Clause 7 - Imposition of surcharges

Seafarers’ Wages Bill [Lords] – in a Public Bill Committee am 2:00 pm ar 17 Ionawr 2023.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Amendment proposed (this day): 13, in clause 7, page 5, line 8, leave out subsections (1) to (4).—(Mr Holden.)

This is the first of a number of amendments and new clauses which, taken together, require harbour authorities to impose surcharges (as opposed to merely allowing them to do so) and set out the circumstances in which they must do so. The circumstances are related to the fact that equivalence declarations may be provided before, during or after the year to which they relate.

Question again proposed, That the amendment be made.

Photo of Carolyn Harris Carolyn Harris Llafur, Dwyrain Abertawe

I remind the Committee that with this we are discussing the following:

Amendment 64, in clause 7, page 5, line 32, leave out subsections (5) and (6) and insert—

“(5) The Secretary of State must by regulations provide for a national tariff of surcharges by which the amount of the surcharge is to be determined.”

Government amendment 14.

Amendment 50, in clause 7, page 5, line 33, after “regulations” insert

“, where the minimum surcharge to be imposed on an operator where Subsection (2) applies shall be no less than 300 per cent of the difference between the amount calculated as the national minimum wage equivalence for the operator and the amount in total paid by that operator”.

Government amendment 15.

Amendment 51, in clause 7, page 5, line 36, leave out

“specified by a harbour authority”.

Amendment 52, in clause 7, page 5, line 37, leave out “the authority” and insert “each authority”.

Government amendments 16 and 17.

Amendment 65, in clause 7, page 5, line 43, leave out paragraph (e).

Government amendments 18 and19.

Amendment 53, in clause 7, page 6, line 1, leave out subsection (8) and insert—

“(8) Monies collected by a harbour authority under this section must be transferred to the Secretary of State at a frequency of not less than twice per calendar year for disbursement towards the costs of shore-based welfare facilities for seafarers.”

This amendment would ensure that revenue from surcharges is passed to the Secretary of State for Transport rather than being held by harbour authorities and would direct UK Government spending to welfare facilities.

Amendment 54, in clause 7, page 6, line 3, leave out paragraph (a).

Government amendment 20.

Clause 7 stand part.

Government amendment 21.

Amendment 55, in clause 8, page 6, line 10, leave out

“specified by a harbour authority”.

This amendment is consequential on earlier amendments relating to the surcharge.

Amendment 57, in clause 8, page 6, line 14, at end insert—

“(2A) Any objection must be made to the Secretary of State within a length of time which may be specified by regulations. Any objection made after this time period will be considered void.”

This amendment allows the Secretary of State to set a time limit for any objections to be lodged.

Government amendments 22 and 23.

Amendment 56, in clause 8, page 7, line 1, leave out

“to direct the harbour authority”.

Clause 8 stand part.

Government new clause 2—Imposition of surcharges: failure to provide declaration in time.

Government new clause 3—Imposition of surcharges: in-year declaration that is prospective only.

Government new clause 4—Imposition of surcharges: operating inconsistently with declaration.

Photo of Mike Kane Mike Kane Shadow Minister (Transport)

It is an absolute pleasure to serve under your chairmanship, Ms Harris.

At the close of the morning sitting, Mr Davies happily interrupted me in full flow about the Laffer curve. I often hear hon. Members talk about the Laffer curve, and earlier the Minister referred to all the tax giveaways implemented by this Government, but I remind Government Members that we are the most taxed society in modern history. Government Members enjoy talking about the nanny state and postcode lotteries, but I worry about how the clause will be implemented by different harbours. The Secretary of State will have enormous powers—a Labour Secretary of State could be implementing the regulations—and will have to play judge and jury between the various ports, harbour companies, the Maritime and Coastguard Agency and others. That is my big worry about the clause.

I rise to speak in favour of amendment 64 in my name and the names of Opposition members of the Committee. The Bill as drafted poses a risk that the surcharge regime will be different between harbours, and too small to have any effect on operator employment practices. Operators could choose to pay the surcharge to continue to use the ports, avoiding any penalty charge set out in clause 9. Will the Minister tell us what happens to penalties if they are charged? Where do they go? Will he seek to fund onshore mariner and seafarer welfare services from the charges? I am keen to hear more about that.

Many operators do not just run ferry services but operate ports as well—P&O itself operates a port. So the Government are potentially asking operators to fine themselves, which is perverse. Ministers must think again.

I note that the Secretary of State said he would use retained powers to decide which port could enforce fines, but he must set a national tariff for surcharges and designate a Government agency to collect them. Agreements and publication of the tariff of surcharges are subject to secondary regulations set out in clause 7. That could undermine the unlimited fines that can be imposed on operators for offences created elsewhere in the Bill, because the tariff will be based only on the differential between the amount paid the seafarers and the national minimum wage equivalence for UK work. Our amendment would give the Secretary of State the powers to set a national tariff of surcharges, which the harbour authorities would then enforce under direction. That would prevent ports from being prosecuted by competitors, and prevent harbour authorities from competing on the level of surcharge company operators would have to pay. That surcharge should not be given to the harbour authorities to use as they see fit, but should clearly be given to support seafarer welfare facilities. It would be wrong for operators to spend on their own businesses the fines levied for exploitation of seafarers. That is why we support amendments 53 and 54 in the names of SNP colleagues.

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Transport)

It is a pleasure to serve with you in the Chair, Ms Harris. I will address amendments 51, 52, 55, 56 and 58, which stand in my name and that of my hon. Friend the Member for Glasgow East. We will also be supporting amendment 64—we have signed the amendment —in the name of the hon. Member for Wythenshawe and Sale East.

Ultimately, we want this legislation, in whatever form it takes at Royal Assent, to stick. That is what we are seeking to ensure today. The surcharges and penalties envisaged have to be realistic to have any effect. The hon. Member for Wythenshawe and Sale East raised the possibility of operators who own ports surcharging other operators who use those ports. If we end up in a position where operators allege sharp practice on the part of other operators and take legal action, it is workers who will be caught in the middle. P&O Ferries can afford the lawyers; poorly paid staff cannot. Setting a national tariff will remove the element of discretion from harbour authorities and ensure that all harbours and all operators across the board pay the same surcharge, regardless of which harbour has jurisdiction.

With all due respect to the harbour authorities, shifting the onus to the Secretary of State would also be a clear sign of how seriously the Government will take infringements. It is one thing for an operator to take on a port, but quite another to decide to take on the Department for Transport, if they know they are in the wrong. The likes of P&O might have deep pockets, but ultimatel, there will be no escape from a law that is properly enforced by the state.

As things stand, the level of surcharge that will be levied on operators in breach of the legislation is set entirely by the harbour authority, with reference to the regulations that will be laid at some point by the Secretary of State. My concern is that if the level of surcharge is set too low—we spoke this morning about the level of fines that could be levied—there would be no or very little disincentive for operators to pay below the national minimum wage equivalent. We saw with P&O that even flagrant lawbreaking was no disincentive whatever.

Photo of Grahame Morris Grahame Morris Llafur, Easington

I completely agree with the line the hon. Member is pursuing here—that the fines should present a disincentive to breach the provisions of the legislation—but would he clarify a point on the minimum surcharge? The amendment says it would be

“no less than 300 per cent of the difference between the amount calculated as the national minimum wage equivalence for the operator and the amount in total paid by that operator”.

We learned in the debates on the previous clause that more than 50% of the savings that P&O were making were not from wages but from the changes in roster patterns. Should that be taken into account as well?

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Transport)

I thank my colleague on the Transport Committee for making that point. It is very important, and he is absolutely right. I spoke about the impact of rostering on Second Reading. I am sure we will come on to the seafarers’ charter and the issues around that later on. My amendment seeks to amend the Bill in front of us, but I would love for us to be taking the whole situation into account, rather than just the wage. We will discuss that point in more detail a bit later on.

