168. Some of those giving evidence claimed that the way in which navigation aids are funded in the United Kingdom further diminishes United Kingdom ports' competitiveness, compared with their foreign counterparts. Navigation aids in the United Kingdom are provided by the three General Lighthouse Authorities (Trinity House, Northern Lighthouse Board, and Commissioners of Irish Lights). These in turn are funded entirely from the General Lighthouse Fund (GLF), which consists of the money paid in 'light dues' by vessels using United Kingdom and Irish ports.

169. The Secretary of State effectively acts as the Trustee of the GLF. Although the GLF is administered by the Department for Transport, there are no Treasury payments into the fund. Under the terms of the Merchant Shipping Act 1995, the fund can only be used for the provision of aids to navigation around our coast. It is given to the 3 lighthouse authorities for that purpose.

170. Light Dues are payable by vessels using UK and Irish ports. In the UK the tariff and regulations, subject to minor amendment in 1998, are set out in the Merchant Shipping (Light Dues) Regulations 1997 (SI 562/1997). The charge is £0.4 per net tonne up to a maximum of 40,000 net tonnes. All vessels below 20 net tons are exempt, as are tugs and fishing vessels below 10 metres in length. Since almost all leisure craft are below 20 net tons, the vast majority of the revenue comes from commercial shipping with small amounts from the fishing industry and certain smaller vessels.

171. The Government argues that the light dues should be funded by the users of the navigational aids.[144] However, this 'user pays' principle does not accurately reflect the position for the UK. A large proportion of the 'users' pay nothing because they do not call at UK ports or are exempt. Light dues principally affect the large commercial operators: revenues from light dues currently stand at £73m, of which £71m is funded by merchant shipping.

172. Indeed we were told, "Trinity House is on record as saying about the leisure sector that if there were a way of collecting it we believe they should bear part of the liability. I have to say as a collector that I have no means of collecting that unless there were some form of registration system, which presumably would need primary legislation."[145]

173. Following the consultation process on light dues the Government still believes that dues should be paid by the users but notes that views expressed suggested that a larger number of users should pay. "We have looked at this with some care, but there would be enormous difficulties in collecting such dues and the logistics of it and the bureaucracy would be enormous. We are analysing this matter now and taking a decision."[146]

174. Furthermore, it is generally recognised that 70 per cent of Commissioners of Irish Lights expenditure relates to the provision of aids to navigation in the Republic of Ireland.[147] The Chamber of Shipping told us: "There is in any case a continuing subsidy, at unjustifiable levels, of the provision of aids to navigation in the Republic of Ireland for light dues collected in UK ports."[148] In a recent Parliamentary Answer the contribution of the General Light House fund to navigational aids in the Republic of Ireland were assessed as follows:
Table 7

	1998-99	1999-00	2000-01	2001-02	2002-03
£000	4350.5	5520.7	4597.9	473.6	4915.5

Data Source: HC Deb, 14 October 2003, col 171 w.

The UK is seeking to renegotiate the current agreement to require the Republic of Ireland to meet the full costs of their aids to navigation, but progress is slow.

Economic Factors

175. The Government considered that light dues had limited economic impact in terms of the competitiveness position of UK ports. "It is balanced to some extent by costs in other countries which may be greater. Some other countries do not charge light dues, they are paid for by the state. Over hundreds of years it has been the case that the user has paid here. For example, pilotage charges in some other countries are very much higher that they are here and to some extent that may balance out the cost of light dues. We have seen no evidence that it is leading to a lack of competitiveness."[149]

176. Shipping is generally a low margin operation, with owners constantly looking for ways of reducing their operational costs. Deep-sea container lines involved in transhipment will obviously consider the most competitive ports for their cargoes, subject to their own customer requirements.

177. The light dues constitute a tariff on ships entering UK ports, which increases the costs of the shipping companies.[150] Ships entering other continental European ports are not subject to such a tariff making them potentially more attractive. In the very competitive shipping trades, which operate on tight margins, such costs can influence policy, particularly in relation to transhipment. The extent to which trade can be diverted to other ports depends on a number of factors - other port costs, customer requirements, port capacity. The opponents of light dues consider that, in an industry which is run on such tight margins, the dues will have the effect of moving trade away from the UK to transhipments from other European ports. This will not only mean a loss of revenue to the UK ports system, but to the economy as a whole.

