COMMITTEE FOR REGIONAL DEVELOPMENT
OFFICIAL REPORT
(Hansard)
Ports Policy Review
___________
21 November 2007
Members present for all or part of the proceedings:
Mr Fred Cobain (Chairperson)
Mr Jim Wells (Deputy Chairperson)
Mr Cathal Boylan
Mr Willie Clarke
Mr John Dallat
Mr William Irwin
Mr John McCallister
Mr Raymond McCartney
Mr George Robinson
Mr Brian Wilson
Witnesses:
Mr John Angus ) Department for Regional Development
Mrs Doreen Brown )
Mr Brian White )
The Chairperson (Mr Cobain):
The Committee welcomes Mr Brian White, Mr John Angus and Mrs Doreen Brown from the Department for Regional Development (DRD).
Mrs Doreen Brown (Department for Regional Development):
I shall make some initial comments. The Minister for Regional Development, Conor Murphy, wrote to the Committee in October 2006 about the ports policy review. That review had begun in the summer of 2006, when the Department issued a consultation paper. That exercise ran in parallel with a consultative exercise that was led by the Department for Transport in London. The timescale for the process was elongated for two reasons: first, because the work in Great Britain was extended; and, secondly, because direct rule Ministers did not want to take final decisions on ports policy when devolution was in prospect. As the incoming Minister, Conor Murphy inherited the review. He considered the issues, and he then met with representatives from the various trust ports to explore those issues and options for the way forward.
The paper that the Minister has sent the Committee outlines his emerging thinking on the main issues, and he seeks the Committee’s views on those before taking matters further, and before final decisions are made.
If the Committee is content, Brian White has prepared a short presentation. Members have before them the relevant papers.
Mr Brian White (Department for Regional Development):
Good morning. I do not wish to go over in detail what is contained in the material that members have been given.
When I appeared before the Committee previously, I explained the background to the current review. The key element of that background is the Office for National Statistics’ (ONS) ruling that, for public-expenditure purposes, the major trust ports be classified as public corporations. Subsequently, the Treasury decided in 2004 that, from April 2005, the ports were to be treated as public corporations.
That has practical consequences for the ports. The ports’ borrowings form a part of public expenditure, for which provision must be sought as part of the normal budgetary processes. I am sure that, in most of the visits that the Committee has made to the ports, members have been told of the potential resulting problems, particularly the constraint on ports being able to react quickly and flexibly to commercial opportunities.
However, I explained to the Committee when last before it that the ONS ruling was made as a result of its assessment of the degree of control that Government can potentially exercise over ports. In the case of Northern Ireland’s trust ports, relevant controls include controls in legislation that were introduced at the Assembly’s request as recently as 2002. I also said that there was an issue around commercial powers for the trust ports, and that those had been consulted on. The ports have concerns that extended powers would be difficult to use unless they have greater freedom as a result of their no longer having public-corporation status. However, some of those powers might be problematic were existing Government controls over the trust ports to be removed.
The Minister has told the Committee that he is minded to remove the trust ports’ public-corporation status. He is also minded to give the trust ports further powers. In that context, he has asked for advice.
Our presentation outlines some of the steps that would have to be taken to remove the trust ports’ public-corporation status. That would involve the removal of powers of compulsory privatisation in The Ports (Northern Ireland) Order 1994; reducing to a minority the commissioners on each board who are appointed either by Government or local government—
The Chairperson:
How many commissioners are appointed in that way at present?
Mr White:
The number varies from port to port. The largest board is that of the Belfast Harbour Commissioners, which has 15 members, four of whom are councillors.
To remove the trust ports’ public-corporation status would also involve the removal of DRD’s power to issue directions, as is set out in The Harbours ( Northern Ireland) Order 2002. To date, that power has not been used. It would probably also involve the removal of DRD’s power to control borrowing by means of imposing a prescribed overall ceiling.
Various powers and controls remain. For example, harbours are required to provide accounts to the Department, and they can be required to provide information, particularly to enable shipping forecasts to be made.
