43. There are three General Lighthouse Authorities (GLAs) for the British Isles: Trinity House, for England and Wales; the Commissioners of Northern Lighthouses, for Scotland; and the Commissioners of Irish Lights, for Northern Ireland and the Republic of Ireland.[61] Each is responsible for managing aids to navigation—lighthouses, light ships, buoys and beacons—within its own area, for inspecting aids to navigation maintained by local lighthouse authorities, and for marking and disposing of wrecks which are a hazard to navigation. The GLAs receive most of their income from the General Lighthouse Fund (GLF), though they also carry out some commercial work. The GLF is funded by light dues, a per-tonne levy on ships calling at UK ports. It also receives a small grant from the Irish Government in respect of the Irish Lights.

Inspection and control of local lighthouse authorities (Clauses 10 & 11)

44. Under the 1995 Act, each statutory harbour authority is the local lighthouse authority (LLA) for the area within which it exercises its statutory powers and duties.[62] It is the duty of the relevant GLA to inspect and monitor the provision of aids to navigation by each LLA in its area. The results of inspections are reported to the LLA and to the Secretary of State and the GLA has the power to issue directions to an LLA as to how it deploys its aids to navigation. This might include, for example, directing the LLA to repair defective equipment, to lay down buoys in particular locations or to change the mode of exhibiting lights in any lighthouse, buoy or beacon. An LLA may not change the deployment of its aids to navigation without the consent of the GLA.[63]

45. However, the Act does not provide for any penalty for failing to provide information as part of a GLA inspection, for failing to comply with a direction from a GLA or for redeploying aids to navigation without the GLA's consent. The draft Bill would create new offences of:

a)  failing to comply with a request for information under section 198 of the 1995 Act (which places a duty on GLAs to inspect LLAs' aids to navigation) (Clause 10), and

b)  failing to comply, without reasonable excuse, with a GLA direction relating to the erection, discontinuance, repair, maintenance or improvement of a lighthouse, buoy or beacon (Clause 11).

Clause 11 completely replaces section 199 of the 1995 Act, but the other changes are primarily drafting changes, in the interests of clarity. For example, it makes it clear that a direction may relate to the repair or maintenance of an aid to navigation, which is not specified in the original Act.

46. Mr Duncan Glass of Trinity House told us that the problem of non-compliance by LLAs was not widespread, but a minority of LLAs continued to give them cause for concern. Of the 13,000 aids to navigation they inspected in 2007, around 2,000 were found to be defective.[64] Although the problem is not large in scale, it is potentially serious: a defective navigational aid can represent a serious threat to the lives of mariners. Representatives of port operators and UK Harbourmasters told us that they had no problem with the proposals insofar as they related to aids to navigation under their direct control.[65] None of our witnesses was opposed in principle to the creation of these offences. The lack of any penalty or sanction for failing to comply with the General Lighthouse Authorities' inspection and enforcement regime is an anomaly in the Merchant Shipping Act. We welcome the proposals in the draft Bill to create new criminal penalties for those who refuse to co-operate with GLA inspections, or fail to follow directions about the deployment of navigational aids.

THIRD PARTIES

47. Port operators and the UK Harbourmasters Association expressed a unanimous concern that the provision in the draft Bill did not apply to third parties with responsibility for maintaining navigational aids.[66] Chichester Harbour Conservancy explained that such third parties might include the local authority, utility companies and private marinas.[67] The Bill as currently drafted could potentially lead to LLAs being prosecuted for the failures of others over whom they have no direct control. Mr Glass of Trinity House told us that

we [the GLAs] would like to be able to deal with the third party aspect ourselves, we think it would be very difficult for the ports or those within whose jurisdiction third party aids to navigation are provided to take on that responsibility. It is our statutory duty and we should really have the powers to be able to deal with all providers even though many of them may be a third party.[68]

The GLAs also argued that the criminal liability should be extended to the operators of offshore installations and renewable energy devices.[69]

48. Restricting criminal liability for failure to comply with an inspection or a direction to local lighthouse authorities has the potential to make the provision both unjust and ineffective. Nor is there anything to be gained by providing for a chain of costly legal actions in which the GLA pursues the local lighthouse authority, which in turn pursues a recalcitrant third party. We recommend that the Bill be amended so as to provide for the GLAs' inspection and control powers under sections 198 and 199 of the Merchant Shipping Act 1995 to apply to all providers of aids to navigation in their areas. Criminal liability for failure to comply with the inspection and enforcement regime should be extended accordingly.