The Insolvency Service refused to undertake criminal proceedings against P&O Ferries or its corporate leadership, despite Mr Hebblethwaite’s appearance in front of the Select Committees’ joint hearing, when he freely admitted that he and his colleagues conspired over a lengthy period of time to systematically break the law and treat their workforce dreadfully. P&O clearly took the view that the chances of facing any real penalty for their actions were slim and, ultimately, they were proved to be right.

The Bill sets no minimum level of surcharge that would be levied on operators found to be in violation of the law. If the surcharge is set at a rate lower than the difference between compliance and non-compliance, there is nothing to prevent rogue operators from paying below the national minimum wage equivalent, making a declaration to that effect, paying the surcharge and still sailing away with full pockets, exactly as P&O Ferries did. [Interruption.]

Photo of Carolyn Harris Carolyn Harris Llafur, Dwyrain Abertawe

Order. I remind colleagues not to have private conversations during Committee sittings.

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Transport)

Thank you, Ms Harris. Amendment 50 would make clear the cost operators would face if they were caught flouting the law. It is deliberately punitive. We picked 300%, but I would be happy to go higher.

The amendment would also have the effect of continually updating itself through reference to the national minimum wage equivalent rate, rather than to an absolute cash figure. We know that those involved in drafting statutory instruments will have their work cut out to say the least over the coming months if the Government’s Retained EU Law (Revocation and Reform) Bill is passed. My amendment would save them the trouble of updating this legislation every time that the rate needs to be updated. Indeed, the Government’s own response to the consultation on the Bill stated:

“We envisage that the rate of surcharge will be set by the SHA with reference to the NMWe deficit, which is the difference between the amount that seafarers are actually paid and the amount they would have been paid if they had qualified for NMW for that work.”

All our amendment would do is ensure that the reference to that deficit is fixed and a deterrent, rather than just a price that they pay for doing business.

I am sure that the current Secretary of State wants to see rogue operators caught and held to account, but he may not always be in this place or be the Minister. If future Ministers and Secretaries of State place less value on seafarers’ wages and conditions, they can amend the regulations, without much recourse to this place and probably without much fuss, to remove any deterrent effect that a surcharge may have. Of course, it is open to set a surcharge higher than 300%, but my amendment would ensure that the minimum is fixed in statute and cannot be amended without a new Bill and Act, thus making it more difficult to remove.

I would be happy to hear from the Minister what the level of surcharge is because, to be honest, it was quite difficult to pick up what he was saying in his oration before the Committee adjourned this morning. It was rather like a horse-racing commentary, so I did not quite pick up his opposition to our amendments. Maybe he is backing our amendments; I did not actually hear. I would be happy to hear what he actually thinks about these issues.

I will now speak to amendments 53 and 54. The Bill makes no orders or compulsion on where the proceeds of any surcharge levied by harbour authorities should go, as the hon. Member—and sometimes Friend—for Wythenshawe and Sale East said. Given that the reason for the surcharge is the mistreatment of workers, it seems apposite that the proceeds of a crime such as this should be directed to its victims. It would remain open to the Secretary of State to direct money to the harbour authority in question to spend on welfare facilities for seafarers, but that would be a decision for the Secretary of State, not for the harbour authority. Equally, it would be open to the Secretary of State to spend the money directly through the Department for Transport or other agencies, or to divert it to one of the many charities and trade unions that provide welfare services to seafarers in our ports and harbours.

We all hope that no surcharges will actually need to be levied under the legislation; equally, we all know that P&O Ferries is one of a number of operators that do not treat their staff with the respect and dignity that they deserve. When harbour authorities and the Secretary of State start to exercise their powers and collect surcharges, we need to ensure that those moneys do not disappear in a black hole somewhere or get set aside for the general running costs of a port. Unfortunately, that is exactly what the Bill, as it stands, allows. I would be happy to hear some clarification from the Minister regarding exactly where these moneys will go and whether the regulations will make clear that the surcharges are not to be spent keeping the lights on or building more infrastructure to handle the implications of Brexit. That is not what should happen. My amendment would end that possibility once and for all.

