COMMITTEE FOR REGIONAL DEVELOPMENT

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Parliament Buildings
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Email committee.regionaldevelopment@niassembly.gov.uk

Conor Murphy, MP MLA
Minister for Regional Development
Clarence Court
10-18 Adelaide Street
Belfast
BT2 8GB

13 December 2007

Review of Ports Policy

Dear Conor,

1. As you are aware, the Committee has taken a keen interest in the Review of Ports Policy in Northern Ireland. As part of its work in this area, the Committee received briefing from officials on a number of occasions, most recently on 21 November 2007, visited the trust ports in Belfast, Londonderry, Coleraine and Warrenpoint in October 2007, heard oral evidence from the trust ports’ executives on 28 November 2007, and met with you to discuss the policy issues at its meeting of 5 December 2007.  
2. In your letter to the Committee of 22 October 2007, you set out your views on the issues arising from the Review of Ports Policy in Northern Ireland and sought the Committee’s views on these issues. The Committee’s response to your request for input is set out in the following paragraphs.  
3. The Committee is of the view that, given the importance of the efficient and effective operation of the ports to the economic and social wellbeing of all the people of Northern Ireland, the over-riding objective of the Review of Ports Policy must be to ensure that a balance is struck between the very real need for public accountability and transparency while ensuring that Northern Ireland’s trust ports are successful businesses, able to respond quickly to commercial opportunities and to compete effectively with each other and with other private and public ports in the United Kingdom and the Republic of Ireland.
4. The Committee recognises that real opportunities for growth and expansion exist for the trust ports in Northern Ireland, Members are mindful that the Assembly must facilitate the trust ports in capitalising on these opportunities.  
5. In your letter to the Committee you state that you are minded:

a. To seek legislation to take the trust ports out of public corporation status, without losing their status as public trusts with a responsibility to operate in the best interests of existing beneficiary and non beneficiary stakeholders; and,

b. To extend the range of commercial powers available to trust ports. 

6. In principle and subject to the comments below, the Committee is in agreement with this proposed action.

Taking trust ports out of public corporation status

7. The Committee notes that taking the trust ports out of public corporation status will mean the removal of controls currently exercised by you as the Minister over the activities of the trust ports. This would require the removal of:

a. The power of DRD to privatise a trust port (contained in the Ports ( Northern Ireland) Order 1994);

b. The power of DRD (of the District Council in the case of Coleraine) to appoint a majority of members of the trust ports (contained in the individual harbour orders made in 2002); and

c. The power of DRD to give a trust port directions of a general or specific nature as to the exercise of its functions (contained in the Harbours ( Northern Ireland) Order 2002; and

d. The power of DRD to regulate port borrowings (contained in the Harbours Act ( Northern Ireland) 1970 and in individual harbour orders made in 2002).

8. The Committee has received briefing that the removal of the powers listed at points a to c above (to privatise, to appoint and to direct) would appear to be the minimum required to remove the trust ports from public corporation status, and that it also may be necessary to remove the power to regulate borrowings in order to secure the status of trust ports outside the ONS definition of a public corporation.
9. The Committee is content with the removal of these powers, and is of the view that early engagement with ONS on this issue is necessary to ensure that actions taken are sufficient to secure the removal of trust ports from public corporation status.  
10. The Committee also notes that were these powers to be removed, the Department would retain, among other powers:

a. The power to prevent certain specific actions (for example the sale of lands without consent);

b. The power to set standards of corporate governance; and

c. The power to require information (for example in order to achieve transparency)

11. A full list of these powers is set out at Annex B of your letter of 22 October 2007.
12. Turning to the issue of accountability and transparency, the Committee is of the view that the removal of the powers listed at paragraph seven above must not preclude or impede stakeholders (DRD, the Assembly and the wider public) from scrutinising the work of the trust ports.
13. To address this, your letter highlights the proposal suggested by PricewaterhouseCoopers (PwC), in the context of the DfT Review of Ports Policy, for the development of guidance and performance indicators to identify and account for trust ports use of their profits in the wider sense – what PwC refer to as the “stakeholder dividend”. Your letter to the Committee states that you would like to consider these issues as they relate to trust ports here.
14. The term stakeholder dividend is not used by ports, but was introduced by PwC in its report on trust ports for DfT in May 2007. PwC employs this term to describe ‘the use of resources by trust ports in a non-profit maximising way for the benefit of stakeholders’. It represents the cost of actions that would not be taken by a plc port. The concept potentially takes a variety of forms, including:

a. discounting of port charges below market rates;

b. investment in new or maintenance of existing infrastructure for the long term future of the port rather than for short to medium term profit e.g. the highest standard of maintenance of critical infrastructure such as lock gates, where a plc port might opt for a cheaper solution.