178. The case against light dues has been championed by the Independent Light Dues Forum (ILDF), an organisation comprising some of the world's largest shipping companies. Members of the Forum regularly contribute up to 50 per cent of the annual spend on light dues in the UK every year. A macroeconomic report commissioned by the ILDF suggests that light dues constitute a significant proportion of UK ports costs (approximately £7,000 per call, 35 per cent of total port costs). Typical ports costs for vessel calling at Southampton based on 48,000 DWT vessel are shown in Table 8.Table 8

Charge	Amount (£)	% of total
Pilotage	2,712	13.4%
Towage	3,804	18.7%
Linesman	813	4.0%
Port Dues	5,884	29.0%
Light Dues	7,077	34.9%
Total	20,290	100.0%

Source: Independent Light Dues Forum

179. The ILDF believe that the payment of light dues by ships calling at UK ports does have an economic impact and reduces the competitiveness of UK ports:

"As other margins come under pressure and as shipping customers force prices down, even further squeezing margins, peripheral regulatory charges are significant. If these costs are not alleviated they may well cause re-routing decisions to be made, if this means that a permanent charge on profits can be removed. The deep-sea container lines, who may often be dropping part cargoes at UK ports, are the most likely to look to transhipment. But all cargoes can now be and are being transhipped. Less efficient and more expensive multiple small feeder vessels transhipped from Northern European Ports could be an unwelcome development to service major installations if UK port costs become relatively less competitive."[151]

180. The Government now accepts that economic effects have not been examined in sufficient depth and the Department has commissioned research:

"The study should consider the current structure of light dues and alternative structures, including a zero light dues case as exemplifying one end of the range of possibilities. The detail of these alternative structures should be discussed with the client, but in general they will include different tonnage rates, different tonnage caps, different voyage limitations, range of ship types to be included. The initial economic impact of light dues may come about through the extent to which light dues, in the context of all other relevant port and vessel operating costs, affects decisions by vessel operators and owners to call at UK ports, and affect decisions by shippers on the routing of cargo. However the study should also consider the extent to which the final incidence of light dues affects the wider economy."[152]

We were told that the Department expected to let the contract in August, and that research would take some four months to complete. The Department for Transport economic impact study on light dues should be made public as soon as possible. The charging system should be reviewed in the light of such findings.

181. Modern Ports: A UK Policy says that the Government "supports initiatives on funding and charging to create free and fair competition in the ports sector." Yet the UK is the only major economy to adopt the system of light dues although Ireland, Greece and Sweden have similar systems.[153] In many other European countries the service is totally funded by the State.[154]

182. The United Kingdom has historically employed a system of light dues to cover the cost of navigation aids. Such a system is inconsistent with other European countries and distorts competition. The Government should reconsider the entire concept of light dues. We support the Government's aim of ending the subsidy to Lights in the Republic of Ireland by the UK users and recommend that there should be more urgency in the negotiations.

145   HC (2000-01) 244 i-iv, Q266 Back

146   Q 531, 18 June 2003 Back

147   Ev (2000-01) 177 Back

148   HC (2002-01) 244 i-iv, p. 23 Back

149   Q 538, 18 June 2003 Back

150   HC (200-01) 244 i-iv, Q 303 Back

151   Independent Light Dues Forum Response to the Department for Transport's Consultation Light Dues Review: Meeting the Cost of Marine Aids para 1.1. Back

152   POR 04D Back

153   According to Trinity House, Greece has a simplified light dues structure. Sweden has a similar system, which is known as fairway dues, which is based on how far ships travel up the estuaries. The Dutch collect light dues through pilotage dues. Denmark is 80% tax and 20% light dues. Canada and Australia have a system similar to the UK. Trinity House believes there is a lot of worldwide interest in the UK system having had enquiries from Korea, India and China, HC (2000-01) 244 i-iv, Q 253 Back

154   Q 24, 24 April 2002 Back