Mr Robin McMinnis, are very welcome. We are pleased that you were able to come back again to assist us in our deliberations.

I understand that you wish to make some introductory remarks, after which you will take questions.

Lord Dubs:

Thank you, Mr Chairman. Thank you also for being so understanding about my difficulties last time. Once again I apologise for the fact that I had to run off. Let me assure you that in case you want to go into this in more detail, I can stay until 2.30 pm, although I suspect you will not want to spend that much time on it.

However, I appreciate your understanding, and thank you very much for giving me another opportunity.

A number of questions were asked last time to which, given freedom from time constraints, I could develop answers. If you are agreeable, I would like to deal with the questions that were not fully dealt with before, and then I will take any other questions.

Thank you very much for a second opportunity to discuss these issues with you. Since my last visit, Robin McMinnis has written to you about the possibility of a meeting with your advisors from the University of Ulster. Given how complicated these issues are, it would be useful if you would let some of my officials have a meeting with the people from the university so that we have a better understanding of the university's thinking. But I will leave that with you.

The Chairman:

The Committee will certainly consider that.

Lord Dubs:

Having looked at the report of the last session I found there were some questions which I can answer more fully, now that I have the time. The first, raised by Mr McGimpsey, was about separating the landbank from the port business. Would you like me to proceed?

The Chairman:

Yes. Mr McGimspey is not present at the moment, but he may be along later.

Lord Dubs:

The first three I have a note of are all Mr McGimpsey's questions.

The Chairman:

The Committee would appreciate an enlargement of your response to his questions even though he is absent.

Lord Dubs:

In fact, the first five came from Mr McGimpsey. The first point is a key one - and one which I know the Committee is concerned about - and that is the possibility of separating the landbank owned by the harbour from the ongoing port business. That is probably the most crucial point that has concerned the Committee - at least that was the impression that I got.

The Commissioners' proposals envisage the transfer of all of the port's assets to the private sector. That is consistent with the Ports (NI) Order (1994). There is no provision in that legislation to permit the port operational land to be dealt with separately. The Department explored that possibility, but the Commissioners and port users did not favour that approach. Both the Harbour Commissioners' advisors and the Department's advisors have said that without the development potential offered by the land, they feared it might not be possible to attract the interest of institutional investors.

Therefore, if that were the case, the business could not be floated and that a trade sale would not offer the same benefits in terms of an equity stake in the business or shares for local investors. They are not saying that it could not be disposed of, rather that the better way of doing so with the various safeguards might not be possible and that they would, therefore, have to do it in a different way and possibly get less money for it. The Harbour Commissioners see the landbank as a very key part of the assets and without it there would be less interest in the harbour. Any decision to separate the land from the port business would reduce the total proceeds from the sale.

I know that the Commissioners are aware of your Committee's concerns and I am sure that you put those points to them when they appeared before you. I understand that the Harbour Commissioners are shortly to submit a further paper on the question of how they intend to proceed. It is not for me to tell the Commissioners how to do so, but no doubt you will put to them options such as how the concerns of Belfast City Council might be incorporated in any way forward.

There is also a master plan for the port lands and there is the planning system, which, for all the criticism of it, does still have a number of possible safeguards with regard to development. I am anxious that there should be safeguards and that the concerns expressed here and by Belfast City Council should be addressed, but in the first instance that has to be up to the Harbour Commissioners.

The Chairman:

Thank you, Minister.

Assemblyman McGimpsey, the Minister specifically directed that response to your question from the last time.

Mr McGimpsey:

I apologise for being late, and I missed part of the Minister's answers. As I came in he was talking about a master plan for the harbour. We are all aware that the master plan for the harbour did not work when it came to the D5 application for the huge shopping centre. This was land zoned for service and light industrial job creation, but we ended up with another out-of-town supermarket, so the master plan is by no means set in stone. When the Belfast City Council and North Down Borough Council, Carrickfergus Council and a number of other councils unanimously opposed it, the planning system just did not work in that situation. Uniquely, in Belfast, every single party represented opposed it, ranging from the Ulster Unionist Party through the SDLP across DUP, Sinn Féin and PUP, yet it still went ahead. The views of the people living in Belfast and further afield, as represented by their political representatives, counted for nothing.

My concern relates to the argument that the land has to go with the port in terms of privatisation. Who says so? The Harbour Commissioners say so. They say that the harbour cannot be privatised unless the land is tagged on. Who says so? The Harbour Commissioners say so. They claim that they have a report from experts which backs this up. We have asked them for it and they will not let us see it. The Minister makes the point about differentials in terms of cash realised between sale of port without land and sale of port with land. There are no figures to back that up.

