UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 601-ii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

WELSH AFFAIRS COMMITTEE

PORTS IN WALES

Tuesday 9 June 2009

MR GIOVANNI MENDOLA

MR ROBIN SMITH, MR CHRISTOPHER SNELLING, MR STEPHEN KELLY and MR MICHAEL FARMER

Evidence heard in Public Questions 48 - 97

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 9 June 2009

Members present

Dr Hywel Francis, in the Chair

Mrs Siān C James

Mr David Jones

Alun Michael

Hywel Williams

Mark Williams

________________

Memorandum submitted by DG Tren, European Commission

Examination of Witness

Witness: Mr Giovanni Mendola, Maritime Transport and Ports Policy, DG Tren, European Commission, gave evidence.

Q48 Chairman: Good morning. Bora da and welcome to the Welsh Affairs Committee and our inquiry into ports in Wales. For the record, could you introduce yourself, please?

Mr Mendola: Good morning, my name is Giovanni Mendola. I am from the European Commission, Directorate-General for Energy and Transport, Maritime Transport and Ports Policy Unit, mainly in charge of internal market issues for maritime transport and ports, and the legal framework for State aid in maritime transport and ports.

Q49 Chairman: Thank you very much and thank you for coming along. A particular big thank you for your memorandum which was very helpful in preparing for this session. Could I begin with a very straightforward question about the Commission's view of the main opportunities for ports in the EU? What do you think are the main opportunities and challenges for EU ports?

Mr Mendola: The Commission adopted in 2007 a broad policy Communication further to the two failed Directives for access to port services. After a large consultation of stakeholders the main challenge for European ports generally speaking is considered by the Communication as being development in full respect with environmental rules, on the one hand, and competition rules, on the other hand. Another challenge, especially from our perspective, is the full application of the principles of the Treaty on the freedom to provide services and the freedom of establishment to ports in the absence of secondary legislation, in the absence of a Directive. Generally speaking, ports are considered essential for the European economy - since maritime transport, as such, is essential for the European economy. At the same time the Commission notices, especially on the Continent, there is quite a large imbalance in the use of ports with environmental consequences. Freight is often routed to ports which are very far away from the original destination. In the Communication the Commission does not intend to take regulatory action in this field, but to use its own means, such as State aid policy or the revision of the TransEuropean networks, to address this issue. Those are the basic messages from the consultation and from the Communication.

Q50 Chairman: How well equipped are UK and Welsh ports for these challenges?

Mr Mendola: This is something on which I could not give a reply since we have not especially addressed ports in the Member States. We have rather presented the assessment of the Commission of ports policy in general and left to Member States, on the basis of subsidiarity, all the decisions relating to port development. In the Communication we do not find a single model for the set-up of ports, for port governance, or for port financing; this is entirely left to Member States.

Q51 Alun Michael: I accept entirely the principle of subsidiarity but, at the same time, there is no point in having a European ports policy unless it is of benefit to the ports in different states within the European Union. You refer to the European Commission's ports policy in your statement for us - please can you outline what the Commission's policy objectives are for the EU's ports in general, and what the action plan aims to achieve and by when?

Mr Mendola: The general objective is allowing for appropriate development, I would say, of ports. Given their importance at the European level (and I will not repeat the usual arguments which are fully true, but everybody knows the role of gateways to Europe and the role for security of supplies in the Member States) appropriate development as I said before means reaching the necessary capacity while at the same time respecting a kind of balance across Europe for traffic flows, without intervening in those traffic flows; again, this is left to the Member States. Another objective, which is very specific to the background of this Communication, the consultation and the two Directives, is social dialogue in ports. One of the reasons why the two Directives were not capable of being adopted was a very strong reaction by port workers. One of the objectives contained in the action plan is starting a European social dialogue in the technical meaning, which is nevertheless not in the hands of the Commission - it is up to certain partners to start social dialogue; to set up a level playing field for competition between ports while respecting the views of the Member States of the role of ports and, therefore, port financing. The item concerned is the adoption of the State aid guidelines which originally was foreseen, optimistically perhaps, for 2008 - so we are late because the guidelines are not there; a set of guidelines on the interpretation of the environmental rules and their application to port development. One of the major worries of port stakeholders during the consultation was about reconciling environmental regulation with port development; and we were asked on several occasions during that consultation to give guidance on the application of environmental rules. With this task we are a bit more advanced because a draft will be ready during the next weeks to come, and possibly a Communication providing such guidance could be adopted before the end of the year. Again concerning the level playing field, an initiative will be taken at the end of this year or early next year concerning the transparency of accounts between public administrations and ports, possibly by means of amending the current transparency Directives called the Transparency Directive. Finally, another initiative which is indicated in the action plan, but which the Commission will only favour but will not be directly part of, is about a better integration of ports with their local communities, by means of spreading best practices in this field; because there are very different practices and very different aptitudes across Europe about this subject. Last but not least, in the Communication there is already a first action which is accomplished there, which is the interpretation of the Treaty rules on freedom to provide services and freedom of establishment to ports. This is an action that could have been carried out after the adoption of the ports policy Communication, but interpretation and guidance was already given in the Communication.

