Cruise Market (Competition)

Julian Lewis Excerpts

Wednesday 4th July 2012 Westminster Hall

[Caroline Nokes]

The hon. Lady is correct. I commend her on the extensive work that she has done on the subject. She hits the nail on the head: state aid and fairness are what matter.

[Dr Julian Lewis (New Forest East) (Con)]

Before my hon. Friend gets back into her stride, does she agree that good faith, as well as fairness, should come into account? It was revealed, as a result of a freedom of information request, that Liverpool city council resisted pressing for a turnaround facility at the outset

“due to advice that there could be state aid complications which could prevent the terminal being built at all.”

The key words are:

“Their approach was to build as a port of call facility and address turnaround later.”

It seems that it was using a Trojan horse tactic and acting in very bad faith.

[Caroline Nokes]

My hon. Friend makes an excellent point. It is partly about good faith and trusting that the port of Liverpool and Liverpool city council will abide by conditions and rules that are set for them.

By 2008, Liverpool city council had launched its first attempt to lift the conditions, and the conclusion, after a detailed assessment by the Department for Transport, was that the change of use to turnaround cruises would have an

“unfair and adverse effect on competition between Liverpool and other cruise ports. It would be unfair to allow one port to benefit when competitors have found, or would have to find, private money to achieve the same objective.”

And so to today. The Government have decided, “based on independent advice”—even though that advice is from First Economics, a consultancy that freely admits it is not expert in either competition or the cruise industry—that they will withdraw their objection to removing the funding condition and Liverpool being used for turnaround calls, provided Liverpool repays either £8.8 million upfront or £12.6 million over 15 years. None of the European regional development fund money would have to be paid back, but—this is crucial and goes back to the good faith argument—state aid clearance from the European Commission would have to be secured.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Transport (Mike Penning)]

It is a pleasure to be here, Mrs Brooke. I should like to get some facts on the record, not only for my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes), but to give the Government’s side.

Like my hon. Friend, I am keen on competition, because I am a free marketeer as well. I am also keen, as a Minister, to consider in detail a request made by anybody anywhere in the United Kingdom. That is not what happened in 2008. The right hon. Member for South Shields (David Miliband) knows full well that when a request was submitted in 2008, it was dismissed quickly. I have not seen any legal advice instructing the Government that it would be illegal for them to look at the matter. Certainly, my legal advice, when Liverpool city council said that it would like to start turnaround, was not that I could not look at that. As a free marketeer, the Minister for the whole United Kingdom, and a Tory MP, here I am defending Liverpool. That is an interesting anomaly. Lord Heseltine would be proud of me.

It is clear that we were open and transparent all the way through; I will come back to how we achieved that. I met the operators of Southampton port—and Members from across the House—on more than one occasion to explain things exactly. In a democratic society that believes in a free market, any request should be looked at fairly by a Minister of the Crown. I looked at the request made by Liverpool city council, and I asked my officials what the procedures would be, what powers I had, and what powers were not in my hands. It was obvious that I had the power to look at the request, so we consulted widely, and got submissions from all parts of the House and across the country on what should happen. The key thing that I got back from the submissions was the point about fairness; that needs to be in whatever we do.

I looked at what I could do about the two separate payments made to Liverpool when it got the grants. First, I asked whether I or anyone in the UK had the power to ask for the regional development grant to be repaid. The answer was no; it is a Commission issue, for the Commission alone to deal with.

[Dr Julian Lewis]

rose—

[Mike Penning]

I will continue for the moment, because I am conscious of the time, and I want to cover many of the points made. If I have time at the end, I shall come back to my hon. Friend.

The issue is being looked at by the Commission, and it is for it to decide. What was in my power was the ability look at whether Liverpool had to pay back the full UK part of the grant, whether there was any depreciation because of the length of time, and whether interest would be added. My Department made an evaluation, and Liverpool asked to pay £5.3 million as a lump sum, which I rejected. The assumptions of my officials were that the amount should be about £8 million —we ended up with a figure of £8.8 million. To ensure that I was seen to be impartial, I asked for some independent advice on how much money should be repaid. My hon. Friend the Member for Romsey and Southampton North came up with the right amount, which was £8.8 million, or £12.6 million if phased. That is almost identical to the figures that the modelling came up with, after consideration of how other repayments were made.

I made that decision, and put it to Liverpool that it would have to pay those moneys back. As yet, Liverpool has not indicated how it will pay that—in stages, or in one lump sum. The assumption—that is all it is—is that it will be a one-stage payment. As yet, Liverpool has not indicated to the Department for Communities and Local Government how it will pay the money, or when it intends to do so. My officials have been in touch with DCLG officials, who have been in touch with the city council to push it on the need for a decision.

It is absolutely the case that state aid has not been cleared yet, but I do not have any power to stop Liverpool while we wait for the Commission to act. The key to the situation is that my officials and I as the Minister, independently and with no vested interests, have looked at what can be done. I believe that competition is good, and that competition around the country will drive up the excellent cruise market. I was at the European Cruise Council conference in Brussels only last week, and even after the terrible Costa Concordia disaster, the market has picked itself up and is moving forward again.

--- Later in debate ---

[Mike Penning]

Will the hon. Lady bear with me for a second, because two other colleagues have tried to intervene as well? I have been given only 10 minutes to sum up the debate and, with so many people present, we could have done with a little longer.

The key for me is whether the effect on other ports and other incomes around the country will be dramatic. I have seen no evidence for that yet. At the European cruise conference, I spoke to the representative of a cruise operator that does not operate here at the moment, but will put 22 cruises in next year. I asked, “Would you be doing this at any other port in the UK?” The answer was no. I had to take that at face value. Will there be such a dramatic effect? I do not honestly think so. The Government have been genuine and honest about how much pain there should be, and Liverpool city council will have to step up to that and be as honest and open with us, and with its own electorate, as we were with it on what will have to be paid back and when. Also, should it have gone ahead without state aid approval? No, it should not have done.

[Dr Julian Lewis]

With regard to the European money, are the Government in a position to make representations to the European Commission on the matter? If the Government think that the Commission is unlikely to ask for the money back, does that not suggest that the Commission acted in a distorting and anti-competitive way when making the money available in the first place?

[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.