PENALTIES

49. Nautilus UK felt that the maximum level of the penalty—level 5 on the Standard Scale, currently £5,000—was inadequate.[70] The Chamber of Shipping argued that, instead of a criminal penalty, there should be a penalty charge payable to the GLA.[71] We asked the GLAs if they would prefer to have the power to carry out remedial work themselves, and charge their costs to the responsible party, but they pointed out that with 14,000 aids to navigation around a 10,000 mile coastline, the resources required to carry out the work would be vast; such a proposal would also require a significantly more far-reaching redefinition of the respective statutory powers of GLAs and LLAs.[72] As the Government pointed out, the purpose of introducing the penalty is not to raise money, but to encourage the responsible bodies to have systems in place which will ensure that their navigational aids are well-maintained.[73]

50. Nonetheless, we are concerned that a one-off, £5,000 penalty will not always reflect the seriousness of the offence and the attendant risk to life. For a major multinational company it would be but a drop in the ocean. The Government has indicated that it has not ruled out the possibility of introducing daily fines for non-compliance in addition to, or instead of, the one-off fine. An ongoing daily fine for failing to remedy a fault when ordered to do so by a General Lighthouse Authority would in our view provide a more compelling incentive for responsible parties to ensure that deficiencies in the provision of aids to navigation are remedied quickly. It might not be appropriate in every case, but we recommend that the Bill be amended so as to give the court this option in the most serious cases.

Areas of operation (Clause 12)

51. It is beyond doubt that the GLAs are entitled to operate within the UK's territorial waters, defined as the waters within 12 nautical miles of the coast. However, they also carry out some operations outside this area, including the maintenance of some installations outside the 12-mile limit and, where necessary, the marking and removal of wrecks.[74] It is not certain that the GLAs have the statutory power to operate outside the 12-mile limit, but they have always done so. Jeremy de Halpert, Executive Chairman of Trinity House, explained that the mismatch between the GLAs' de facto area of operation and the 12-mile limit was something of a historical accident, since Trinity House was established long before the legal concept of territorial waters.[75] The three-mile limit was established in 1870 and by 1986, around 250 navigational aids were outside the UK's waters. The establishment of the 12-mile limit in 1987 reduced this number to around 40.[76]

52. The 1995 Act defines the GLAs' areas of operation as the United Kingdom "and the adjacent seas and islands".[77] A recent legal ruling has cast doubt on the extent to which this permits them to operate beyond the 12-mile limit. The Bill seeks to re-define the GLAs' areas of operation as the United Kingdom Pollution Control Zone (UK PCZ), the area of sea in which the UK is responsible for preventing and dealing with maritime pollution under the United Nations Convention on the Law of the Sea (1982). The PCZ extends up to 200 miles from the UK coastline; a map of the Zone is at Annex 2.[78]

53. There was general agreement that Clause 12 is intended to regularise in statute something that has been settled practice for a very long time.[79] Only the Independent Light Dues Forum, an organisation which represents five large shipping companies, objected to the proposal, on the ground that it would ultimately charge the cost of operations outside the UK's territorial waters to light-dues-payers.[80] Given the comparatively small sum of money involved (around £1.5 million and 2% of fleet time), the fact that the work is essential for the safety of seafarers and the fact that there is no other body which would obviously carry out the work if the GLAs did not, this objection is less than compelling.