Q52 Alun Michael: You referred there to the relationship between ports and their wider hinterland and the need for greater consistency in the way that that is dealt with. You have also got the desire to balance the needs of the market with the spatial planning objectives of national authorities. To what extent can the existence of the action plan influence that, particularly in influencing national authorities, given what you said earlier about the subsidiarity that applies to most of the things that would need to be done in order to deliver that greater consistency?

Mr Mendola: There is only a broad message, and this was very much discussed with stakeholders during the consultation because for many of them - and ultimately Member States, because the Member States were also consulted during this port policy consultation - there was a great fear on the Member States' side about a possible idea of a general European master planning for ports, hinterland connections and traffic flows; but it is clearly stated in the Communication that this is not what the Commission intends to do. The Commission in this context only recommends the Member States to take into consideration the environmental dimension in their master planning, if they want to master plan ports - because Member States are free to do or not to do it.

Q53 Mrs James: How successful have funding instruments such as the Marco Polo II programme been in shifting freight from road to short sea shipping and other modes of transport?

Mr Mendola: They have been, generally speaking, quite successful, even though the different actions which are included in the Marco Polo actions - the ones which more directly relate to ports, the Motorways of the Sea action - today cannot be considered as the most successful initiative. On the occasion of the last Marco Polo call in 2008 there was still no Motorways of the Sea action which was adopted, and there were very few proposals. In this respect we tried to encourage Member States to act in this direction, first of all, by introducing more consistency between State aid rules and rules of new funding. One of the worries of the Member States was that if they want to provide financial support to projects and there is no EU funding available, or not to the extent which is possible, they were not able to provide complementary State aid which is aid to operational costs - so a very sensitive matter. For this reason we aligned the threshold ceilings that can be used for complementary State aid by means of a Communication adopted at the very end of 2008; and possibly this will encourage, and as far as we know it is encouraging, Member States to in turn encourage initiatives for new Motorways of the Sea projects; and there could be a couple of them in the current exercise, which is not yet finished.

Q54 Mrs James: We have taken previous evidence from experts and operators referring to the fact that Welsh ports struggle to access EU funds because programmes are not suited to smaller projects. We do not have any public subsidies at all for the development of new operations or facilities; this is not the case in other EU countries. What effect, do you believe, does the fact that UK ports are market-led have on their ability to receive TEN-T funding?

Mr Mendola: I do not think that there is a direct link between the fact that ports are market-led and the problem with the thresholds, because basically I understand there is a problem with the thresholds. This is rather related to regulation, to the current rules on TEN-T funding as they are, and there are three categories. In practice ports falling in the third category have more limited access, or no access in certain cases, to public funding. This is something that could be addressed. To answer your question - I do not see any relationship between the two. This is something that could possibly be addressed now in the course of the consultation for the setting up of the revised TEN-T guidelines in 2010, which will also affect the framework for port funding.

Q55 Mark Williams: Following on from points you made in answer to Mrs James, how is that process of consultation going to work? There is the feeling that smaller Welsh ports suffer under the TEN-T programme because of the relatively short distances for freight within the UK as opposed to other EU countries. I am interested in how that process of consultation is going to work and discussion of the guidelines. Could you tell me more about that, please? How the process of consultation is actually going to work, so that those representations which we heard about in evidence last week are going to be made to the Commission?

Mr Mendola: I am not involved in the consultation - as you know, we are quite fragmented in the Commission - so I cannot tell you at which stage of the consultation my colleagues currently are. The final result: a Green Paper was published, if I am not mistaken - because, as I said, this is a bit outside my direct competences; but the final result of the consultation should be a proprietary document in order to have new guidelines for TEN-T. I would like to add something to that. Here we are talking about the funding of ports under TEN-T; so the 10% of works and the 50% of studies. TEN-T funding is also available for the development of Motorways of the Sea. In a different way, it is not State aid but it is Community aid to infrastructure ancillary to the development of Motorways of the Sea. Within a Motorways of the Sea project - and one could imagine a Motorways of the Sea project for your region - ports could receive funding under the current scheme for trans-European networks in the way of funding to ancillary infrastructure to the Motorways of the Sea; not the 10%/50% standard TEN-T funding.

Q56 Mr Jones: Mr Mendola, you have referred in your submission to the Committee about maritime tourism, which has been a major catalyst for economic development in coastal areas; and you referred also to the study that the Commission has launched to "analyse the benefits for ports to invest in infrastructure". I understand this study is to be published in September of this year. How do you anticipate this work will help encourage port operators to invest in the facilities required to develop the cruise market?

