Draft Marine Navigation Bill (HC 709-ii) Transport Committee 25 Jun 2008

Evidence given by
2.45 Joint panel from the General Light House Authorities; Jeremy de Halpert - Executive Chairman (Trinity House); Duncan Glass - Director of Navigational Requirements (Trinity House); Douglas Gorman - Director of Finance (Northern Lighthouse Board); Martin Dyas - Head of Corporate Services (Commissioners of Irish Lights)
3.30 UK Maritime Pilots Association; Joe Wilson, Chairman; Nautilus UK; Allan Graveson, Senior National Secretary; UK Harbour Masters' Association; Captain Kevin Richardson, President
4.15 Minister and Officials; Jim Fitzpatrick MP; Richard Bennett, Head of Ports Division, DfT; Cameron Clark, Bill Manager, Ports Division, DfT; David Bolomini, Head of Maritime Liability, DfT.

Q117 Mr. Eric Martlew (Carlisle): Just to carry on on that, you have not got a deficit, have you, you have got a liability which is different to that.

Mr Gorman: Yes.

Q118 Mr. Eric Martlew (Carlisle): It seems as though your scheme is running very well; is it just fashion that makes you want to change it and make it worse for the people who you work for?

Mr Gorman: There is nothing wrong with a pay-as-you-go arrangement; where it can cause problems is where it goes out of equilibrium. As long as there is enough money coming in to pay pensions and the number of pensioners and employees stays around the same it does not create a problem, but we can see possibly in the future - we have got a very mature pension scheme which means far more pensioners than we have got employees as a result of automating lighthouses, and therefore the cost of pensions is increasing because we are having to pay these pensioners. All we are trying to do under the new arrangements is to better manage the facility and look further ahead to the point where ultimately you can potentially see a situation with technological change where the General Lighthouse Fund could have to be run and collect light dues purely to pay pensions. That is what we are trying to avoid and that is why I am saying it is a long term aim.

Q119 Mr. Eric Martlew (Carlisle): You seem to be in a very good position that most other pension funds would dream about. Really what you are saying is that the number of potential people coming to work there is going to reduce by new technologies, yet the amount you are going to get in from the various sources is going to stay the same or go up, so you have not convinced me why you want to change it other than there is a trend to do away with decent pensions for people who work in public services.

Mr Gorman: Certainly what we have done in all our planning is to try and ensure that the actual pension benefits are broadly similar. As I said, there will probably be a higher employee contribution but looking longer term we want to avoid the situation of the General Lighthouse Fund being run purely as a pension fund. What this will do is allow the new pension fund to stand on its own feet because what it has done is built up the assets to meet the pension liabilities. At the moment if there was some situation - and I cannot envisage what that might be ---

Q120 Mr. Eric Martlew (Carlisle): Neither can I, Mr Gorman.

Mr Gorman: If there was a change in the General Lighthouse Fund, the liability is £348 million.

Q121 Mr. Eric Martlew (Carlisle): Are you saying we are going to come to a point where you will not need any lighthouses? That is really what you are saying and that is why you would end up with £300 million odd deficit.

Mr Gorman: As I said, looking at pension provision is a long term provision. You could see technological change in the future that could make changes to the way the General Lighthouse Fund is run, and all we are trying to do is make sure that pensions are considered there so that our employees' pension provision is protected.

Q122 Mr. Eric Martlew (Carlisle): What you are really saying is that you are going to stop the final salary scheme, I presume for new people coming in, you are going to put up the amount that they are going to have to contribute to it - is that existing employees as well? You have not given us a good reason for doing it.

Mr Gorman: The first thing is we have made no decision on the actual pension provision. When we looked at what the new scheme might look like we looked at a career average scheme which is exactly what is the latest scheme and the principal civil service pension scheme. To all intents and purposes, therefore, we have mirrored those provisions and said how can we afford that, so we looked at the cost to the General Lighthouse Fund and said, yes, there would probably be an increase in employees' contributions, but what we are trying to do is protect the employees' pensions. They are very aware that the General Lighthouse Fund is a strange beast - the fact that it is a single separated fund -they are looking for some security in their pension provisions and they welcome what we are trying to do.

Q123 Mr. Eric Martlew (Carlisle): This is the last question - I realise I am getting boring - but you have not convinced me that there is any threat to your funding at all.

Mr Gorman: There is none.

Q124 Mr. Eric Martlew (Carlisle): So there is not a threat to the pension fund, there is not a threat that the liability will not be met and you cannot see circumstances where that would be the case so why change it?

Mr Gorman: Because what we are trying to do is to be able to move over time the potential responsibility for the General Lighthouse Fund to meet pensions to a separate pension fund that can stand on its own two feet. Yes, you are right, there is no immediate threat to employees' pensions; we work very closely with the Department for Transport and they take that into account when they advise the secretary of state on the light dues rate, we have got a letter of comfort from them but this, as I said, is a long term solution, you have to look 30, 40, 50 years ahead in pension provision and what we are looking for is the power to be able to allow our successors the ability to manage that liability.