54. We welcome the clarification of the territorial extent of the General Lighthouse Authorities' operations offered in Clause 12. The GLAs carry out vital work for the safety of shipping in the UK's territorial waters and beyond. No legal uncertainty which could in principle jeopardise their ability to carry out essential operations beyond the 12-mile limit should be allowed to persist. The Government is right to include this provision in the Bill.

GLAs' commercial activities (Clause 13)

55. The 1995 Act, as amended by the Merchant Shipping and Maritime Security Act 1997, permits the GLAs to use their spare capacity to carry out commercial activities. They may do so only in the case of assets which are held in order for them to carry out their principal functions—they have no power to acquire any other assets—and only with the consent of the Secretary of State.[81] This work includes, for example, maintaining buoys on behalf of harbour authorities and carrying out surveys for the Maritime and Coastguard Agency. Its net contribution to the GLF is in the order of £2.3 million, around 3% of total annual turnover.[82] Clause 13 of the draft Bill seeks to extend the scope of the GLAs' commercial activities by allowing them

a)  to enter into hire agreements for others to use their assets;

b)  to enter into agreements for the provision of consultancy or other services;

c)  to acquire assets for the purpose of entering into a hire agreement, provided that it is "merely preparatory or subsidiary to hire agreements in respect of other assets"; and

d)  to be reimbursed from the GLF for any expenditure incurred in connection with an agreement.

Any sums received as a result of any of these agreements are to be paid back into the GLF and, as with the 1997 provision, the Secretary of State must give her consent before a GLA can enter into an agreement.

56. There was general support for this proposed extension of the GLAs' power to carry out commercial work.[83] The dissenting voice was, again, the Independent Light Dues Forum, who argued that the GLAs' commercial activities did "not seem to demonstrate much commercial benefit, and they certainly exposed the GLAs to commercial risk".[84] The ILDF was also concerned that light-dues-payers were not adequately consulted about the GLAs' commercial plans which could, in theory, lead to an increase in light dues if something were to go badly wrong. On the other hand, Mr Asprey of the Chamber of Shipping told us that

In practice the secretary of state always consults light dues payers about these proposals so we feel that we shall be able to have our say to ensure that what is proposed is not going to be anti-competitive in relation to the private sector or involve undue investment by the lighthouse authorities from the General Lighthouse Fund. We think on the whole the balance is right.[85]

Mr Bennett, Head of the DfT's Ports Division, told us that the Lights Advisory Committee, which represents the payers of light dues, was one of the bodies that the Department consulted about the GLAs' forward plans.[86]

57. We welcome the provisions in Clause 13 of the Bill, which will allow the General Lighthouse Authorities to make more effective use of their spare capacity, including the very considerable expertise of their staff. The requirement for the Secretary of State to approve any new commercial ventures is, in our view, an appropriate safeguard which appears to have worked well since 1997. It will be important to ensure that robust accounting arrangements remain in place so that the GLAs can demonstrate beyond doubt that their commercial activities are subsidising the General Lighthouse Fund, and not vice versa.

General Lighthouse Fund: pensions (Clause 14)

58. Each of the GLAs operates an internally-financed, defined-benefit pension scheme under the same rules as the Principal Civil Service Pension Scheme. Like other "public service pension schemes", they are not required to be separately funded.[87] The schemes are operated, for employees who joined the scheme before 1 October 2002, on a non-contributory basis. There is a facility for employees to make additional contributions in respect of benefits for widows and children and to buy added years; these are also defined benefits and unfunded. Employees who joined the scheme after 1 October 2002 contribute 3.5% of pensionable elements of pay and may also make voluntary contributions for the purchase of added years entitlement. Employees joining after 1 October 2002 can opt instead to open a partnership pension account, a stakeholder pension with an employer contribution.

59. Clause 14 makes three separate changes to the current arrangements for the GLA pension schemes:

a)  it provides for the General Lighthouse Fund to be divided into two parts, creating a separate, ring-fenced pot for pensions;

b)  it creates a new power for the Secretary of State, by Order, to establish a new contributory pension scheme for GLA staff, "as a first move towards a fully-funded pension scheme";[88] and

c)  it creates a new power for the Secretary of State, by Order, to provide for payments to be made into third-party pension schemes.

