Seaborne Freight

Baroness Sugg Excerpts

Tuesday 8th January 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

My Lords, with the leave of the House, I will repeat in the form of a Statement the Answer given by my right honourable friend the Secretary of State for Transport to an Urgent Question in the other place. The Statement is as follows:

“Mr Speaker, as you know, this Government are working towards ensuring that we leave the European Union in March with a sensible agreement for the future through the withdrawal agreement that this House will consider next week, but any responsible Government need to plan for all eventualities.

As part of this work, the Department for Transport has been undertaking a wide range of activities to mitigate the impact on the transport system of a potential no-deal EU exit, particularly around the movement of freight. My department has, for example, delivered measures, including passing the Haulage Permits and Trailer Registration Act, which puts the systems in place if a permit system is required and to ensure that UK HGVs can continue to be used in the EU.

We have also put in place Operation Brock as a replacement for Operation Stack, in order to deal with disruption at the Channel ports. This is not simply a Brexit-related measure. We do not want to see any repeat of the issues that Kent faced in 2015 with the closure of the M20. Operation Brock should mean that during any future disruption at the ports, for whatever reason, the motorway is kept open while we prepare the long-term solution of a lorry park.

Yesterday, Kent County Council and my department carried out a live trial of one part of Brock, on the route from Manston. We were satisfied with the number of vehicles that took part, which was more than enough to determine a safe optimum release rate from Manston to the Port of Dover via the A256, causing minimal traffic disruption along the route.

This is a range of examples of the sensible contingency planning that a responsible Government are carrying out to make sure we are prepared for a range of outcomes. But we are committed to ensuring as frictionless as possible movement across the UK border whatever the outcome. However, without planning there could be significant disruption to the Strait of Dover, particularly if no agreement is reached.

Given the importance of these routes to the UK economy, it is vital that we put in place contingency plans to mitigate against any disruption that might occur in a no-deal scenario. Now the department is working with the Port of Dover and the Channel Tunnel as well as our French counterparts, at both official and ministerial level, to ensure that both operate at the maximum possible capacity in all instances.

Those discussions are positive and I am confident everyone is working constructively to ensure that the Dover-Calais route, and particularly the Port of Dover and the tunnel, continue to operate fluidly in all scenarios.

However, in order to ease any pressure on those routes, my department has completed a proper procurement exercise to secure some additional ferry capacity between the UK and the EU. Following this process, three contracts were awarded to operators, totalling a potential £103 million. Almost 90% of this was to two well-established operators: £46 million to Brittany Ferries and around £42 million to DFDS.

These contracts provide additional capacity on established routes, through additional sailings and in some cases additional vessels, into ports in northern Europe and other parts of France. A third, smaller contract worth £13.8 million potentially was awarded to Seaborne Freight, a new British operator, to provide a new service between the Port of Ramsgate and Ostend.

Now let me stress, no money will be paid to any of these operators unless and until they are actually operating ferries on the routes we have contracted. No money will be paid until they are operating the ferries. No payment will be made unless the ships are sailing and, of course, in a no-deal scenario money will be recouped through the sale of tickets on those ships.

But as the House, I believe, knows, Seaborne is a new operator looking to reopen the route, which closed five years ago. As a result, we ensured that its business and operational plans were assessed for the department by external advisers, including Slaughter and May, Deloitte and Mott MacDonald. This included Seaborne’s plans to charter vessels for service, as is common across many transport modes including airlines and rail operators. We also conducted searches on the directors of Seaborne, via a third party, and found nothing that would prevent them contracting with government.

Mr Speaker, I make no apology for being willing to contract with a new British company, particularly one which has a large number of reputable institutional backers. We contracted with Seaborne Freight as the service it proposes represents a sensible contingency in the event of disruption on other routes.

I am pleased that this award supports the Port of Ramsgate, which operated as a commercial ferry port as recently as 2013 and has taken ro-ro services as recently as last year. I am looking forward to seeing ferry services resume from this port. The infrastructure work to make that possible has already started and is one of the most visible and symbolic elements of how seriously my department is taking contingency planning for all Brexit eventualities”.

[Lord Tunnicliffe (Lab)]

I thank the Minister for repeating that incredible Answer to the Question in another place. The Transport Secretary has awarded a £14 million contract to a company with no money, no ships, no track record, no employees, no ports, one telephone line and no working website. The Minister calls this a sensible contingency plan; I call it a crisis. In a crisis, you turn not to the lowest bidder but to the contractors that can ensure safety and reliability. I have two specific questions. First, what risk assessment has been carried out in awarding the contract to Seaborne Freight and were issues such as shipping experience, maritime safety and financial robustness taken into account? Secondly, what guarantees can the department provide on the uninterrupted delivery of critical goods such as food and medicine?

[Baroness Sugg]

I thank the noble Lord for his question. As I said, 90% of the contracts were awarded to established operators. With Seaborne, the proposal was subject to technical, financial and commercial assurance as part of a standard due diligence procedure consistent with that undertaken on all government contracts. Our contractual arrangements with Seaborne clearly reflect its status as a new ferry operator, and it is obliged to meet a number of stringent time stage requirements to demonstrate that it can provide an effective service, with break clauses in the Department for Transport’s favour if it fails to meet them. I reiterate the point that no taxpayers’ money will change hands unless these services are provided.

[Baroness Randerson (LD)]

My Lords, from my ministerial experience, I recall that the usual due diligence process involves ensuring that the company has appropriate experience—Seaborne has none—and that it is financially secure. I wonder who its shadowy financial backers are. It also requires directors to be of good financial standing. Can the Minister tell us whether the unpaid tax bill of the managing director’s previous company, which went into liquidation, has now been paid?

The Statement refers to three very reputable companies which are supposedly involved in the due diligence process. Can the Minister assure us that all three signed off on the awarding of this contract, and if one or two of them did not, can she tell us which? Have the Permanent Secretary for the Department for Transport or the director asked for written ministerial direction in this case?

Finally, has Seaborne now signed a contract with Ramsgate and Ostend ports? On 3 January they had not even done that, let alone begun building or requisitioning the ships. Clearly no one looked properly at the company’s website—unless, of course, they were wanting to order a pizza.

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[Baroness Sugg]

My Lords, we conducted searches on the director of Seaborne via a third party and found absolutely nothing that would prevent the company contracting with the Government, which is why we went ahead. There was no ministerial direction in this case. The company has been working to open the service for over two years. Since we have given them the contract, it has been developing that service, and there will be updates in the near future.

[Lord Campbell-Savours (Lab)]

My Lords, I understand that international haulage operators are today threatening to drop their channel business because of the risk of customs delays and that those who remain are upping their costs by 5%. Can the Minister confirm this? And how can the Ramsgate-Ostend freight service be viable when the cross-channel freight rate for vehicles, which is linked to the Channel Tunnel rate, stands at £180 per container or lorry? That was the rate in 1981 and is still the same 37 years later. Is it not true that numerous attempts have been made to rekindle that service and all have failed? Is it not also true that after dredging—even at those rates—a four-ship, two-rotation, sixteen-sailings-per-day service is still not viable? Is this just a joke?

[Baroness Sugg]

I assure noble Lords that this is not a joke but part of our contingency planning. We are concerned that in the event of no deal, there will be disruption at the port of Dover. Our first priority is to minimise that disruption on the narrow straits, but we are aware it is a real issue, which is why we are making these contingency plans and why we are looking at alternative ways of ensuring that trade carried on ro-ros can continue to come and go from this country.

[Baroness McIntosh of Pickering (Con)]

My Lords, would my noble friend consider other ports, which do not require dredging and which operate ferries? I declare an interest: I represented the port of Harwich for 10 years as a Member of the European Parliament, and I was a frequent user of DFDS when it operated ferries to Denmark. Would my noble friend consider looking at the option of a new ferry service out of the port of Harwich? I am sure the port would benefit too from this revitalised process.

[Baroness Sugg]

As I said, the current work at Ramsgate will certainly benefit that area. With this procurement, the Government set the criteria of the additional freight capacity, within which the port of Harwich would have been in scope, but we did not specify the origin or destination ports. We left that up to the commercial operators. We regularly engage with a wide range of ports across the country, including Harwich, and we will continue to discuss how the Government can support them in the development of the maritime industry.

[Lord Berkeley (Lab)]

My Lords, could the Minister explain her comment that no money would be paid to this company until the service is started? It actually started dredging at the weekend. Who is paying the probable millions that will be spent on dredging? Are the Government or someone else paying? Secondly, who will guarantee the traffic on this ferry service, if it ever starts? Who will set the prices? As my noble friend Lord Campbell-Savours said, it is an open competition now between these ferries. Will the Government direct trucks where to go?

[Baroness Sugg]

My Lords, the dredging of Ramsgate, which the noble Lord said is already happening, is separate from this contract. We have a prioritisation process in place to ensure we can facilitate trade in the goods that we need to. That is an ongoing process that will continue up until we reach a deal with the European Union.

[Lord Davies of Stamford (Lab)]

My Lords, when did any British Government in any field last place a major contract with a company that had no experience whatever of operating? Are the Government confident that the contract given to Seaborne Freight is fully in accordance and fully compliant with our rules on public procurement and the European public procurement directive?

[Baroness Sugg]

My Lords, we are absolutely confident that it is fully compliant. We duly published the details of the contract. As with many operators in the maritime sector, it is not uncommon for it not to own its own vessels. Many operators charter them through third parties, as Seaborne is doing.

[Lord Adonis (Lab)]

My Lords, who is paying for the dredging at Ramsgate? The noble Baroness did not answer that question.

[Baroness Sugg]

It is not part of this contract. I believe that the cost is around £1.5 million. I will have to get back to the noble Lord with the exact details of who will pay for it.

[Lord Harris of Haringey (Lab)]

My Lords, can the Minister give us a clear statement that there are no financial connections between Seaborne Freight and close family members of any Minister?

[Baroness Sugg]

I can certainly reassure the noble Lord that I am not aware of any such connection. This contract has been brought about to try to facilitate the easing of trade should we be in a no-deal scenario. There is certainly no ulterior motive to it.

[Lord Naseby (Con)]

My Lords, does my noble friend accept that a great many of us recognise that what the Department for Transport has done broadly to meet the possible problems at the end of March is greatly welcome? Nevertheless, it seems that this particular contract is not exactly straightforward, to put it mildly. Against that background, it might be beneficial if Her Majesty’s Government and the department found an alternative supplier for the 10% of this supplementary work on a more regular basis, perhaps on a standby basis, if and when this contract does not quite produce what it is put forward to do.

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[Baroness Sugg]

My Lords, we are confident that we will be able to provide the facilities to carry goods to and from for the 90% of the procurement contract. Should the contract with Seaborne fail we will of course look to make alternative measures. I thank my noble friend for his comments. As I said, the Department for Transport is making a number of contingency plans in the event of no deal. I am certainly not saying that no deal is an ideal situation or indeed one that we want to be in. We are trying to avoid it through getting agreement to the Prime Minister’s deal.