I repeat that there is deep unease over this proposal and it seems to me that we are not talking about privatisation of a port but about a grand land sale with a port thrown in. Those deep concerns remain. We cannot get answers to our questions. How much is the port, with land, going to realise? There must be a rough idea of idea of that. How much will the port realise without the land? In other words, what is the value of the land? Before we get into the commercial benefits, what are the benefits going to be in cash terms? The argument is that the Harbour Commissioners are strapped for cash, yet they have over £20 million lying in their bank account, and they say that they cannot release that. It seems to me that if it is their wish to develop the port, that money could be released and ways could be found to allow them to borrow money on the open market, without going through all of this process.

Mr Wilson:

May I comment on what the Minister has said about this specific issue. I am becoming increasingly concerned about the Department's neutrality on this matter. Your arguments sound like those of Gordon Irwin.

They are almost exactly the words and propaganda that we heard from the Harbour Commissioners on this issue. One of the reasons for the huge concern about the sale was the cavalier way in which the Harbour Commissioners dealt with the landbank and the way in which, in the past, they have overridden their own plans. Michael has alluded to the fact that this was done despite the huge shortage of land in east Belfast for light industrial use. The part that was set aside for that purpose was put into retail use because it was more profitable, and the Harbour Commissioners simply tore up their master plan for the harbour.

There is concern about such an amount of land being handed over to a privatised company that is driven by profit by an organisation that was not primarily profit making. I do not think that that fear about the landbank transfer will go away. It is reinforced by your point that if the sale were to go ahead without the development land there would not be the same degree of interest by institutional investors. Is this just about getting development land into the hands of institutional investors or, as you have said in your brief, is it about enabling the port to better meet the challenges ahead and to ensure the long-term security of the port?

The emphasis that is being placed on this land by you and by the Harbour Commissioners, leads us to the conclusion that the port is simply a side issue, and that the 2000 acres of land in the heart of Belfast is the main issue. If privatisation is to go ahead, we should like to see the landbank removed from the equation.

Mr Beggs:

You said that under current legislation, the land and the port have to be dealt with as one issue. Surely you and your Department appoint the Commissioners, and if it was in the public interest I am certain that it would be possible to introduce new legislation to ensure that that is not the case. Do you accept that the matter is under your control, and that you could deal with it differently?

Lord Dubs:

I agree that I appoint the Harbour Commissioners, although some are nominated. Belfast City Council has one nomination and my function is to ensure that that person is a proper individual to be a Harbour Commissioner. I cannot otherwise second guess the City Council's approach. I have never seen it as part of my responsibility to use my power of appointment in as specific a way as is implicit in your question - in other words, you play ball or you do not get on.

That would not be the proper way for me to approach it, and it is certainly not any suggestion that I have acted on in the past in relation to appointments.

Prior to devolution the Government have the power to bring in new legislation. The difficulty is legislative time. We would have to have new primary legislation to deal with this, to give to the Government the powers that you want them to have in relation to this, and it would take a long time to have the legislation drafted, to consult on it and then find parliamentary time.

Obviously if devolution happens quickly, the Assembly will be in the driving seat, and all of these problems will be for the Assembly to deal with, but, even so, developing entirely new legislation will inevitably bring about a lot of delay. What we are doing at the moment - and what we have done - is to act on existing legislation, and it is on that basis that the Harbour Commissioners came forward with their proposals. It may be possible to do some fine tuning, but that is the position.

Mr Wilson said that I sounded like the Harbour Commissioners. In a sense, of course, the initiative for this proposal has come from the Harbour Commissioners, and they have had a lot of experts advising them on the way forward, so if I am quoting what they have said to you on other occasions, it is hardly surprising, because on this issue, they have had more expertise than we, as a Department, have had. I am simply saying that that is the advice I received from them, and I do not have enough independent advice which has gone in a different direction - any advice we have had has gone along the same lines.

Mr McMinnis:

Yes. It has generally supported what the Harbour Commissioners have said.

Lord Dubs:

It is not surprising that on this issue I have not taken a different line from the one the Harbour Commissioners have given you, because all advice has come from the same source.

How neutral is the Department in all this? When the Harbour Commissioners first came up with their proposal I said to them "Yes, in principle that is fine. Would you like to develop the proposal?". We went public at that point, because I wanted it to be absolutely clear that nothing underhand was going on, that the Government were not doing anything that was not in any way absolutely clear and transparent. So I said publicly what I had said to the Harbour Commissioners "Yes, go ahead. In principle we go along with that".