The Department also has powers to prevent certain actions from taking place. It has powers over harbours that enable it, in certain circumstances, to prevent the levy of unduly onerous harbour charges. The Ports ( Northern Ireland) Order 1994 provides that privatisation can take place only with the Department’s consent, and, under various harbour-specific Orders, memorandums of understanding have been developed on land use and disposal.
The Department also has certain enabling powers. For example, under the Harbours Act ( Northern Ireland) 1970, it can make loans and grants and vest lands. In certain circumstances, that is important to harbours. It also has clear influencing powers to develop codes of practice. It may be possible for the Department to remove trust ports’ public-corporation status and still appoint a minority of board members. Moreover, the Department may send observers to attend board meetings.
When we met previously, I talked about possible steps that could be taken to ensure greater transparency. Those ideas were set out in a report that PricewaterhouseCoopers (PWC) prepared for the Department for Transport in London. That report talked about the development of operational and financial indicators that the trust ports could routinely publish and about the ports’ capacity to make more explicit statements about the stakeholder benefits, that result from the current consultation.
The extended commercial powers that would be available to the ports is a further issue to consider. Those were consulted on as part of the general consultation on ports. A range of extended powers would be available to any partner or party. I do not intend to go through the list of extended powers in detail, but I am prepared to answer questions on them.
We should focus more on the specific additional powers that would be available to the trust ports. They include powers that would enable the ports to develop or procure non-harbour land. In other words, the ports would be able to derive an enhanced income stream from the development of non-harbour land that they own. It would enable them to acquire adjoining land, to perform at a port the activities of a ship’s agent, and to enter into and pay personal liability insurance premiums for commissioners for proposed general commercial powers. That range of powers would be aimed more specifically at the trust ports.
Two more general additional powers are available. Those powers have a wider scope, and they were also consulted on. One is a general commercial power to enable a port to undertake any business activity, on its own or in partnership, within or outside a harbour, that would be considered to be of benefit to the harbour. The other is a power to undertake any functions or activities outside Northern Ireland.
The Minister seeks some general advice from the Committee. Given the degree of control and influence that will remain, the Minister wishes to know whether the Committee is content for the necessary steps to be taken to remove the trust ports’ public-corporation status. In other words, is the Committee content to see the four main controls removed? Moreover, does the Committee have views on any remaining powers? For example, does the Committee believe that the Department should have the freedom to continue to appoint a minority of board members? Does the Committee support the concept of greater information transparency of the kind that was suggested as a result of the PWC report to the Department for Transport in London?
Finally, the Minister seeks advice on whether the Committee believes that there are powers that should not be extended to the ports. Furthermore, are there powers that might be extended to the ports, subject to limitations that are not set out?
Thank you, Chairman. That is a quick canter over the ground.
Mr Wells:
The Committee visited the four trust ports. We were impressed to see how successful and profitable they are, and the incredible and important role that they play in the local economy.
First, what are the practical difficulties of their being public corporations? For example, how long would it take the Department to turn around an application for loan sanction from a port, and would it often say no?
Secondly, what would the present Department of Finance and Personnel (DFP) rate of interest be on that loan, compared with that which would be charged the open market? I am trying to understand the practical difficulties that being public corporations are causing the trust ports.
Mr White:
I shall answer your second question first. Our understanding is that the rate of interest charged might be the same as that charged on the open market. Any difference between the interest rate that the Government charged and that available on the open market might be considered to be state aid.
You asked how long it would take the Department to turn around a loan application. Under current budgetary arrangements — discussions on which the Committee has been involved in recently — we bid for moneys in rolling three-year cycles. If a port were to seek the capacity to borrow money, it must enter that type of cycle.
Whether the Department would say no to such an application would very much depend on how successful the Department had been in a particular Budget round. A difficulty would arise were a port to propose a scheme that fell outside that three-year timescale.