Mr Mendola: The study is not ready and again, unfortunately, it is a study about which I am aware but it is followed in a different context within the Commission. It is part of this holistic approach of the Blue Paper on maritime policy, which is not only focussed on traditional maritime transport - which is what we mainly deal with in our Directorate, the transport of freight - but of different possibilities for coastal regions. The market for cruises is one of these possibilities; and possibly it could be at the origin of interesting development, especially in certain areas of the community where classic, so to say, transport of freight is less important. What I can say about investment - because it is much closer to my files, so to speak - is that investment in this field will be mainly private investment in facilities. The building and the operation of a cruise terminal is the kind of activity which has a commercial nature that we will possibly address in future guidelines of State aid to ports, to be adopted this year or next year. I cannot anticipate the result of the study on this. There is an internal draft but I have not had the occasion to read it.

Q57 Mr Jones: I appreciate it is early days and the study is not published yet, but given that you have just said you anticipate most of the investment in cruise facilities to be private investment, is there any likelihood at all that the Commission will be able to provide any financial mechanism to help develop cruise facilities?

Mr Mendola: I do not know whether this would be mentioned in the study. It is not the first time here, in my context, about the possibility of funding facilities relating to cruises. You mean new funding?

Q58 Mr Jones: Yes.

Mr Mendola: Honestly, I do not think that this would be an item for new funding, considering the instruments as they are now which much more tend to encourage modal shift or the development of trans-European networks. This is something which is really of a commercial nature, and which, in my personal view, could hardly be funding by means of new funding or even by State aid, except in very special circumstances, such as to outermost regions, islands which are completely outside the natural itinerary even of a cruise.

Q59 Mr Jones: So you would not regard Wales as an outermost region?

Mr Mendola: It is not. The outermost regions are listed in Article 299 of the Treaty.

Mr Jones: That is encouraging!

Q60 Hywel Williams: Good morning, Mr Mendola. Could I ask you some questions about security. Firstly, what are the main obligations on EU ports in respect of security legislation; and, secondly, how do you assess the security of Welsh ports in particular?

Mr Mendola: There are two sets of obligations since there are two instruments. The older one is a regulation of 2003 which concerns security measures for specific facilities, like terminals, and the measures were already conceived at an international level, the so-called ISPS code, and the regulation improves and makes mandatory recommendations included in the Code. The second one is the more recent Directive which has a large scope of application and concerns the implementation of security measures to the port area as a whole, and implies that Member States establish a list of ports and fix the boundaries of those ports for the general measures to be implemented. I will not comment about security measures in Wales. I know that there is an ongoing (and I can say so because we are at the stage where it is no longer confidential) infringement procedure for non-communication of implementing measures relating to the Directive by the United Kingdom. This is rather at a general legislative level than regarding implementing measures. I will not comment about the level of security measures in Wales.

Q61 Hywel Williams: There is a delay in transposing the Directive. What are the implications of that?

Mr Mendola: There are many infringement procedures over Europe - that is part of our job. The final stage is a judgment of the Court of Justice and possibly the application of penalties if that judgment is not obeyed by the Member States; but I am sure that even before the judgment there would be notification of the measure by the United Kingdom.

Q62 Chairman: When we talk about "Motorways of the Sea", which is an interesting concept, and you relate that specifically to the Celtic Sea, at what point would we be able to say that there would be developments that would link those motorways to Ireland and to Wales?

Mr Mendola: The initiative to launch Motorways of the Sea is in the Marco Polo context up to the private undertakings backed by one or two Member States. The Commission does not take initiatives in this field. It gives money, so to say, and has fixed a framework for launching new initiatives in this field; but it is not up to the Commission to start the new initiative. It is not bottom down, it is the other way round: it is a process which starts from the lower level, from the level of undertakings, and then at the level of the Member State according to the framework which is used. Marco Polo is more for undertakings; TEN-T is more for the Member States; and then the Commission makes an assessment and makes a choice on the project, in the case of Marco Polo; and leaves it to a committee composed of Member States in the case of TEN-Ts.

Chairman: Thank you very much for your evidence today. It has been very refreshing to get a wider European perspective. We tend to be a little too introspective on some of our discussions. We look forward to sharing our report with you. If you feel there are some issues which we have not covered adequately we would be very pleased to receive a further memorandum from you. Thank you very much.

Memoranda submitted by the Rail Freight Group and the Freight Transport Association

Examination of Witnesses

Witnesses: Mr Robin Smith, Welsh Representative, Rail Freight Group; Mr Christopher Snelling, Head of Rail Freight and Global Supply Chain Policy and Mr Stephen Kelly, Head of Policy Midlands, Wales and South West, Freight Transport Association; and Mr Michael Farmer, Regional Director, Road Haulage Association, gave evidence.

Q63 Chairman: Good morning and welcome to the Welsh Affairs Committee. Please do not be afraid to raise your voices as there are very poor acoustics in this room. For the record, could you introduce yourselves, please?

Mr Kelly: My name is Stephen Kelly. I am Head of Policy for Wales, Midlands and the South West representing the Freight Transport Association.