I forgot that I had so many amendments to speak to. Amendment 57 is essentially aimed at ensuring that any objections to a surcharge being levied are made in a reasonable timeframe. It is not too great a stretch of the imagination to foresee a company—again, such as P&O Ferries—being levied with a surcharge, procrastinating on payment and, months later, objecting to the surcharge, thus prolonging the process even further. Setting a time limit would prevent these kinds of frivolous uses of the objection procedure while still allowing genuine objections to be lodged. I can see nothing in the Bill to prevent objections being lodged and then withdrawn, so it would still be open to trade unions and others to lodge on a holding basis, as it were, while retaining the right to explore their options along the way. If the Minister will advise what time limits for objection will be in the regulations when laid, I may well be happy to withdraw that particular amendment.

Photo of Richard Holden Richard Holden Parliamentary Under-Secretary (Department for Transport) 2:15, 17 Ionawr 2023

I thank everybody for coming back. I am sorry that my speed of speaking was so swift earlier; I shall try to keep these comments at a more temperate pace. I will pick up on a couple of points from hon. Members, then enter into a little more of the briefing.

Tariffs or surcharges will be set by each harbour authority, but they will be in accordance with the regulations made under clause 7. As the hon. Member for Paisley and Renfrewshire North said, we also hope that the surcharges will never be required, but we need to have them to ensure proper practice. Opposition amendment 50 seeks to set out in the Bill how the surcharge is to be calculated. Currently, the Bill provides that harbour authorities will set the tariff of surcharges in accordance with the regulations. It is important that the surcharges disincentivise operators from not providing equivalence declarations, and we agree that surcharges should be high enough to act as a disincentive. We will consult on the levels of the tariffs to be set in the regulations. We do not want to commit to setting the level in the Bill, but please be assured that we are going to take everything into consideration in the drafting of the regulations.

Amendments 51, 52 and 56 seem to be designed to take responsibility for setting the surcharge away from the harbour authorities. Harbour authorities have been given this duty given their proximity to operators as their customers. The tariff must be set in accordance with regulations, but harbour authorities are well placed to determine within those regulations what the surcharge should be in each case. However, we will consider this position further before Report.

Amendment 53 would remove the option for harbour authorities to keep the surcharge for any of their functions, and would mean that moneys would be transferred to the Secretary of State for disbursement . The Bill already allows moneys to be spent by the harbour authority for the purpose of shore-based welfare facilities. I can see that to make the Secretary of State an intermediary places great faith in the speedy actions of the Government in all cases, but there is a possibility that this transaction would put a significant administrative burden on the Department were it to be dealt with on a case-by-case basis and would delay seafarers seeing the benefit of this money.

Amendments 54 and 68 would remove the harbour authority’s ability to spend moneys collected from the surcharge on the discharge of their functions. This is not intended to be a profit-making mechanism, but I am happy to review this function as intended before Report, because we need to ensure the surcharge is high enough to act as a disincentive.

Amendment 65 would remove the power to make regulations providing for the notification of a surcharge to the Secretary of State. The power to make regulations providing for the notification of the surcharge to the Secretary of State is an important mechanism to deter non-compliance. The mechanism of the Bill relies heavily on the monitoring of enforcement, and, as the imposition of the surcharge is a duty under the Bill, it is important that the Secretary of State is notified in this process.

I understand the importance of making it clear that it is the imposition of the surcharge that must be notified to the Secretary of State. I have thus tabled Government amendment 18, which provides for notification to the Secretary of State of the imposition of a surcharge. I hope colleagues are reassured by that.

Photo of Grahame Morris Grahame Morris Llafur, Easington

I am grateful for the explanation. The Minister said amendment 65; did he mean amendment 64 in relation to the powers of the Secretary of State to set regulations? Can the Minister have a quick look at that? It is a point that in the earlier clauses he had indicated he was going to look at again before Report, so that we have a consistent level set by the Secretary of State in regulation. Could the Minister clarify that?

Photo of Richard Holden Richard Holden Parliamentary Under-Secretary (Department for Transport)

The hon. Member is quite right. I should have been referring to amendment 64. What I was referring to in that section was Government amendment 18, which relates to Opposition amendment 65. I am about to come on to amendment 64; I did try to reference the hon. Member’s comments earlier, but I will come on to them now.

Amendment 64 would require the Secretary of State to make regulations setting out a national tariff of surcharges, as I indicated earlier, removing any role for harbour authorities in setting surcharge tariffs. The surcharge is an important mechanism to deter non-compliance, and the Government consider it reasonable and proportionate for harbour authorities to play some role, alongside the national tariff setting under clause 7. It is envisaged that a schedule of rates for the surcharge will be set by the harbour authority with reference to the estimated difference between the amount that seafarers are paid and the amount they would have been paid if they had qualified for national minimum wage. This is expected not to be an exact calculation, but to be based on estimates of the number of seafarers involved. The detail of how that will be worked out will be set out in regulations, and we will work closely with industry to ensure we get it right. It is important that surcharges are relevant to the circumstances of the service in scope, and harbour authorities are well placed to make that call given their proximity to services. We have, however, heard the concerns raised by the ports industry and others, so we will consider the matter further ahead of Report.

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Transport)

On Government amendment 15 and the tariff of surcharge being at the discretion of harbour authorities, how much consideration has the Department given to the possibility of surcharge shopping and other conflicts of interests, both of which have been raised here and in the other place?

Photo of Richard Holden Richard Holden Parliamentary Under-Secretary (Department for Transport)

That is a fair point. We have considered the matter, but we will be setting a national tariff in regulations following wide consultation, which will then be looked at by the individual harbour authorities. The cost implications of operators changing routes in order to shop around between what we expect to be minor cost differences mean that we do not expect it to be a particular issue.

Amendment 57 would allow for regulations setting a time limit under which an objection to a surcharge can be made. We think it is unlikely that there will be delays in objections to surcharges, but we are none the less happy to continue to consider that point ahead of Report, because it is important to get these things right and to have the right disincentives. We do not want to create strange situations that could act against seafarers’ interests.

Amendment 13 agreed to.

Amendments made: 14, in clause 7, page 5, line 32, leave out second “the” and insert “a”.

See Amendment 13.

Amendment 15, in clause 7, page 5, line 33, leave out from “regulations” to end of line 35.

This amendment is consequential on the removal of clause 11(3) (see Amendment 34).

Amendment 16, in clause 7, page 5, line 37, at end insert—

“(6A) A duty to impose a surcharge is subject to any direction given by the Secretary of State under section 11(2)(a).

(6B) A harbour authority which fails to comply with a duty to impose a surcharge is guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale.”

See Amendment 13.

Amendment 17, in clause 7, page 5, line 39, leave out paragraph (a).

See Amendment 13.

Amendment 18, in clause 7, page 5, line 43, after “notification of” insert “the imposition of”.

This is a drafting clarification.

Amendment 19, in clause 7, page 5, line 44, at end insert—

“(7A) Regulations may make provision requiring a harbour authority that has imposed a surcharge to notify the Secretary of State if so much of the period within which the surcharge must be paid as is specified in the regulations has expired without the surcharge having been paid in accordance with regulations under subsection (7)(d).”

See Amendment 13.

Amendment 20, in clause 7, page 6, line 6, at end insert—

“(10) In this Act, ‘surcharge’ means a charge under section (Imposition of surcharges: failure to provide declaration in time), (Imposition of surcharges: in-year declaration that is prospective only) or (Imposition of surcharges: operating inconsistently with declaration).”—

See Amendment 13.

Clause 7, as amended, ordered to stand part of the Bill.