The Chancellor of the Exchequer's initiative is another factor. I mentioned this before, but I will elaborate. The Chancellor announced that an additional £70 million would be made available to the Northern Ireland block but that figure was clearly based on the amount that would be raised from the sale of the harbour. The Department is not neutral on that one.

I am not in a position to get involved in the details of the scheme that the Harbour Commissioners will eventually come forward with. The Department will have to satisfy itself that that scheme is satisfactory and act on it, and we do not want to prejudge that. I think that deals with the neutrality aspect.

What is the motive? Is the motive the land, or is it the well-being of the economic effectiveness of the port of Belfast. I believe that doing nothing as regards the port operation would be damaging to Belfast's future. Ports are an increasingly competitive business - I mentioned when I was here last time that Dublin is becoming increasingly competitive in terms of what it has to offer - and if we stand still, we shall simply lose business from here to Dublin. I am concerned that Belfast, as a port, should be as competitive as possible, consistent with the need to improve the local economy. I am also concerned that Belfast port should not have to operate under constraints which counteract its ability to be as effective as possible. For example, Belfast port is currently very limited in terms of making investment decisions.

If, for example, Belfast Harbour Commissioners wanted to upgrade port facilities in England to improve movement of goods and people from Belfast, at the moment they are precluded from doing that even though they might want facilities at the other end to improve things for customers.

With regard to the £20 million that you mentioned, they are very limited under their present status as to how they can spend that. Indeed, they would have been happy to spend it on improvements to the Westlink which would improve access to Belfast harbour. However, under the trust port status they are simply not allowed to do that.We need to have some change so that Belfast harbour can actually make use of assets and resources such as that £20 million. Now that is the harbour side and that alone seems to me to justify a significant change in the status of Belfast harbour from its present position.

With regard to the land, the Government's general view is that the public sector should not be sitting on assets which are not being used in the best interests of the people of Northern Ireland. It is wrong in principle that the Government should sit on chunks of land which are not being properly used when there are ways in which they can be used to the benefit of the local economy. Indeed, after the election we did a review of all public sector assets to make sure we were not inadvertently sitting on things which should be disposed of and put to better use rather than just sitting idly in Government possession. The landbank of the harbour is the biggest single chunk of land, and it is not right to allow a situation to develop wherein land is not being properly used. That holds back the economy and is not proper in the interests of Northern Ireland. Both interests apply, although my initial concern was that I wanted Belfast harbour to be as competitive as possible.

The land issue was a more general one, but it had a specific application in relation to Belfast harbour because of the size of the landbank and because there was land in the middle of our major city. Therefore it is of crucial importance to the city's future and to Northern Ireland's future. Both are important but even if there were no land attached to the harbour we would still have to take action to enable the harbour to develop in the way I have suggested.

The Chairman:

Mr Wilson wants to ask a supplementary question. Would you like to respond now and then move on to Mr McGimpsey's point?

Lord Dubs:

That is fine.

Mr Wilson:

It refers to something you said, Minister. You say your conclusions are based on the information you received from the Belfast Harbour Commissioners and the independent advice which you have received. We are not aware of what other advice you have received - perhaps you could enlighten us. The only advice we have been informed of is in paragraph 4 of the brief which you sent us for the last meeting and that was in relation to the review of the trust ports. The Department mentioned only two recommendations. They were that the legislative powers should be extended and that public accountability should be improved by increasing district council representation on the boards. Maybe you have received other independent advice which is not mentioned in this document. However, it is significant that the only recommendation which you told us you had received from other findings does not mention privatisation but does mention extended powers and greater accountability.

Lord Dubs:

May I ask Mr McMinnis to comment on that. I have had advice from Mr McMinnis and maybe he will tell you where he got his advice from.

Mr McMinnis:

Mr Wilson, I explained last time that Belfast Harbour Commissioners' proposals came forward at a time when the review of trust ports was underway. I said then that it was largely a coincidence. If we think back, the legislation which governs the privatisation was two years before that. The Harbour Commissioners were working on these proposals for the best part of two years before the review of trust ports came forward.

As we explained in the paper we have commissioned PricewaterhouseCoopers and a firm of Glasgow solicitors, McGrigor Donald, to advise the Department and assist us in evaluating Belfast Harbour Commissioners proposals.