CREATING A NEW PENSION SCHEME

60. Pensions are paid on a "pay as you go" basis out of the General Lighthouse Fund. The GLAs have told the Committee that this means that the Secretary of State "seeks to ensure that annual revenues into the GLF are maintained at a sufficient level to meet the pension scheme's liabilities as they fall due".[89] There is a significant "actuarial deficit" in the funding available for the pensions. The deficit stood at £347 million at March 2007 after rising steadily from £256m million in April 2005 to £305 million at March 2006.

61. Mr Bennett, Manager of the DfT's Ports Division, told us that this "deficit" represented the total amount that the Fund would have to pay if all its pension liabilities were suddenly to "crystallise" and have to be paid out at once, something which he and other witnesses considered very unlikely to happen.[90] Mr Gorman of the Northern Lighthouse Board explained that the deficit arose only because it was a pay-as-you-go scheme with no assets set aside to meet the pension liability; it was in that sense a liability (which the GLAs currently receive enough income to meet as and when it falls due) rather than a shortfall in funding as such.[91]

62. The GLAs want to move from a system in which current pensions are paid directly out of the GLF to a system where new employees will join a funded pension scheme where employees' and employers' contributions will go into a pension fund which will be used to pay the pensions of those employees when they retire. The rates of pensions in such schemes will probably be a function of the contributions made to it (a defined contribution scheme) rather than a proportion of final earnings (a defined benefit scheme). Mr Gorman told us that the notional cost of such schemes is around 22%, so any new scheme would see an increase in employees' contributions above the current level of 1.5-3.5% (though part of the difference would be met by the employers).[92]

63. This potentially represents a very significant loss of benefit for new GLA staff, who would have to make larger pension contributions for a pension which might prove to be smaller on retirement than the pension they would have received under the old scheme. As Mr Graveson of Nautilus UK argued

It appears to be quite attractive to have a fully funded scheme on the face of it, but when you look somewhat more closely, when you move away from a final salary scheme to a money purchase scheme the pensioner suffers. If you have a steady income stream and you can satisfy the outgoings of a pension fund the question is why change it?[93]

64. It would also involve a significant period in which the GLF was meeting current liabilities in respect of existing pensioners, continuing to acquire additional liabilities in respect of current staff on the old scheme, and making pension contributions in respect of new employees.

65. Against these significant disadvantages, there was no real evidence of any problems with the current scheme. Mr Gorman told us that the proposals for a new pension scheme were intended to guard against potential problems in the future:

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 have got a very mature pension scheme which means far more pensioners than we have got employees […], 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.[94]

He made it clear that there was no immediate threat to the GLF pensions and that the proposals were intended to safeguard against a situation "30, 40, 50 years ahead" in which technological changes might mean that the vast majority, if not all of the revenue collected in light dues, was going towards pension payments.[95]

66. We are not persuaded that there is any compelling or urgent need to create a new pension scheme for the General Lighthouse Authorities. The obvious attraction of doing so, in the very long run, is that it would remove ongoing pension liabilities from the General Lighthouse Fund and protect against the possibility of a situation in which light dues were being collected for the sole purpose of meeting the GLF's pension commitments. But this would be at the expense of a significantly worse deal for new GLA staff. There may be benefits to taking the statutory power to create a new, funded pension scheme now, before any potential problems do arise, but we would not expect them to be exercised unless a more pressing need to do so arises. We further recommend that a statutory duty to consult interested parties before the power is exercised be included on the face of the Bill.

