Cruise Market (Competition)

John Denham Excerpts

Wednesday 4th July 2012 Westminster Hall

[Caroline Nokes]

I thank my hon. Friend for making that point, and for standing up for the cruise business in Dover. He makes an interesting point, which I will move on to later.

I have an unashamed loyalty to my home port of Southampton, the second-largest cruise port in Europe and the embarkation point of a cruise voyage for 720,000 passengers a year. Southampton is not a port that is afraid of competition. It is not afraid to invest private money to provide the facilities required for a thriving and expanding cruise business. As port director Doug Morrison, who has taken the time to be here today, has said on more than one occasion:

“We believe in fair competition. We do not fear Liverpool and competition, but it is simply not right.”

Of course, that is what our debate is about: ensuring that competition in the cruise industry is on an equal footing, and that a leg-up to one port is not an iceberg to another.

European competition rules on state aid are clear. The European Commission website devotes a considerable number of words to explaining them. Why does that come as no surprise? The Commission seems to be very good at devoting a considerable number of words to many things, but perhaps less good at applying those ideals when it comes to the crunch. I will quote those words to the Minister:

“Sometimes Government authorities spend public money supporting local industries or individual companies. This gives them an unfair advantage over similar sectors in other EU countries. In other words, it damages competition and distorts trade...It is the Commission’s job to prevent this,”

which seems a fairly unequivocal statement to me. It does not say that the Commission’s job is to sit back and allow market distortion. No—it is the Commission’s specific job to prevent it. However, first it must apparently ask some questions. That is fair enough, and I would like to take hon. Members and the Minister through those questions and ask whether they have been rigorously asked and responded to in relation to the UK cruise market.

Have state authorities given support, for example, in the form of grants, interest and tax relief, guarantees, holdings in companies, or goods and services provided on preferential terms? The answer strikes me as a big yes in the case of the port of Liverpool, which has received £19 million in grant and been asked to pay back only somewhere between £8.8 million and £12.6 million. Has such aid been available to other port operators in the UK, or has investment and expansion in their cruise facilities been without such support and advantage?

Is the support likely to affect trade between EU countries? Arguably, yes again. Barcelona and Venice are two of the leading ports in southern Europe, and a significant proportion of the UK cruise market heads directly to the Mediterranean. Clearly, therefore, there is potential for an impact. Of course, it is not only ports on the Mediterranean, but other European ports, too. For the past two years, the port of Copenhagen, primarily hosting departures to the Norwegian fjords and the Baltic, has been rated as Europe’s leading cruise port at the world travel awards. In Southampton, we might have a view on that, but it would come as no surprise to learn that cruises from Liverpool might reasonably be expected to head in that direction as well.

Southampton has been shortlisted at the world travel awards for the past four years, and I am pleased to see that it is nominated again for 2012. I have no doubt that the other ports shortlisted this year, which range from Las Palmas in Gran Canaria to Stockholm in Sweden, are all extremely concerned about the state aid to the Liverpool cruise terminal, which could have a very detrimental effect on the business they have worked so hard to attract. It is a market that continues to expand, as one in every eight British package holidays sold is a cruise.

[Mr John Denham (Southampton, Itchen) (Lab)]

I congratulate the hon. Lady on securing the debate. She has made a compelling case about the importance of EU rules in this case. I am sure that she will be aware of the recent statement by Commissioner Almunia, who said that he has reminded the British Government

“of their obligation to comply with EU state aid rules.”

Does the hon. Lady agree that this is not a matter where the Minister can simply say that it is down to the European Commission in Brussels? He has a personal responsibility to ensure compliance with the rules, which means taking action to prevent Liverpool from breaking them.

[Caroline Nokes]

I thank the right hon. Gentleman for that comment. When I conclude, I will ask the Minister to work with his colleagues in the Department for Communities and Local Government on that very subject.

Is the support selective? Does it confer an advantage on specific companies, parts of industries, or on companies in specific regions? Yes, again. No other port operator, whether ABP, Hutchison or the port of Tyne, has received that sort of assistance for their cruise facilities. They have had to invest in their facilities themselves using private capital, just as they should in a free and fair market.

Has competition been distorted or might it be in future? We can fairly safely respond to that one. In requiring Liverpool city council to get state aid clearance from the European Commission prior to commencing turnaround cruises, the Government appear to endorse that view. However, what has happened in Liverpool? It has started anyway. The European Commission states that if that has happened, the Commission must disallow the support unless it is shown to be compatible with the common market.

--- Later in debate ---

[Mr Denham]

Will the Minister give way?

[Mike Penning]

If the right hon. Gentleman could bear with me, I will give way in a moment.

Looking at the situation from my point of view, have we been open and completely honest about what we did and the process? I believe we have. Is Liverpool doing what I asked it to do? No, because it has not paid the money back and we do not yet have state aid clearance. Do I have the power to stop Liverpool? The answer is no. Would I really want to? If the European Commission declares the payment to be incorrectly done state aid—my legal advice is that it is not—Liverpool would have to pay the moneys back. Liverpool, however, has indicated that it will pay the money back. The words of the then leader of Liverpool city council, now the mayor, were, in effect: “We will pay back what you ask us to pay back.”

--- Later in debate ---

[Mike Penning]

My hon. Friend is leading me down a path that I am probably quite happy to be led down. I understand from my legal advice that the Commission has never asked for any such funding back in other, similar cases. Looking around Europe at subsidies, the Commission would probably rather not open such a Pandora’s box.

[Mr Denham]

The Minister says that he has no power to act, but infraction proceedings would be taken against the British Government in the first instance, not Liverpool. Ministers have always had the ability to prevent the misuse of European regional development fund money, if they thought the misuse would leave the Government liable to action by the Commission. There must be legal powers for him to take to guard against the risk of infraction proceedings by the European Commission.