Mr Wells:
What if Warrenpoint Harbour Authority or Port of Belfast, spotting that Dublin Port was at capacity, wanted to seize an opportunity to move in quickly to secure investment by taking advantage of that slack at Dublin Port? Is it the case that if a funding request did not fall within the budgetary arrangements, that would just be tough luck, and the port simply would not be given the money?
Mrs D Brown:
Yes. The public-expenditure processes are elongated and inflexible compared with the financial processes to which the private sector is used.
The Chairperson:
We had two and a half hours of that yesterday.
Mr Wells:
The mechanism is such that public corporations can get money only if they can meet DFP’s tight criteria. That is a major constraint on our four trust ports’ potential growth.
Mrs D Brown:
Yes. In order to get that public-expenditure cover, the ports must compete with every area for which DRD seeks funding, as well as with every other area right across the public sector.
Mr Wells:
Can anybody, having considered all the evidence, think of a good reason why that situation should continue?
Mrs D Brown:
If one looks at it from that perspective, there is no good reason why that situation should continue. However, to discontinue that arrangement would involve the dismantling of certain controls, and consideration would have to be given to the implications of that and to whether any degree of dismantling would be acceptable.
Mr Wells:
The four trust ports are generating very high profit returns for their expenditure outlay. Surely their boards of directors must have a fair idea of what does or does not constitute a commercially expedient loan. Is it really the Department’s role to look over the ports’ shoulder and tell them that they do not really need a third pier, jetty or crane? It is for each port’s board of directors to make those decisions. Surely we must give them the flexibility to do that, while, at the same time, retaining the right to uphold the public interest.
Mrs D Brown:
Exactly. It is about achieving that balance.
Mr Wells:
But the balance is wrong at the minute — it has to be.
Mr White:
If the ports’ expenditure counts towards the total figure for public expenditure, it is understandable that Government would want to control it. However, that inevitably brings the consequences that Mr Wells has highlighted.
The Chairperson:
As far as the ports are concerned, our interest is the public interest. The ports are at the centre of our economy. They are a huge economic driver and a huge employer, so the public interest must play a part in the Committee’s thinking on the review of ports policy. I accept Jim’s point, but checks and balances are in place all the way through the process. The point of these discussions is to try to come to an arrangement whereby the ports can be given sufficient freedom yet remain accountable to the public, who are in control of the process.
Mr Dallat:
Like Jim, I visited the four trust ports. I was entirely fascinated by how good three of them were. However, I am rather embarrassed to say that the fourth was totally dysfunctional. Its board was split, and it did not talk to the local council. No attempts at outreach to town-centre partnerships or other bodies had been made. The port was not even communicating with the Department for Social Development (DSD).
Your briefing paper states that one of the proposed extended powers that would be available to any harbour authority is:
“Promotion of leisure activity and tourism to maximise the benefit for the local economy”.
Am I correct to say that that power is absolutely critical, particularly when one happens to live in a town that is the gateway to the coast?
What do harbours do when they are filled to the brim with scrap, and nobody will talk to them? Is that being examined? I have read various reports that state how certain ports in England managed to branch out to become hubs of economic activity. I am sure that I do not need to tell you which port I am talking about. How would that dysfunctional body fit into any review of the existing legislation?
Mr White:
I do not wish to go into great detail about individual port facilities. It can be viewed that, if those ports were to be taken out of public-corporation status, they would have more freedom. If ports were given that freedom, some of them would exercise it responsibly, while others could make a mess of it. That is a point.
Mr Dallat:
To save time, Brian, when a lease for the next 20-odd years is signed, what do you do to ensure that nobody makes changes? That relates to the legislation, does it not?
Mr White:
A lease for what?
Mr Dallat:
The lease for the scrapyard in question was signed for fifteen years, in addition to the six that the existing lease still has to run.
Mr White:
The decisions that the harbour authority took fell within its remit. Even with current legislation, the Department would not have the power to control such decisions.