SPLITTING THE GENERAL LIGHTHOUSE FUND

67. Clause 14 also allows the General Lighthouse Fund to be divided, so that part of the Fund may be allocated for the payment of pensions, and for no other purpose. Any employee pension contributions made at the moment are absorbed into the general Fund—there is no statutory provision to ring-fence or otherwise protect them from being used to pay for the GLAs' core work. It is, of course, highly unlikely that a situation would arise in which the GLAs had to dip into employees' pension contributions to pay for aids to navigation. But it is undesirable in principle that employees' contributions should be exposed in this way. We welcome the proposal to ring-fence the pensions element of the General Lighthouse Fund. Though there is no threat to employees' pension contributions at the moment, nor any foreseeable threat in the future, it is a matter of principle that they should be protected in this way.

CONTRIBUTIONS TO THIRD-PARTY PENSION SCHEMES

68. Currently the GLAs pay employer contributions into the Merchant Navy Officers' Pension Fund (MNOPF) for some of the ships' crews who have joined the GLAs as existing members of that scheme. There is in fact no statutory basis for these payments to be made and Mr Gorman of the NLB told us that it is possible that they are ultra vires.[96] Clause 14 would permit the GLAs to make payments to an external funded pension scheme, which would not only regularise the payments to the MNOPF, but would enable the GLAs to contribute to other schemes as well, if they chose to.

69. Nautilus UK welcomed this provision, insofar as it enabled the GLAs to continue to make payments to the MNOPF. It is sensible to use the opportunity presented by this Bill to regularise the practice of the General Lighthouse Fund making employer's contributions to the Merchant Navy Officers' Pension Fund. However, as we have already noted, we do not see any compelling case for extending the use of this power beyond clarifying the legality of this specific, long-established practice.

62   Section 193 (General and local lighthouse authorities). There are other local lighthouse authorities, in addition to the statutory harbour authorities. Back

63   Sections 198 (Inspection of local lighthouses) and 199 (Control of local lighthouse authorities). Back

64   Q99. Back

65   Q176 [Captain Richardson of the UK Harbourmasters Association]. Back

66   Ev 34 [British Ports Association], Ev 58 [Chichester Harbour Conservancy], Q34 [Mr Snelson of the UKMPG and Mr Putman of the LGA], Q176 [Captain Richardson of the UKHMA]. Back

67   Ev 58 Back

68   Q104. Back

69   Ev 44 [General Lighthouse Authorities] Back

70   Ev 34 [Nautilus UK] Back

71   Ev 53 [Chamber of Shipping] Back

72   Q102 [Mr Glass of Trinity House]. Back

73   See Annex A: Schedule of Comments Back

74   Cm 7370, p. 16 & Q 106 Back

75   Q106. According to its website, Trinity House was established in 1514, and was granted control of all lighthouses around the coast of England and Wales in 1836. See www.trinityhouse.co.uk/corporation/history.html. Back

76   Q106. Back

77   S. 193 (General and local lighthouse authorities). Back

78   The PCZ is defined in the Merchant Shipping (Prevention of Pollution) (Limits) Regulations 1996 (S.I., 1996, No. 2128). It is the nearest equivalent the UK has to an Exclusive Economic Zone (EEZ), an area over which the coastal state has certain rights and jurisdiction under the UN Convention. The Convention defines the maximum size of an EEZ as "200 nautical miles from the baselines from which the breadth of the territorial sea is measured" (Article 57). Back

79   For example, Q107 [Mr de Halpert, Trinity House], Ev 37 [Independent Light Dues Forum]. Back

80   Ev 36-38 Back

81   S. 197(8)-(11) (General powers of general lighthouse authority) Back

82   Q105 [Mr de Halpert of Trinity House] Back

83   Ev 34 [British Ports Association]; Ev 42 [Nautilus UK] Back

84   Ev 37 [Independent Light Dues Forum] Back

85   Q 78 Back

86   Q 241 Back

87   Pension Schemes Act 1993 Back

88   Cm 7370, p. 17 Back

89   Ev 44 Back

90   Qq 217-220. Back

91   Qq 110 & 118. Back

92   Q115. Back

93   Q150. Nautilus represents some GLA employees, notably ships' crews. Back

94   Q118. Back

95   Q124. Back

96   Q129 and Qq 222-224 [Mr Bennett of the DfT]. Back