Mr Snelling: Christopher Snelling, also from the Freight Transport Association. I am Head of Rail Freight and Global Supply Chain Policy.

Mr Farmer: Mike Farmer with the Road Haulage Association. I look after Wales, the West Midlands and the Southwest.

Mr Smith: Robin Smith. I am the Welsh Representative for the Rail Freight Group.

Q64 Chairman: Could I ask a very straightforward but rather broad question to begin with. Could you comment on the effectiveness of UK Government and Welsh Assembly Government in working together coordinating policy, particularly with regard to ports policy and also, more widely, transport policy and its framework?

Mr Kelly: I think we have mentioned in the past that coordination and communication could be improved between central government here in Westminster and the Welsh Assembly Government down in Cardiff. As an example of that, some of the work that we have done as the FTA has looked at Delivering a Sustainable Transport Strategy, the recent publication looking at transport 2014 and beyond; and, when you look at what they have identified in terms of strategic national corridors, it seems to stop at the border. Obviously that strategy is not focussed on cross-border issues, which is an inquiry that this previous Committee held as well and something that we raised as a concern. In essence, there does need to be more communication especially on transport issues, because as far as freight is concerned it does not know borders; a shipment coming into Fishguard does not necessarily stop at Newport, it will go beyond into England and beyond into Europe as well. The thing we want to flag up is that we do have concerns that delivering a sustainable transport strategy, whilst it is to be applauded, is only looking at England necessarily and is not focussed upon Wales.

Q65 Chairman: That is what you would call Anglo-centric, I suppose?

Mr Kelly: It could well be.

Mr Farmer: I agree with what Stephen has said. There needs to be much more linkage; but I would add a further factor: there needs to be also greater linkage at local level and local authority level as well, because that is a major building block of the development of ports et cetera.

Q66 Mrs James: Just to tease out a little bit more about that, what impact has the Department for Transport's ports policy, which appears to be letting the market decide where ports-related developments should happen, had on the movement of freight through Welsh ports?

Mr Snelling: I think the market-led approach has led to the greatest efficiency in the way that freight moves: particularly when we are looking at deep-sea intercontinental deliveries, they all want to come to a certain location and there is actually a limited amount that government can do to prescribe them to come to a different area. I think working with the market is the best way to get efficiencies out of ports. I think what you would need to do in working with those market conditions is to work to the strengths and to try to accentuate those.

Q67 Mrs James: What balance do you think is needed between private and public sector involvement for port development or in developing ports?

Mr Snelling: I think developments need to be private sector led as they will, through market forces, be the best judge of where the traffic is going to be for the greatest efficiency of the economy, which depends on good flows to ports. We also expect that private developers should be responsible for the cost of developing those ports. They are private facilities which can make money; and they should be responsible for doing that. Where we would like to see the public sector come in is really in two places: one is in a planning framework which enables the efficient development of ports - and by that we do not necessarily mean a planning system that says yes more often, but a planning system that gives a yes or a no more quickly and with less expense, so that generally the development of ports can be planned more efficiently; and the second thing we would like to see from the public sector is greater support for development of inland infrastructure connections, rail and road links. The guidelines that have been outlined by DfT are perfectly reasonable. What they stand or fall on is how much money the Government actually puts behind it. We would like to see a lot more money put behind it, because certainly what we see is the ports in the UK are severely disadvantaged because their rival ports on the Continent get all these links provided for free, as well as being given money to carry out development as well.

Q68 Mrs James: Really it is the transfer of goods from the port on to the next stage of its journey (and obviously I am very interested in rail access to the mainline et cetera) which is essential; those improved facilities at dockside, in effect?

Mr Kelly: Yes, I think so. I think where Welsh ports suffer is that they are not rail-linked to a certain extent, or to any extent as a matter of fact, and that is due to the rail infrastructure itself in terms of the loading gauge requirements. For example, in terms of some of the bigger sized containers rail in Wales is not equipped for that. That has been highlighted in the rail utilisation strategy for Wales.

Mr Snelling: Just to make that point about port development - if you as the public sector improve road and rail links, that improves the prospects of the port and the return developers would get on their money. That does not mean that they, therefore, just make lots of extra profit to their own advantage. What tends to happen is it means they expand the port more because they can attract more business because the business case for those companies is so much the better. Obviously the infrastructure connections you are looking at have got to be suitable for the kind of traffic that the port can potentially attract.

Mr Smith: I would like to speak from a rail freight point of view. We also would support a market-led system, rather than a prescriptive system from central government. We would fully support what our RFG colleagues have just said regarding the fact that government can provide a framework within which development can take place, because trade is international and trade patterns can change. Therefore I think ports and their infrastructure and their hinterland infrastructure need also to be able to react quicker than seems to be the case at the moment. I would certainly go on to support the comments regarding loading gauge issues. If you look in the freight utilisation strategy, as published by Network Rail, the network within South Wales and North Wales to Holyhead are fairly restricted at the moment and there are no plans, certainly in the next five-year period, to enhance that loading gauge, which will constrain port development, particularly for containers.

Q69 Mr Jones: You mentioned the importance of adequate load infrastructure at ports; and you also mentioned earlier that you had concerns about the lack of coordination of transport policy between the Welsh Assembly Government and the Department of Transport. To what extent is the fact that ports are not devolved and road infrastructure is devolved a complicating factor in your opinion?

Mr Kelly: I suppose it is a Catch 22 scenario more than anything, in that the Scottish Executive and Northern Ireland do have responsibility for their ports; whereas the Welsh Assembly Government does not, basically. I suppose the fact that the Welsh ports are policy-led by DfT effectively whereas Welsh roads are policy-led by the Welsh Assembly Government in terms of their trunk road forward programme, one would have to question if there is any cohesiveness there more than anything. The Welsh Assembly Government will have their forward programme in terms of road improvements for the next ten years effectively and, if the plan is for the DfT to support Welsh ports, does that fit in with the Welsh Assembly Government policy in terms of their forward programme and access to these ports effectively?

Q70 Mr Jones: Am I to infer from your answer that you regard it as a complicating factor?

Mr Kelly: I think it is complicating this. We do not particularly have a view as to whether Welsh ports policy should be devolved to the Welsh Assembly Government.

Q71 Mr Jones: No, I was not asking you that. What I was interested in was the practicality of the consequence of this?

Mr Kelly: Yes, I think it is a concern, in that left arm and right arm are not working in coordination with each other.

Q72 Mr Jones: Your answer again appears to me to underline the point that it is necessary for the DfT and the Welsh Assembly Government to act more in concert in the development of road freight policy?

Mr Kelly: I just think it is essential.

Q73 Alun Michael: Could I just be clear on that final point, because I think answers to questions are sometimes open to misinterpretation. Are you identifying a lack of cooperation and cohesion between the Welsh Assembly Government and the Department for Transport; or are you saying the fact that it is two different bodies might lead to a lack of coordination?

Mr Kelly: I think there is more of a need for better communication between the two parties.

Q74 Alun Michael: We understand the need; I am asking you whether you were identifying actual problems, or merely stating that problems might arise from the fact that it is two separate bodies? If it is the former it would be helpful to the Committee if you were to identify what those are; and if it is more detail than can be done in a single sentence perhaps you could provide us with some supplementary evidence?

Mr Kelly: I can take that away, yes.

Mr Farmer: Perhaps I might comment on that. Clearly there is a disconnect there; and I suspect it is more of a perception rather than a reality. I would expect there to be very good linkage between the Welsh Assembly Government and the DfT. I would think that commonsense ought to prevail with regard to the importance of the ports to Wales, and thus the importance of the road links, and indeed rail links, to those ports. I suspect it is perception but from a business point of view it does not make sense to have separately devolved areas.

Q75 Alun Michael: There obviously are decisions taken by local authorities in relation to ports, and the relationships with the wider environment by the Welsh Assembly Government and by the Department for Transport. I think quite a big ask in terms of some other developments leads us to ask the question: what is the potential for moving greater volumes of freight through Welsh ports? Would that justify, for instance, the change in the rail infrastructure which would be quite a significant investment? What is the potential in this marketplace that you have described for growth in volumes of business in Welsh ports?

Mr Snelling: I would say that there is the opportunity for what you might describe as "healthy growth", but I would contrast that, for example, with the container ports in the Southeast of England, where the kind of potential we are looking at is talking about doubling capacity. I do not think there is necessarily a potential in the short-term of that kind of order in the Welsh ports; as we are looking at greater use of the Irish Sea trade and expanding some of those ro-ro services, rather than the massive deep-sea container movements that you would see at those kinds of points. There is the potential for growth but, you are right, before any money is spent or any decisions about how things should be administered, you have got to do adequate demand forecasting to estimate exactly what those possibilities are.

Q76 Alun Michael: To what extent are you able to make that sort of forecast in relation to what is quite a varied number of ports? There are big differences, are there not, between the nature and the strengths of our different ports in Wales, and presumably also the degree to which individual ports have a potential?

Mr Snelling: Yes, absolutely, and the growth potential for different ports will vary completely depending on what kind of business it is that they are in, You have to take each kind of trade, each kind of commodity on its own merits and assess it in that fashion.

Q77 Alun Michael: Again, perhaps if it is more detail than could be given in a simple answer, to what extent are you able to outline what you see as the growth potential of different types of freight and in relation to different ports around Wales?

Mr Snelling: In different areas for freight movements there is a lot of demand forecasting that has been done. We could certainly look into what is available on that and supply the Committee with any information.

Q78 Alun Michael: I think that would help to make sense of the general replies for us. Another question really is how decisions get taken. How do freight forwarders and shippers decide which UK ports to use; and what potential is there for Wales to improve its attractiveness?

Mr Snelling: For a freight forwarder particularly to make a decision, as it will typically be the freight forwarder making a decision about which port to use, the main factors will be its connectivity towards the next destination. If we assume that something is arriving at a Welsh port to go to a further destination somewhere inland within the UK, it will be about the relative connection times of the ports on offer; a further factor would be the cost of using that port; ports have different charges depending on how they are operated and how they are set- up; and a third factor would be the efficiency of that port, which could mean not only the speed that you get through, but also its reliability. Frequently when UK ports get congested, the same with other bits of the transport network, as soon as you have a small problem everything can grind to a halt. Those would be the generic factors that would drive a decision. I think the most important one of those is the linkage to its onward destination. There is no point arriving, getting something unloaded very efficiently in a port if it is then going to be a long, unreliable journey to get on to the West Midlands or the north of Scotland; people will simply look for alternatives.

Mr Smith: I would support the three that Christopher has actually advanced as key criteria. The other one that I would add in is the general patterns of trade. At the moment they are well set, and most of the forecasting that has been done by the Rail Freight Group and the Freight Transport Association is based around no significant change in shipping routes away from the Southeast; but there are potential developments on the Tees at Liverpool and at Bristol, all of which could have some effect on patterns of trade. Unless and until we know the extent and the success of those developments it would be very difficult to give other than broad-brush figures, I believe, for future patterns of trade that would underpin significant developments.

Q79 Alun Michael: I suppose the question is really to what extent Welsh ports are currently meeting the needs of the freight transport industry; how are they doing, against the triggers for decision-making that you have referred to; how do they need to adapt for the future; and will they be able to adapt; have they got the capacity to adapt at the rate that is needed to increase their market share?

Mr Kelly: From an FTA members' perspective we have not had any feedback to say there are problems at Welsh ports at the moment in terms of standing times on docks et cetera. Just to echo what my colleague said, I think there is quite a lot more capacity at ports at present before they reach that saturation point more than anything. With that extra capacity there, I would not foresee the need to change anything drastically at the moment. Once you start reaching that saturation point you need to look at access to ports, you need to look at rail interchanges and so on and so forth. At present I have not heard from major members of the FTA - like the Association of British Ports themselves who operate ports down in South Wales - that they are crying out for more traffic at the moment. I think the extra capacity is there, and at present the size of the ports is adequate I would assume.

Q80 Mark Williams: This question is to Mr Smith. In your memorandum in the section on demand forecasting you seemed critical of the Department for Transport and their projections. You talked about "some consideration of scenarios with increases in transhipment, but little consideration of scenarios where ports in other areas increase in relative significance". What did you mean by that?

Mr Smith: I have just borne that out in the previous answer I have given to Alun Michael. All the current forecasting, both from the Department and from the industry, is based on no significant change in trade patterns. It is based on growth in trade, as Christopher has just talked about, significant growth through the Thames, Felixstowe and Southampton but not necessarily on a change in shipping patterns. We are not criticising the Department; that was made as a statement of fact reflecting the current situation, that there is no perceived significant change happening or likely to happen.

Q81 Mark Williams: It may be a statement but it is nonetheless pretty serious, is it not? To what extent do those forecasts, skewed as they are, limit the freight transport sector? How much credence do we put on those forecasts?

Mr Smith: The forecast from the Department and the joint forecast from the FTA and the Rail Freight Group have been used by Network Rail in particular to underpin their freight utilisation strategy and their regional utilisation strategies, which is why we are engaged in work like gauge enhancement between Southampton and the Midlands; why work has been done between Felixstowe and the Midlands et cetera. It is on the basis of those forecasts, which have been in the public domain for a long time and are seen to be robust, that people like Network Rail are making significant investments.

Q82 Mark Williams: Put that into a Welsh context. You have talked of English examples there.

Mr Smith: At the moment, because of the patterns of international trade, it is not seen that there are likely to be any significant increases in demands within South Wales or North Wales ports. Growth, yes - I think the word Christopher used was "growth" - but not significant changes in patterns.

Q83 Hywel Williams: I think there is something of a theme in some of your answers about the split between the Assembly's responsibility and Westminster's responsibility about who is responsible for roads, about the spare capacity that is already available in ports. Can I just ask you the plain question: are the existing road and rail links putting Welsh ports at a disadvantage, affecting their competitiveness and so on?

Mr Farmer: I think they have to be a large factor. The two specific ones - the A55 North Wales, good dual carriageway but it is let down by having a bottleneck right at the end into the port. The bulk of the journey fine; the last mile congested. The A40 Fishguard; the A477 Pembroke: the A40 is still a single carriageway road heading for a port which is a ro-ro port which develops a lot of lorry traffic. I think that is a distinct disadvantage. Obviously, Wales being on the periphery, the ports being on the periphery of Wales, you need those road links; and that, for us, is the limiting factor for a number of ports.

Mr Snelling: The right way to look at it is the quality of the inland infrastructure, those connections, is not a kind of black and white issue where once you reach a point where it is good enough then it ceases to be a factor. It is a scale whereby the better the links are the more competitive the port is. If you make the links amazingly wonderful then the port will become even more competitive. It is quite a moveable feast in that sense. You would certainly increase the competitiveness of Welsh ports if the links to them were improved. You cannot ignore the road links in that, given the kind of trade that is going to come into ro-ro and ferry ports particularly.

Mr Smith: The ports that are currently rail-linked - Newport and Cardiff are rail-linked; Swansea has a link that is not used at the moment; the Port Talbot Harbour has links through the Corus site et cetera - the rail links are there; but we touched on earlier that the loading gauge would be an issue if the traffic were to be containers. The tracks are generally able to support the heaviest wagons but not the biggest wagons. Yes, again, it is a little bit of a chicken and egg. Improved links would improve the competitiveness of the ports but the question mark is that, unless trade patterns change, how much use would be made of those links?

Q84 Mrs James: Just to go slightly off on a tangent from that - I am very aware in Swansea in particular of the competing need for the land around the ports. We are seeing more and more development on port land; we are seeing more and more housing; and there is a huge capacity there. What is your opinion of these competing needs for the land? I feel strongly that we need to preserve for the land or dock activity but it is not very popular in my constituency; they would like houses on it, please.

Mr Farmer: I think any port with a developed hinterland has got to be of benefit to the local community, because an active thriving port will actually generate local business. It is always going to be this clash between the economy and the community. I do not think there is any set answer, but this comes back to a point I made right at the beginning that local authority planning and such like I think has a major part to play in this. It is one of the things that we would like to see, more landside development. One particular point I made in our memorandum was facilities for HGV drivers. At the moment they are parking in public car parks with no facilities or anything down at Fishguard and up in Holyhead, and it is criminal that we each rely on each other but there is no ability at the moment or desire to put facilities for the drivers at the ports. That is one use that could be made of this land and, again, it could generate business: lorry drivers have to eat et cetera, so I think it could all work together quite well. As you say, the perception is sometimes not the reality.

Mr Smith: Could I add to that that other ports around the country are developing a concept; one in particular (I do not think it is copyright) is called PortCentric Logistics, which is where people like Tescos are encouraged to put distribution centres on port estates, partly so the goods can be imported through that port but partly also to generate employment in the area. Such developments on a port estate in Swansea, for example, even if they are not totally export or import related, might be the key to generating improved rail links. The port estate can become the catalyst, rather than just pure import and export activities over the key sites.

Q85 Mr Jones: Pursuing the theme of links, do you agree with the Government's guidelines on developing links to port, that is the developer should pay the cost; and, if not, what alternatives would you put forward?

Mr Snelling: I think for the development of infrastructure connected to a port to link it the guidelines that were set out by DfT as to how developer contributions should be assessed and how, alongside that obviously, Government contributions should be assessed, we do not have a problem with the guidelines themselves; they seem like a reasonable way of making that assessment. Obviously ideally we would like the Government to pay for everything on the grounds that that gives us a more level playing field with the Continent, except that we are not quite there.

Q86 Mr Jones: Pausing briefly there, on the Continent the Government pays for all the links?

Mr Snelling: Yes. They frequently pay for the development of the ports as well. Yes, it would be 100% of the links. There is the example even where the Dutch Government has paid to upgrade railways in Germany because they are of benefit to Dutch ports. That is simply how it is operating on the Continent, and it is not a model that we have followed here, which is a shame and has led to British ports being less competitive compared to Continental ones. Given that - if we work within a context that Government policy is that developers have to pay a contribution, the guidelines themselves and the way they are worked seem fine; but the key issue is, how much is the Government actually going to put into this fund to provide its share? Essentially what the guidelines set out is an order of priorities for how the Government should spend its money. If it only puts £2.50 into that pot then the fact that they have set out nice and clearly what their priorities are does not really help if there is no money to spend; that would hinder port development. If there is generous funding of it then the guidelines can work and the developers can get a contribution commensurate to the public benefit from those same infrastructure upgrades.

Q87 Mr Jones: Clearly to that extent you would need fairly close liaison between the port developers and the Government to ensure that the forward budget is available for the infrastructure funding?

Mr Snelling: That is one of the many imponderables that port developers have to face, in that they know what the guidelines are but they have no idea what kind of funding is behind it. Obviously governments set their budget each year and that is just a fact of life, but that does mean you cannot plan five years ahead and know that by applying this formula we know we will get government funding, because the Government could simply turn round and say, "We've run out of money this year, you'll have to wait for around five years' time before you can get that funding".

Q88 Mr Jones: How could the present system be improved?

Mr Snelling: I think it is about political will and the commitment actually from all sides in politics that this is an important issue which would require funding. Obviously in the current financial climate this is a difficult time, but the more that there is seen to be a political will behind that, and therefore a likelihood of reasonable funding, then the more surety that developers have and the more confidence they will have, and the more likely it is that the UK will get the inward investment of developers' money. You have to remember these developers are always multinational companies who are choosing where in the world to invest in ports. It is a question of where they will get the best return that will get their money.

Q89 Mr Jones: Give that, to what extent are local authorities in your experience giving consideration to the needs of ports and their development in developing their local plans, specifically in a Welsh context?

Mr Kelly: I think that is where the regional consortia have a role to play. Obviously we have the four regional consortia in Wales. We have obviously produced the Wales Freight Strategy last year and are looking to take that forward and deliver the action plan that is against it; but a lot of those actions are against the regional consortia. Once again, it is all subject to funding effectively, and whether the Welsh Assembly Government is willing to put up funding for any developments or provide the funding for the regional consortia to take forward.

Q90 Hywel Williams: Given that we are talking about money, are there any ballpark figures for any of this? Is anybody saying, give it to individual ports in Wales, or to Wales in general? How much would any particular improvements to road or rail actually cost?

Mr Kelly: Millions!

Mr Farmer: A lot!

Q91 Mr Jones: Mr Farmer, you have raised concerns about the risks that face hauliers when they leave their loads at ports for significant periods of time. How would you like that issue to be addressed, and by whom?

Mr Farmer: We believe this to be incumbent upon the port operators. They rely on the lorries and the rail - I am not being differential there but obviously I am focussed on the road side - to bring the goods into and out of the port. Talking to one of our members the other day at Cardiff, his operating centre is leased from the docks people but he is not included in the dock security. They will not put the perimeter to include his premises, where he has got a lot of lorries parked with loads et cetera. I think that is the responsibility of the port operators, to be inclusive with regards to looking after, in a sense, the suppliers to that port. That is the security side. That is one example, but I hear of other ones from other places as well.

Q92 Mr Jones: Just pausing briefly there, why do ports not provide that level of security?

Mr Farmer: I cannot prove it but I think this is down to cost. A lot of port land, as I understand it, is leased to other businesses. There was just this one example, because obviously we were talking to our members in preparation for this, and he made this specific point: "I lease the land; I operate part of the docks; but I am exclusive to the dock perimeter and the dock security".

Q93 Mr Jones: Surely arrangements could be made through the leasing agreements for a contribution, for example?

Mr Farmer: It would appear not. That is just one specific example. I think security is a major issue because not just the cost of the lorries, the average artic is coming in at £75,000-£80,000, a load of a quarter of a million on the back; we are talking serious money here which needs to be secured - let alone, obviously the anti-terrorist security et cetera which has to prevail at the docks. The other issue, as I have already mentioned, is the parking facilities for lorries. At the moment, if they early, late or having to wait because the ship coming in is delayed, essentially they are outside the docks; they are on their own; there is nobody there to help them, to look after them, to offer them parking spaces.

Q94 Mr Jones: Is there not a wider issue there too, for example on the A55 where I believe there are no truck stops at all?

Mr Farmer: There is the odd one. There is a small truck stop on one of the junctions of the A55. I think that brings us into another realm, and how long have you got if you are going to starting talking about motorway service areas and truck stops. It is probably not directly relevant.

Q95 Mr Jones: At the very end of the A55 is the Port of Holyhead, this must surely be a significant concern of yours, given that most of the lorries going along the A55 I guess ultimately will end up in the port?

Mr Farmer: Absolutely. The problem we have is this perception again, frankly, nobody wants a lorry park in their backyard. We see this time and time again. I am sorry to bring it back but this comes back to the local authority planning. If the local authority will not offer planning permission, or what have you, we are on a hiding to nothing because if you mention lorry park to the general population they start running for cover.

Q96 Mr Jones: Ought this not be something that the relevant local authorities incorporate in their local development plans?

Mr Farmer: I believe it should be. The Welsh Assembly Government, and DfT for that matter, should be cognisant of the fact so that they can factor it in to all their discussions.

Q97 Mr Jones: Is this a matter that you are raising with local authorities because they are now of course developing their local development plans?

Mr Farmer: Yes we are and, as I say, truck stops is not a word that goes down well when you start talking to local authorities, sadly.

Mr Kelly: I would echo Mike's comments there in that there are some basic facilities along the A55 but when we say basic we are talking about lay-bys effectively more than anything. There is no dedicated lorry parking facility. Obviously we were hit with the bad news a couple of months ago about the initiative to set up a lorry park/truck stop which was denied by Flintshire County Council, I believe. I would go one further from what Mike said in that when you are looking at new industrial developments and new industrial estates, et cetera, part of the planning procedures should be an inbuilt lorry parking facility in that, and that would mean section 106 agreements, et cetera, so there is a need to look at it from a national planning legislative perspective but also the local authorities have a duty, I think, in terms of road safety more than anything just to provide basic lorry facilities so that drivers are not abusing their hours regulations and so on and so forth.

Chairman: Thank you very much for your evidence this morning and also for the memoranda that you have provided. The memoranda have been very helpful in preparing for this session. As I say to all witnesses, if you feel that you have not covered all the points then we would be very pleased to receive any additional memoranda in future. Thank you very much.