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Q154 Mr. Eric Martlew (Carlisle): Mr Wilson, have you any comments about the changes to the pension fund?

Mr Wilson: I am a trustee of our pension fund and it is also in deficit; we have an obvious deficit and we are wondering where the money is coming from. I do not think I have sufficient knowledge on the GLA pension fund to comment.

Q155 Mr. Eric Martlew (Carlisle): Mr Graveson, what percentage of the total income goes to pay the pensions?

Mr Graveson: That you must ask the GLA. I only know that the money is transferred through from the three respective bodies to the MNOPF and it is a relatively modest amount because there are very few active employees in the pension fund, it is a closed fund. There are of course liabilities remaining from those that have left the employment and are not yet drawing a pension, and indeed there are pensioners drawing a pension. The scheme as drawn up is that there is a spread liability amongst all of the participating employers.

Q156 Mr. Eric Martlew (Carlisle): Can I take it, gentlemen, that you do not see any problem looking forward with keeping the existing system.

Mr Graveson: There are two points, the first point of which is my knowledge and competence with respect to the payments to the Merchant Navy Officers Pension Fund, and that is relatively modest. I do not foresee any problems in the GLA pension fund unless of course there was some political decision to remove, of course, light dues or to restrict the income to the authorities in some way.

Q157 Mr. Eric Martlew (Carlisle): You cannot see that happening.

Mr Graveson: That is for you to decide, not for me, sir.

Q158 Mr. Eric Martlew (Carlisle): It is for us to question.

Mr Graveson: Yes.

Q159 Mr. Eric Martlew (Carlisle): Do you think that is a possibility, do you think that is what it is about, reducing the light fees?

Mr Graveson: There is a potentiality there to do that, yes.

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Q179 Mr. Eric Martlew (Carlisle): I am a little confused. Which one of you represents the staff of the General Lighthouse Authorities?

Captain Richardson: None of us.

Mr. Eric Martlew (Carlisle): I thought you were very mild about the pension scheme. There is an empty chair and there should be somebody there. Do they have trade unions?

Q180 Chairman: We have everybody we are expecting.

Mr Graveson: We have people, I will admit not officers, although there may be one or two that have retained their membership, but on board the vessels the officers across all three authorities are in our membership. The master and the officers are in our membership.

Q181 Mr. Eric Martlew (Carlisle): Obviously the pension is a big personnel issue and it seems that if they are represented by a trade union - I think they may be - that trade union is not at the table today.

Mr Wilson: No.

Q182 Mr. Eric Martlew (Carlisle): In the vast majority.

Mr Graveson: Yes.

Q183 Mr. Eric Martlew (Carlisle): You have an interest because of the ----?

Mr Graveson: The Merchant Navy Officers' Pension Fund, yes.

Mr. Eric Martlew (Carlisle): I just thought the responses to the questions about the pension fund were a bit mild and now I understand why.

Chairman: Thank you very much for coming and answering our questions.

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Q194 Mr. Eric Martlew (Carlisle): The premise of this Bill is to improve safety. If you have a headline figure of 540 over five years, it seems a lot of people and obviously something needs to be done. When you look at the Bill and where a lot of the accidents occur, beach activities, swimming, sub-aqua, this Bill is not going to do anything for those numbers. We are really talking about the 72 deaths relating to commercial maritime operations over a five year period. Is the Bill really necessary?

Jim Fitzpatrick: We believe the Bill is necessary. If I can draw attention to this, what we are talking about is updating a lot of legislation, some of which goes back up to 100 years. We are talking about improving the arrangements for pilotage and extending the professional competency of those who are pilots in the way that they are certificated. We are talking about the ability for harbours to be able to control whole areas and introducing the chance for them to be able to be more in control. We are looking at the Port Marine Safety Code which does affect safety within harbours. We are looking at the General Lighthouse Authorities and how they are operated, what costs they apply and how we are able to make sure that the buoys and other markers round our coast are effectively maintained. We are looking at the pension arrangements for those within the industry, which is a very big issue and one which certainly needs to be addressed. Finally, we are talking about wreck removal in the International Convention, so you are absolutely right to say there is a deficiency there in respect of dealing directly with the numbers of people who are being killed but, as you also describe, given the numbers that we are talking about, some of these arrangements, one would expect, would impact and create a safer working environment within the marine sector. In that instance, it will have an impact but it has not been specifically designed with targets which you and the Chairman have been asking about, which we are quite happy to take away as a suggestion from the Committee and think more about.

Q195 Mr. Eric Martlew (Carlisle): It is modernising the legislation. It is bringing it into the 21st century?

Jim Fitzpatrick: Indeed.