c. undertaking port activities with less than commercial returns e.g. provision of cruise terminal facilities which support the local tourist industry;

d. employee packages above the market rate;

e. support for community projects; and

f. charitable payments or donation of time.’ ¹

15. It can take the form of cash revenue foregone as well as capital and revenue expenditure. PwC states that it does not believe, in most cases, that trust ports are currently quantifying the ‘cost’ of the stakeholder dividend, nor do they have a clear policy, approved by the board, regarding how much it should be and how it should be allocated between stakeholders.
16. PwC also suggest that, in order to truly reflect profit / loss, this should be set and monitored by the board, and reflected in the accounts of the trust port.
17. The Committee is of the view that this approach to stakeholder dividend is a new idea, and it is not clear to the Committee that the ports are in favour of this approach. The Committee would urge the Minister to engage further with the trust ports on the issue of stakeholder dividend of the type proposed by PwC in tandem with the drafting of legislation, and to keep the Committee appraised of progress on this matter.
18. However, at the meeting of 28 November 2007, the trust ports clearly indicated that they were keen to facilitate greater transparency and reiterated their commitment to publishing enhanced information and agreed metrics to achieve this. The Committee would support this as one of a number of approaches to increasing transparency and accountability.  
19. Both of these issues, together with consideration of engagement with the wider community and environmental issues, should form part of a wider agenda to enhance the accountability and transparency of the ports, encompassing primary legislation, secondary legislation, guidance, memoranda of understanding, codes of conduct, and so forth. The Committee is of the view that all of these non-legislative aspects should be progressed in tandem with the development of legislation in this area. The Committee requests to be informed of progress on these issues as work develops.
20. The Committee is of the view that it would be necessary to update the guidance on trust port governance to reflect the fact that DRD will no longer be appointing a majority of port members, and that port members continue to be appointed in accordance with the OCPANI rules.
21. The Committee is supportive of your proposal to review the new arrangements after a period of five years to assess the outcomes of any new legislation.

Extended powers

22. In your letter you state that you are minded to extend the powers, including the commercial powers, available to the trust ports. The Committee notes that most of these powers would also be available to any port including private and local authority ports, not just the trust ports. These are the power:

a. To promote investment in its harbour;
b. To dispose of property no longer required for harbour purposes;
c. To promote leisure activity and tourism;
d. To undertake general port consultancy;
e. To reserve part of a harbour for particular vessels or classes of vessels (for example yachts for the purposes of creating a marina);
f. To give directions to regulate navigation;
g. To require security for the payment of charges due;
h. To create a new offence of interfering with safety equipment or safety arrangements; and
i. To make bye-laws to regulate control of personal watercraft (to ensure that harbour authorities can control jet skis). 

23. These are set out in Annex C of your letter of 22 October 2007, in which you indicate that most of these powers are already available to other ports in Great Britain and the Republic of Ireland.
24. In addition to the above powers, the Committee suggests the inclusion of an additional and explicit power to promote aquaculture.  
25. The Committee is supportive of the move to extend the above powers to the ports. In relation to point i above, the Committee would suggest that the power to make bye-laws should not be limited to the control of jet skis but must be sufficient to encompass the control of all personal watercraft.
26. In addition to the above, you state your view that more careful consideration is needed in relation to:

a. A general commercial power to undertake any activity which the trust ports considered to be profitable and of benefit to the port; and
b. The power to undertake any functions or activities outside the jurisdiction².

27. On the basis of the evidence received by the Committee, it is in agreement, in principle, that a power to engage in general commercial activity which the trust port considered to be profitable and of benefit to the port, and a power to undertake functions and activities outside the jurisdiction should be extended to the ports.
28. However in the case of trust ports, the exercise of these powers should be clearly of benefit to port activity and with the agreement of the Department through, for example, a memorandum of understanding or another mechanism.  
29. Finally, the Committee would request regular and timely updates on the progress made by the Department in taking forward the Review of Ports Policy, and is looking forward to continuing its work on this important issue.

 

Yours sincerely,

Fred Cobain MLA
Chairperson
Regional Development Committee

1. PwC, May 2007, PPRO 4/039/0004 Trust Port Advice, Final Report

2. Meaning outside of Northern Ireland