Belfast's initial proposals which came to us in December 1997 were simply an outline, and we looked at them with the assistance of Ernst and Young. We did that quite separately from the review of trust ports, because the terms of reference for that review, which we have shared with Mr Wilson in the past, were much wider and did not focus on whether the port of Belfast should be privatised.

As the Minister said, the Government came to the view that, in principle, it was right that the matter should proceed and that Belfast Harbour Commissioners should develop their proposals. The Government received BHC's detailed proposals at about the same time as you did. The Government wants to hear from the Assembly before doing anything further, which means that, in a sense, we await the reaction of the Committee and the Assembly to those proposals.

Mr Tierney:

Did the Government consider the other ports and the problems that could arise?

Mr McMinnis:

We are looking closely at the other ports. We commissioned further work by a firm called ERM, which is familiar with such work and has been employed in the past by Warrenpoint and Lisahally ports. ERM has intimate knowledge of the port scene in Northern Ireland, and we have asked it to carry out further studies on the likely effect of the privatisation of Belfast on the activities of other ports. Belfast Harbour Commissioners are equally aware of the fact that we are looking at that and have commissioned separate advice. I think that it is incorporated in their submission to you.

Mr Tierney:

I do not agree that we received the same information as the Department. We read in the newspapers that infrastructure work was subject to the sale of Belfast port. Surely before the Department or Ministers support anything, they should have all the necessary information. We are told that the Department is in favour of privatisation and that it is seeking more information from the other ports to enable it to assess the damage that might result from privatisation.

Lord Dubs:

Decisions by the Government or by the devolved administration come into it in two ways. I made the decision in principle to ask Belfast Harbour Commissioners to work out their scheme in detail. Any further decision by the Government has not yet been made. It has been entirely left to the Harbour Commissioners to work out their scheme and for consultation to take place between the Commissioners and interested parties. The Assembly decided to set up this Committee to work on its behalf, and we have not made any further decisions. We are partly in the Committee's hands and those of the Harbour Commissioners. After devolution, it will be a matter for the Assembly.

There was a review of trust ports. We are now considering the views put forward on behalf of Warrenpoint and Lisahally ports. There are some difficulties, which we are discussing with them, relating to the problem of how to reconcile the degree of freedom of action which they wanted with the necessary public accountability. We need to discuss this further, and no final decision has yet been made.

Mr McMinnis:

With regard to Mr Tierney's point, I have to say that, even after this stage of the consultation, Belfast Harbour Commissioners still have to submit a formal transfer scheme. This will have to be advertised in the 'Belfast Telegraph' and other local newspapers, after which there has to be a 42-day public consultation period. It would be quite wrong, therefore, for this Department to reach any final decision on the privatisation of the port of Belfast in advance of that.

Mr Tierney:

Why were the plans to improve the road network announced if no decision on the port had been made? I understood that those plans depended on income from the sale of the port.

Lord Dubs:

The Government agreed in principle to the Harbour Commissioners' proposal and asked them to work out the details. This was on the assumption that the Commissioners would submit a scheme which would be - or could be made to be - acceptable to the Department. The Chancellor, in good faith, announced a package of schemes, £70 million of the cost of which would come from income generated by the sale of the harbour, representing a net increase in the money available for Northern Ireland. The Government did this because it supported the proposal, but the precise details of the scheme have not been finalised, for the reasons which I have set out. We have not received details of the transfer scheme from the Harbour Commissioners, but I imagine that they are taking note of the views of this Committee, and that these views will have an influence on the scheme which the Commissioners will, eventually, submit.

The Chairman:

Would you like to address the points raised by Mr McGimpsey?

Lord Dubs:

I am not sure that it would be proper for me to take up the Committee's time in discussion about the D5 issue, although I would be happy to discuss it on another occasion. Could we put this to one side for the moment?

Mr McGimpsey:

I do not wish to get involved in another discussion about D5. That is water under the bridge. We discussed it previously, and our views were not -

The Chairman:

It would be best if we were to avoid a discussion on D5.

Mr McGimpsey:

We are talking about a breach of the masterplan - the planning system which, you said, gave some sort of protection. I mentioned the case of D5, because that shows that it does not.

Lord Dubs:

I understand what you are saying, but I would like to move on to the next point, concerning valuations. We do not have a valuation for the harbour, with the land. That will have to be worked on, and I understand that it will be a detailed, complicated and costly exercise. The Harbour Commissioners will want to have this done when they are preparing a prospectus for the sale of the harbour. I too would like to know the difference between the value of the harbour together with the land and their separate values. The information I have received - most of it from the Commissioners' advisers as well as some from our own - states that the harbour would be worth much less without the land, than it would with it. I do not know the answer, but I agree that it is an important question. Nevertheless, the Harbour Commissioners will want to be careful about spending large sums of money on such exercises, given that the prospectus for the sale, which they will, eventually, produce, ought to be as up to date as possible, and that market forces can influence the valuations. I do not know the answer, but the golden share, which, it is clear, will be part of the scheme, will give the Department a key input to any decisions about the disposal of assets.

A privatised harbour could either sell off the land, though the golden share could prevent the Belfast Harbour Commissioners from doing this, or they could develop it through short-, medium- or long-term leases. I understand that the Belfast Harbour Commissioners would prefer to lease the land rather than sell it.

Mr McMinnis:

Mr McGimpsey has expressed his concern about the valuation of the land. May I assure him and the Committee that the Department takes this matter very seriously. In Great Britain, when the privatisation of a port was contemplated, the port authority undertook the valuation and the Department did a second check. With regard to the port of Belfast, we have enlisted the Valuation and Lands Agency to help us recruit independent valuers to check the Belfast Harbour Commissioners' valuation. In addition, due to the commercial advantages that the holder of the landbank would have, we are also seriously considering employing someone with the necessary business acumen to assess its true value. All that information will then be considered. We must ensure that we get full value from the sale. We are very conscious that we will have to answer to the Assembly if we get the valuation wrong.

Mr McGimpsey:

I do not believe the Belfast Harbour Commissioners when they say that they have no idea of the value of the land. It is an absolutely fantastic proposition that the Belfast Harbour Commissioners could be sitting on this land for generations, and when they decide to sell it, they ask us to believe that they do not even know its notional value. We are discussing 2,000 acres in the heart of Belfast, and as Mr Wilson mentioned, whoever owns that land will literally have Belfast in the palms of their hands in terms of development. Through owning this city centre land, they will be able to determine how Belfast develops for generations. This is one of our deepest concerns.

There is a view that this is all pre-cooked. We are told that the Westlink upgrade and the Toome bypass are both dependent on the sale of the land. I do not wish to labour the point but it almost sounded like blackmail - that these roads are dependent on the sale of the harbour. I would refer you to a letter that you sent to Belfast City Council a few weeks ago which detailed the roads that were to be included in the next five-year programme. In one of them, lo and behold, half of the money is the Westlink allocation of £36 million. We may be seeing things that do not exist, but we are concerned that this has been pre-cooked.

Mr McMinnis referred to the Pricewaterhouse Coopers report, a McGrigor Donald of Glasgow report - I have never heard of that one - and an Ernst and Young report. We cannot make an informed decision unless we have all the information. We asked the Belfast Harbour Commissioners for a sight of the reports, and we are still waiting. These reports should be in the hands of the Committee.

This might not be within their remit, but are you aware that the Belfast Harbour Commissioners have employed a public relations company to sell their view on the privatisation? If everything is being done strictly upfront, I do not see why they need spin doctors to help them.

Lord Dubs:

I should like to make some comments and Mr McMinnis may amplify some of the points. I do not know what type of assessment the Belfast Harbour Commissioners have made on the value of the land. I suspect that their reluctance to comment is because whatever they say that might be grossly inaccurate. As the value of their assets will be crucial to the prospectus for the eventual sale of the harbour, I can see that they do not want to say anything publicly that might be at variance with the final valuation. They would naturally be cautious at this stage because, should the valuation be out of line, it would cast doubt on the way in which the prospectus is presented. Historically, they would have some knowledge about it, but we are debating a valuation for a prospectus that will interest potential investors. This is crucial, and I suspect that their sensitivity stems from the fact that they do not want to make a mess of the final prospectus and the way in which it would be perceived.

Mr McGimpsey:

I can understand that, but on the open market, the valuation will be determined by the market at that point. I understand that the proposals are for placements of shares, which means that someone rings his chums in the London money markets. It is that sort of closed bidding that makes this so important.

When one has a piece of property to sell, one gets an agent to value it, and he may get it right or wrong. People bid for it and the final price becomes the market value at that time. That will not happen here. I understand from the Belfast Harbour Commissioners' proposal that fund managers in the City of London will be asked to consider shares. There will be no bidding, and that is why the valuation is absolutely crucial.

Lord Dubs:

I agree that the valuation is crucial. However, there are other ways. Theoretically, they could be advised of a value for the shares and then put them on the market. If they are undervalued, people would make a killing overnight, and we are anxious that there should not be any overnight killings. The advice that I have received is that the suggested method of offering the shares will maximise the return and is consistent with providing a safeguard against people mounting a takeover in the way that has happened elsewhere. We are trying to avoid fat cats and takeover bids and are hoping to maximise the return. The advice that I have received is that the way suggested will better achieve those ends. I am not an expert in this area, and I have to listen to the people who are.

I was asked about how much information from our advisers could be made public. I shall ask Mr McMinnis to comment on that. The Department needs advisers to enable it to carry out informed scrutiny of the harbour proposals. Independent advisers enable us to make a critical assessment of the Belfast Harbour Commissioners' proposals rather than simply having to accept them on the basis of their advice. Mr McMinnis will comment on whether any of that can go public and at what point. After that I shall deal with the Westlink and blackmail points.

Mr McMinnis:

PricewaterhouseCoopers and McGrigor Donald are providing ongoing advice to us on the proposed sale of Belfast harbour. There is no report that we can simply hand over to you. The Minister is right to say that this is a sensitive commercial issue. For the reasons that I gave earlier, we have not pronounced on the Harbour Commissioners' proposals. We are waiting to hear from this Committee and from the Assembly, and the transfer scheme has still to be published.

On the value point, it is important to remember that not just the land but a brand new business would be up for sale.

Once they have established themselves as a successful business, BHC can get involved in the kind of things that the Minister was talking about, such as engaging in a joint venture with port authorities in Great Britain. That is one of many ideas being discussed by the board at the moment. These would be described in the prospectus, allowing prospective investors to form an opinion on the value of the new business. As Mr Gimpsey said, the land will be of crucial importance, as will existing-and potential- profits. Our advisors will study the price/earnings ratio of ports in Great Britain and compare them with those of Belfast Harbour Commissioners to see if they compare favourably. All of these considerations will have to be taken into account before a final decision is reached.

Let me deal quickly with the method of sale. The initial proposals from Belfast Harbour Commissioners were concerned only with encouraging financial institutions to take a stake in this business. However, we in the Department encouraged the Commissioners - we are Northern Ireland people after all - to make their offer more widely available to the public. We proposed that they use local intermediaries, banks and building societies to make shares available to the general public. We are pleased that they agreed. It is no longer a question of selling the port to five or six financial institutions. We intend to discuss the business with these financial institutions as part of a book building process in order to determine how much the port is worth and how much they are prepared to pay for it. Clearly, we will be keen for it to realise its full value.

Lord Dubs:

Mr McGimpsey used the words "pre-cooked" and "blackmail" when he talked of Westlink. Before the Chancellor's announcement, the Government were under enormous pressure to increase investment in the infrastructure of Northern Ireland, not just roads but a whole range of things. One important element in the Chancellor's announcement was that £70 million would be spent on important roads in Northern Ireland. I am deeply unhappy about the use of the word "blackmail". As devolution was some time in the future, the Government had to find ways to raise the money necessary for the successful economic development of Northern Ireland. The strategic roads mentioned by the Chancellor are an important part of that. We felt that speed was of the essence; we would not hold up schemes. We would do the preparatory work, because we felt that we owed it to people to get these schemes under way as soon as possible.

Doing nothing about the ownership of the harbour was not an option for the Government. If the Harbour Commissioners were to develop the land themselves, the money raised could not be used for the roads. If that had not been the case, we might have looked at the matter differently; but it is the case. We had to use the assets for the economic betterment of Northern Ireland rather than leave them as they were.

We felt that there was a way forward which would help Northern Ireland economically, based on the Chancellor's announcement and the proposals that the Committee is currently considering. If we do not do this, the harbour will be left as it is. Some changes will have to be made as per the Trust Ports Review, but it will remain the way it is, and there will be no assets to use for the good of Northern Ireland. That is the alternative. I do not like the word "blackmail", but it seems to me that a simple choice will have to be made.

We wanted the Assembly to take the driving seat on this; difficult decisions will have to be made, and we cannot see any way of avoiding that. The Chancellor has produced a net increase of £70 million for Northern Ireland through the sale of the harbour. If the Assembly's view is that they do not want this or they have a better suggestion, so be it. I sound as if I am preaching; I do not mean to. That decision falls properly within the remit of the Assembly. You have to decide what is most important; should you cut expenditure on roads or cut expenditure on other things and keep roads going? Some very clear choices will have to be made. The Government did not wish to put improper pressure on our successors, but the Chancellor, in good faith, was merely saying that this was the best way forward.

Mr McGimpsey:

We were told originally that the roads would not be built unless the sale of the harbour went ahead, but your letter to Belfast City Council says that the road schemes are going ahead.

Lord Dubs:

There are two sets of road schemes. I announced certain other schemes, but we are talking about the main road schemes announced by the Chancellor.

Mr McGimpsey:

The Westlink was the big project announced by the Chancellor; it is also the big project mentioned in your letter.

Lord Dubs:

We are proceeding because the Government have said, in good faith, that we will proceed with those schemes. We have also said that it will be up to the Assembly, when it takes over, to decide on the priorities that it thinks are proper for Northern Ireland. I have said on a number of occasions that choices will have to be made, and if the Assembly does not wish to proceed with the plans for the sale of the harbour, £70 million will have to be found from elsewhere or cuts will have to be made. Those are the day-to-day political choices that Governments have to make.

Mr Byrne:

I am concerned that we are rushing towards a predetermined outcome. You are presenting us with a dilemma over the £70 million that is needed for the roads. A proper economic appraisal of the development potential of these 2000 acres has not been done. According to the recent unemployment figures, 25,000 people in Belfast are out of work. We have a duty to ensure that this land is utilised so as to address that problem.

At the same time, we have to consider the existing harbour and its potential for future development. It is worrying that Belfast has slipped back as a port facility and that Dublin has moved ahead of us. The Harbour Commissioners' submissions do not emphasise how they intend to develop the port; they seem preoccupied with utilising the landbank as a resource. If there is no proper economic appraisal of its development potential, I do not know how the land, as it presently stands, can be valued.

Mr McGimpsey mentioned the shortage of land in Belfast for industrial units. It seems to me that it is not good enough for the Department of the Environment solely to be handling this matter. We need to have an interdepartmental approach involving the Department of the Environment and the Department of Economic Development as this is a vital resource, not only for the people of Belfast, but also for the people of Northern Ireland.

I am also concerned that it is only now that we seem to be talking about the other ports - Warrenpoint and Lisahally in Derry. The Warrenpoint Port Users' Association wants to see Warrenpoint port expanded and developed. There has to be a comprehensive examination of how the three ports can be developed to their potential, be it niche-market services or whatever for the smaller ports.

Finally, I am sure that there are other things which could be looked at. Surely we should not be afraid of looking at developing a free port enterprise park in Belfast, if need be. This is an ideal location for people from north, west and east Belfast. We want Belfast, as a city, to revitalise itself from a retail and general business perspective. The Department of the Environment is looking at this from a very narrow perspective at the moment. The Harbour Commissioners are looking at it from a very subjective perspective. The Committee's remit enables it to be wider in its deliberations.

I do not like the problem concerning the £70 million required for road improvements. The Minister will be aware that I have lobbied for many years about the roads in my part of the world. I do not want to see this asset being frittered away purely for the roads.

Mr Morrow:

The whole consultation process greatly concerns me. We were told initially that the whole future road infrastructure in Northern Ireland depends upon the sale of the harbour. That, to say the least, is quite outrageous. Furthermore, what is being handed down to us is ludicrous. It is a case of "this is what we are going to do, and before you agree to do it we are going to read it out to you and tell you". Paragraph 12 of the Minister's written submission states

"In considering the Commissioners' proposals the Department has been drawing on the advice of PricewaterhouseCoopers, and McGrigor Donald".

Pricewaterhouse only considered the proposals of the Harbour Commissioners. Are there other proposals which we should know about?

The Department of the Environment has established a project team led by a senior civil servant and consisting of officials with experience of earlier privatisations. Who are they? Does the team exist yet? May we have access to the information which they have? May we have this information made available to us?

With regard to the sale of the harbour, I suspect that it will be sold in the same way as every other asset has been sold - wrongly. There is no redress after something has been sold. It is put up for sale and it is sold. If you get it wrong you shrug your shoulders and walk away. That happened with the sale of the airport, British Airport Authority, British Telecom and the building societies. Do I need to continue? Tell me of one which was sold correctly? How can we guarantee that we will get this one right? There is no guarantee that this will be the case. It is most likely, if past experience is anything to go by, that the harbour will not be sold correctly.

I would like to know a bit about the team which the Department has established. How far has its study progressed? Can we have access to it?

Lord Dubs:

Mr Byrne asked about the development potential of the land. At the risk of upsetting my officials, I may say that I do not think that Government Departments are very good at dealing with matters that involve commercial decisions. There is a view that Government should be good at this, but my experience of civil servants and Ministers is that they are not good at that sort of thing.

Mr Byrne:

At the same time they should not give the land away.

Lord Dubs:

Of course not. Although there may be better ways of proceeding, we have to take action on the landbank, and there will be no action if the harbour is left as it is. Even if the Department could take the lead on this matter, we do not have the legislative power. Land gets developed because individual enterprises, mostly private companies, although there may be some publicly-owned businesses as well, feel that they can do it in a way that is economically advantageous. The skill lies in maximising the benefit of such decisions, slotting them into the scarce resource of land. Even if the Department had the powers, I do not think that that would be the right way forward.

Although I am a long-standing Labour Party member, I have to say that in some fields the private sector is better than the Civil Service. This is one such field in which the private sector can work for the economic benefit of the people of Belfast and of Northern Ireland. We must ask ourselves whether there are better options than the one that we are discussing. In terms of broad principles, I am not sure that there are. We need to make sure that the public sector is not putting an artificial brake on the development of an asset. We must allow development to proceed, and we must encourage it for the benefit of Northern Ireland's forward-moving economy. In what way could one develop the land to achieve that other than in the way that is being discussed?

Part of the benefit of the review of Trust Ports is that the ports of Warrenpoint and Lisahally have come up with proposals. We are not happy about all aspects of them but at least the issues are being discussed and we wish to resolve matters in the wider interest of Northern Ireland. I am reluctant to hold Belfast back, although I understand the difficulties and sensitivities over Warrenpoint and Lisahally. My fear is that Dublin would benefit.

Mr Beggs:

Larne port should also be considered.

Lord Dubs:

Larne is a private enterprise port. As far as I am aware, it has not approached us on this matter.

Mr McMinnis:

We have considered Larne's interests as well as those of the ports of Warrenpoint, Lisahally and Coleraine.

Lord Dubs:

Larne is in the private sector and has to accept the virtues of competition.

Dublin is getting its act together rather well and is developing its competitive edge. Northern Ireland's ports need to keep a good cutting edge, and that applies to Belfast more than to the others. I understand the concerns of Warrenpoint and Lisahally, but I do not want all the port business in Northern Ireland to decline and Dublin to benefit. I want ports in the whole of Ireland to do well.

Mr Byrne:

The emphasis in the proposals is on land disposal through flotation. There is no great emphasis on the development of port facilities or on how Belfast could get itself back to a premier position. Those are serious defects in the proposals.

Lord Dubs:

I am not aware that they have not done that but perhaps Mr McMinnis would care to comment?

Mr McMinnis:

My understanding of the Harbour Commissioner's position is that trade through the port has more or less levelled out. They see the future growth and potential of the port to be through diversification, and they wish to move into the private sector to be able to capitalise on ideas which they are currently unable to pursue. They recognise that there is a natural level which they are close to reaching. They refer to that level as a plateau, and they do not wish to slide down the hill by standing still. Instead they wish to develop and move into new business ventures.

Mr Byrne raised another point about the interdepartmental approach. I set up and chaired the first interdepartmental group which brought together every Northern Ireland Department. We sought their views on every conceivable issue that could be raised by the privatisation of the port of Belfast, ranging from ensuring proper medical cover for persons with infectious diseases arriving in ships from overseas to more major matters such as future war planning, emergency planning, the implications for Northern Ireland if the port of Belfast were to move into the private sector and how we would handle or address that. All of these issues are being considered but we cannot put the final seal on the matter until we know the Assembly's views on the whole concept.

Lord Dubs:

Mr Byrne asked about the feasibility of a free port or an enterprise park. I am unsure as to whether or not such a suggestion has already been put forward, but if it subsequently is then the Government would wish to consider it. I am interested in all ideas which might prove helpful, and if the Harbour Commissioners support the proposal then I will wish to hear their views. If the Harbour Commissioners pick up on such an idea from other sources then they will, no doubt, put forward their views.

Mr McMinnis:

The senior management teams at the other ports are much better equipped than we, as civil servants, are to suggest how those ports might be developed - for example Mr Byrne suggested niche markets. We are there to provide help and support with matters such as the development of a deep-water quay at Warrenpoint. In this instance we intend to made a bid to Brussels for grant assistance with a £7 million project and this is currently being advanced. We can do this type of thing to help but they are the people with the business acumen, and they must initiate and lead such ideas.

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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