Mr Dallat:
Is there the possibility of any legislative provision in future to prevent that sort of abuse of power?
Mr White:
I do not think so. I have tried to outline the controls that exist to deal with such abuses in the future. Part of the solution is staffing. I will not comment on individual harbour authorities. We must ensure that, under any new arrangement, people are appointed to bodies according to the proper process. That process must properly identify people with the ability to understand the role that they are taking on and to carry it out. I will not comment on whether that has happened in the past, but clearly it is important —
Mr Dallat:
The Department has been in the middle of it, so you know about it.
The Chairperson:
It goes back to checks and balances. As Jim said, a difficult tightrope must be walked between giving companies the commercial freedom to operate, without having to look over their shoulder every five minutes. The Department must ensure that what the trust ports do is in the public interest.
Mr W Clarke:
Can you give the Committee some details about the proposed extra powers available to the trust ports to conduct business outside the jurisdiction? Does that include setting up terminals?
Mrs D Brown:
It could refer to anything. If we were to give the trust ports the full list of freedoms on which we have consulted, and which are available — to varying degrees — to ports elsewhere, they would have the freedom to acquire land or businesses outside Northern Ireland for any purpose. They could do anything that would generate an income stream or that would help them to acquire the resources to invest further in their port business. It could be anything; it does not have to be port-related.
Mr W Clarke:
Therefore, the proposed extra powers to conduct business outside the jurisdiction could mean anything at all?
Mrs D Brown:
Yes.
Mr W Clarke:
If we extend the powers to the harbour authorities, the trust ports will expand, but what joined-up approach will be agreed between the Department and the ports to improve the necessary infrastructure? I am thinking specifically of a southern relief road that will be required if there is any further expansion at Warrenpoint port. What guarantee can the Department give the Committee on that? It is all very well to say that we should expand the ports, but if the necessary infrastructure is not in place, they will be damaged.
Mrs D Brown:
That is absolutely right — there would have to be a joined-up approach. I do not know whether “guarantee” is a word to which I could sign up, because what can be guaranteed? If a trust port planned to expand, its representatives should talk to the authorities responsible for infrastructure to find out whether infrastructure plans could be advanced, and whether they could contribute to the costs of the necessary infrastructure. It would not be sensible for a port that was seeking to expand to assume that the infrastructure would magically fall into place.
Mr W Clarke:
The Department must think about that, however, because the ports will expand.
Mr White:
I am sure that the trust ports can speak for themselves. The Department has had a reasonably good relationship with them. They have certainly been open with us and bodies such as Roads Service about infrastructure needs. I am not aware of there being any problem in ensuring a necessary liaison with the ports. Whether the trust ports have always got the investment that they wanted is a different matter, which concerns the management of scarce resources.
If trust ports’ public-corporation status is removed, they will be taking de facto decisions on their infrastructure development in the same way in which other companies do. A large company that is setting up a factory, although it is not connected to Government, will want to speak to people to find out about roads and the water and a sewerage system in the area. Those mechanisms must be there.
Mr W Clarke:
I am just flagging the issue.
The Chairperson:
To return to Willie’s first point, he asked about other commercial interests that the trust ports might have. If the ports were to concentrate purely on port activities, would that make them less competitive over a protracted period? Ports in the Republic of Ireland manage to be at the forefront of things all the time. Would restricting our trust ports to port activities have commercial implications?
Mr White:
The Port of Belfast, in addition to being a port business, functions as a landlord. Members will be able to explore issues concerning Port of Belfast when its representatives give evidence to the Committee next week. I think that Port of Belfast would like to make more use of their land holding, which would involve activities that are not purely port-related. That would generate a further income stream for the better support of the port.
The Chairperson:
That is what I said. It seems that the more innovative that ports are, the greater is the likelihood of their survival. It is a hugely competitive business.
Mr White:
Yes; it is very competitive.
Mr Boylan:
Who appoints the observers at meetings and to whom are they accountable?
Mr White:
The Department would appoint an observer accountable for correctly observing the Department. We must be clear that, if public-corporation status is removed from the trust ports, the Department’s levers of direct control will be lessened. Part of the message that I was trying to put across, and that is consistent with the approach that is taken elsewhere, is to try to ensure that, if ports are given greater freedoms through the removal of their public-corporation status, there is nevertheless sufficient information publicly available to enable proper scrutiny. Ports will obviously want to be economically successful, because that will benefit of the economy, but they also want to work fully inside the local community in order to make a proper contribution to it. The ports are not particularly happy to find themselves in such circumstances. As part of the overall package, it is important that better information be made available.
The Chairperson:
There will be no difficulty with that. Again, we return to checks and balances. It would be in the public interest, and to the benefit of those organisations, were the trust ports seen to be operating openly and transparently.
Mr B Wilson:
I would be somewhat concerned were the trust ports to become involved in economic ventures in which they had no experience. Obviously, the harbour authorities are extremely successful at running ports. After privatisation, one of the water companies — I believe that it was Welsh Water — became involved in areas in which it had no experience. As a result, it ended up in administration. In that case, it was a water company, but what might happen to a port?
Imagine, for example, that Warrenpoint Harbour Authority decided to branch out into selling insurance, and lost a great deal of money. Will there be any restrictions on what the proposed companies can do, or will they be able to do whatever they like?
Mrs D Brown:
The extent of the commercial powers to be given to the ports is a decision that must be made. They might be given carte blanche to do anything or they might be severely limited. Alternatively, the decision made might be somewhere in-between. A spectrum of possibilities exists, and we are attempting to judge the right balance between commercial freedom and protecting the public interest, as well as protecting the ports from making unwise decisions.
Mr B Wilson:
Do you use a model to do that, or is it simply a matter of judgement?
Mr White:
It is a matter of judgement. Framing legislation is always difficult, particularly [Inaudible.], because it is unclear precisely what the future will bring. When drafting legislation, there is always a danger that seemingly sensible restrictions, which were included because of prevailing circumstances, will preclude taking advantage of opportunities that arrive five years later. [Inaudible.]. That is a matter that the Committee could put to the ports. I have not heard of any budding insurance salesmen at the ports, but who knows?
That is a concern. However, the ports will tell the Committee that they do not want those extended powers in order to take over ports’ businesses throughout the world; rather, they want to be able to pursue specific opportunities that might be to their commercial advantage.
Mr B Wilson:
I agree that the trust ports should have extended powers, but my concern is whether they should be given total freedom.
The Chairperson:
The ports are a bit of an anachronism. They are public companies that operate in a commercial environment, and that is the quandary that we must attempt to overcome. It makes no sense to shackle the ports; nevertheless, they cannot be given carte blanche to do whatever they want. That is the balance that we are all trying to achieve.
Mr McCallister:
We must free them up as much as possible, because the Government can be slow to react to, and can be unresponsive to, a port’s needs. As has been said, it is a case of achieving that balance. If business leaders are considered the best people to run our ports, a certain amount of trust must be placed in their judgement. Perhaps that is why I do not share many of Brian’s concerns.
I agree with the Chairperson about the need for checks and balances. The evidence that we gathered from our visits to the ports certainly seemed to suggest that they need freedom to diversify into other avenues and schemes that would also be of benefit to the local community and to tourism, through marinas, for example. Even if that meant purchasing adjoining lands, and as long as it made commercial sense, the improvements in the service offered might help them to compete with ports in the Republic of Ireland.
Mr McCartney:
When will any decision be made? Is there a timeline for decision-making?
Mrs D Brown:
We believe that we will receive the Committee’s comments by 12 December. It is hoped that final decisions will be made very soon thereafter so that the necessary legislation can be progressed in the new year.
Mr Irwin:
I agree with what has been said. It is important that ports have the power to be proactive, and to maximise any business opportunities that exist. As the Chairperson said, however, checks and balances will be very important. The departmental briefing proposes that ports should have the:
“Potential to maximise business opportunities — either port-related, or commercial.”
It goes on to say that their power to do so should not be limited to core port activities. It also indicates that those powers are available in the Republic of Ireland, although only for harbour functions. We must be careful where we draw the line.
Mr Wells:
Unless it is shipping-related insurance, I do not think that the issue of insurance will come up. Let us call a spade a spade: some of these ports are potentially sitting on some of the most fabulous private-housing or commercial-development land. If Warrenpoint harbour were to be cleared, and apartments built on the land, it would be worth an absolute fortune, given its view over the Cooley Mountains and Carlingford Lough.
I just want to reassure myself about the legislation. Would the ports still have to obtain consent from the Department to sell off land? No matter what model is adopted, I want to be assured that that provision will appear in the legislation.
Mr John Angus (Department for Regional Development):
A port could not cease to be a port without the Department’s approval.
Mr Wells:
There could still be a port in Warrenpoint, even if a huge swathe of apartments were to be built on the front of the harbour. Until recently, given house prices, far more money could be made from building apartments than from bringing in cargo. We would all agree that to sell off the land for development would be against the public interest. Can we be assured that no model will come before us that will not prevent that happening?
Mr White:
The memorandums and arrangements that are in place, and will continue to be in place, will mean that ports cannot dispose of land without permission. It may be the case that they will want to dispose of land. Circumstances could be envisaged in which harbours might close. For the ports that we are talking about, that will not happen in the foreseeable future. I cannot see flats replacing Warrenpoint port.
The Chairperson:
My concern is the opposite of Jim’s. I am more worried that the Executive might steal land to sell than I am about the ports doing so. We must be careful, Mr White. We want to see the ports being as commercial as possible; that is to say, we want any land that is banked to be banked for port use. We do not want to see DFP taking and selling off land that could be used to expand all of the ports and increase their commercial activity. My worry emanates not from the ports but from another pressure.
Mr McCartney:
Is that a possibility?
The Chairperson:
Yes; that scenario is more possible. The Executive could do that without recourse to legislation. The ports cannot do that, but DFP can do so whenever it wants.
Mr B Wilson:
Does the same model apply to all four ports or can it be varied?
Mr White:
We will act on whatever advice the Committee gives us.
Mr B Wilson:
We would have more confidence in some ports than in others. [ Laughter.]
Mr Wells:
Well said.
Mrs Brown:
The trust ports — some of them at least — would say that the model does not have to be “one size fits all”. We will have to wait and see what the Committee proposes for each of the ports. We would then have to assess whether your proposals would achieve the desired outcome; for example, removing them all from public-corporation status, or whether any of the proposals would raise further issues.
The Chairperson:
It is time to be flexible, in order to ensure that one size does not fit all. Is it possible for the Executive to dispose of trust ports’ land?
Mr White:
As far as I am aware, the answer is no — certainly not as things stand at present. The Department does not own the ports, so we cannot insist on a dividend from the ports. We do not own the land. My understanding of the matter is that, if the Executive wanted land or a dividend, or whatever, from a port, legislation would be required in order to —
The Chairperson:
However, could the Executive do that?
Mr White:
Legislation would be required in order to do it.
The Chairperson:
Can the Executive introduce legislation in order to do that?
Mr White:
They could. However, the legislation would have to be in place first.
The Chairperson:
Would the legislation originate in the Assembly?
Mr White:
The Assembly would have to enact primary legislation.
The Chairperson:
If the Executive were minded to do that, could they do it?
Mr White:
The Assembly would also have to be minded to do it, and that is the point that I am making.
The Chairperson:
The way that things being run here, I am waiting for Joseph Stalin to be wheeled out one of these days.
Mr McCartney:
Alternatively, were a piece of land needed for social housing, or for a new road, there must be a way in which [Inaudible.]
The Chairperson:
That clarifies that point for us. I thank Mr White, Ms Brown and Mr Angus for attending the meeting.