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Q208 Mr. Eric Martlew (Carlisle): Coming to the pension scheme for the General Lighthouse Authorities, why is the Secretary of State taking the power to put in alternative pension schemes?

Jim Fitzpatrick: Very simply because of the deficit which exists and is not going away. Therefore, it is clear that the pension arrangements are not working adequately. We want to make sure that adequate pension entitlement and adequate pension provision is there for staff for the future.

Q209 Mr. Eric Martlew (Carlisle): Surely that is not the case, Minister, because this type of pension does not have a deficit. It has a liability. The liability is being easily covered year to year by the fees that are coming in and it is only a small percentage of those fees.

Jim Fitzpatrick: The liability is being covered. Whether it is being easily covered is a judgement and obviously you are absolutely right. My apologies. There is not a deficit; it is a liability. We believe that to make sure that there are adequate arrangements, to make sure that people's pensions are protected, we need to update the pension arrangements. There is a number of schemes being considered and prepared for consultation with staff in respect of what will happen for the future.

Q210 Mr. Eric Martlew (Carlisle): What is the possibility of the pensions not being covered? How could that happen under the present arrangements?

Jim Fitzpatrick: It is not a question of the pensions not being covered. It is a question of a more stable way of ensuring that pensions will be covered. The liability is there. It has to be met out of our funds. The objective is to build up a fund to make sure that pensions will certainly be in a much more secure position, which is why there is a decision to move to a new scheme.

Q211 Mr. Eric Martlew (Carlisle): I am being pedantic and I am sorry. They are secure now. They are always going to be secure in the future as long as you continue to collect fees. What possibility is there of not collecting fees in the future?

Jim Fitzpatrick: There is no prospect that we will not collect the fees. However, we want to separate out the pension fund liability from the general running of the lighthouse authorities to make sure that there is clear transparency as to where the money is going and what contributions are being made. There is a lot of pressure from the maritime sector to say that fees need to be controlled as much as possible. We want to make sure that, notwithstanding the value for money which is provided in respect of the provisions around our coastal areas, staff are looked after. Therefore, moving to a different way of funding the pension scheme seems to be a sensible way forward.

Q212 Mr. Eric Martlew (Carlisle): I am not sure the staff would agree with that. There is no problem with security; it is about the fact that it is costing too much. You wish the employees to pay more into it and it seems likely that you will stop the final pension scheme for new entrants. Is that the case?

Jim Fitzpatrick: It is certainly a possibility. There are five schemes, as I understand it, under review. The contribution level is one of the issues being examined. The separation out of the pension scheme liability from the general lighthouse funding arrangements would seem to be a sensible way to move forward.

Mr Clark: It is also the case that as the General Lighthouse Authorities have improved their efficiency the cost of pensions compared with the cost of their other operational matters is increasing, so the pensions are becoming a larger and larger proportion of the general lighthouse fund. That is one reason why they need to make better arrangements for paying pensions.

Q213 Mr. Eric Martlew (Carlisle): I hear what you are saying. You are saying that, because of new technologies, fewer and fewer people are being employed. If you are looking at the longer term, there is hardly going to be any pension liability at all because you will be paying robots, will you not? That is the point. I do not accept your argument. What you are saying is there are fewer people working now because it is more automated but eventually that will work through the pension system.

Mr Clark: It will work through in the long term. It will also mean that light dues will hopefully fall further, so the amount of money available will reduce further.

Q214 Mr. Eric Martlew (Carlisle): What we are talking about is reducing light dues. That is why we are altering the pension scheme, is it not?

Jim Fitzpatrick: It is about better managing the financial arrangements of the authorities' business and separating out lighthouse fees, the operational costs and pension costs seems to be a sensible way forward.

Q215 Mr. Eric Martlew (Carlisle): Firstly, we have a fashion to get rid of pension schemes. That is a trend. It is about reducing the costs to the people who use the service, is it not?

Jim Fitzpatrick: You can interpret it that way. Our interpretation is that it is separating out the pension fund liability, bringing in a new scheme to make sure that the pensions for staff are protected. There may very well be a cost to that. Pension schemes in different industries in different sectors have always been actuarially assessed and negotiations are taking place on whether there needs to be an increase in contributions from staff or from employers. Those arrangements need to be reviewed on a fairly regular basis to make sure that the ----

Q216 Mr. Eric Martlew (Carlisle): This is not about protecting the pension scheme for the staff. That is protected by the system. It is about making changes.

Jim Fitzpatrick: I said at the start that I accept your interpretation that it is about costing staff more. It may very well and there is a likelihood that there may be an increased requirement on contributions. However, were we not to separate out the funding arrangements and the liability continued to increase as it has been, notwithstanding the improved technology and the reductions in staffing levels over the years, if the pension liability grew to such a level, it could put the pension scheme in jeopardy and we want to make sure that that is not the position we arrive at.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.

On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB