5th Report, 2015 (Session 4): Stage 1 Report on the Harbours (Scotland) Bill

SP Paper 750

Contents

Remit

Report

Introduction

Overview of Committee consideration
Background

The trust port model of ownership
ONS classification of trust ports

Summary of Provisions
Scottish Government consultation

Mediation step in section 31 of the Harbours Act

The Bill: overview of provisions and evidence received

Section 1 – Modification of Ports Act 1991
Section 2 – Orders and schemes relating to harbours

Conclusions

Policy and Financial Memorandum
General Principles

Annexe A
Annexe B

Remit and membership

Remit:

To consider and report on infrastructure, capital investment, transport, Scottish Water, and other matters falling within the responsibility of the Cabinet Secretary for Infrastructure, Investment and Cities; and matters relating to housing and digital infrastructure.

Membership:

Jim Eadie (Convener)
Adam Ingram (Deputy Convener)
James Dornan
Mary Fee
Alex Johnstone
Mike MacKenzie
David Stewart

Stage 1 Report on the Harbours (Scotland) Bill

Introduction

Overview of Committee consideration

1. The Harbours (Scotland) Bill 1 (“the Bill”) was introduced to the Scottish Parliament by Keith Brown, Cabinet Secretary for Infrastructure, Investment and Cities on 18 March 2015.

2. On 24 March 2015 the Parliamentary Bureau, under Standing Order Rule 9.6.1, designated the Infrastructure and Capital Investment Committee (“the Committee”) as lead Committee on Stage 1 scrutiny of the Bill. The lead Committee is required, under Rule 9.4.1 of the Parliament‘s Standing Orders, to report to the Parliament on the general principles of the Bill.

3. As the Bill does not confer any powers to make subordinate legislation, the Delegated Powers and Law Reform Committee did not consider the Bill at Stage 1.

4. The Finance Committee chose not to formally consider the Bill’s Financial Memorandum. The Scottish Government, however, confirmed that it expected that no costs would be incurred on the Scottish Administration, Local Authorities, other bodies, individuals and business as a consequence of the Bill’s proposed provisions. 2

5. On 21 April 2015, the Bureau agreed to recommend to the Parliament by motion a deadline of 19 June 2015 for consideration of the Bill at Stage 1. This motion was agreed by Parliament on 22 April 2015.

6. The ICI Committee issued a call for views on 25 March 2015 which remained open until 22 April 2015. The Committee received five responses to its call for evidence and these are available at Annexe B.

7. Given that there was broad support for the proposals contained within the Bill during both the Scottish Government’s and the Committee’s consultations, the Committee agreed to move straight to oral evidence with the Minister for Transport and Islands (“the Minister”), on 29 April 2015. At that meeting the Minister was accompanied by the Bill Team and a list of those in attendance is attached at Annexe A. The Committee expresses its gratitude to all those who provided it with written and oral evidence.

Background

8. The Policy Memorandum states that the primary purpose of the Bill is “to provide an improved legislative framework for trust ports across Scotland and increase the efficiency and effectiveness of existing procedures and processes for stakeholders.” 3

The trust port model of ownership

9. The following infographic provides further background on trust ports. 4

ONS classification of trust ports

10. The main driving force behind the bill is to reverse a decision by the Office for National Statistics (ONS) to reclassify certain trust ports (that is, those currently with a minimum annual turnover of around £9 million) as public corporations. Whilst the ONS acknowledges that the ports that meet the £9 million criteria operate in an independent environment, they are still subject to an element of public control. It explained—

These ports are all subject to powers whereby the relevant sponsoring body [Scottish Ministers] can choose to enforce their sale (i.e. privatisation) under Section 10 of the aforementioned Act [the Ports Act 1991] and furthermore have the right to a legally defined share of the proceeds from such a sale. The NACC viewed the existence of this power alone as a critical control over the ports' general corporate policy, and therefore Major Trust Ports will remain in the Public Sector (in accordance with the earlier classification review published in 2001). 5

11. At the point of the Committee’s scrutiny, trust ports that met the £9 million criterion were Aberdeen Harbour, Lerwick Port Authority and Peterhead Port Authority. Out of these, the ONS already classifies Aberdeen Harbour as a public body however, it has postponed classification of Lerwick and Peterhead pending confirmation of the Bill. 6

Summary of Provisions

12. The Explanatory Note summarises the two main provisions of the Bill as follows—

The Bill will repeal section 10 of the Ports Act 1991, removing the Scottish Ministers’ powers to require trust ports (over a certain annual turnover threshold currently circa £9 million) to prepare privatisation proposals.

It will also remove the requirement for six copies of a draft harbour revision or empowerment order (and any map to be annexed to the order) to be submitted along with the application for the order. In addition, it will remove the requirement to submit six copies of a harbour reorganisation scheme (and any map to be annexed to the scheme) to the Scottish Ministers. 7

Scottish Government consultation

13. The Scottish Government consulted on proposals for the bill prior to its introduction between 21 August and 12 November 2014. Ten consultation responses were received, with all but one agreeing with proposals to remove Scottish Ministers’ powers to require trust ports to prepare privatisation proposals. All were in favour of removing the requirement to provide six copies of the harbour revision or empowerment order and six copies of harbour reorganisations schemes. 8

Mediation step in section 31 of the Harbours Act

14. During the original consultation period, the Scottish Government also consulted on a third proposal to introduce a mediation step in section 31 of the Harbours Act 1964, which allows harbour users to challenge harbour dues through an appeal to Scottish Ministers. Only four responders, however, were in favour of legislating to introduce such a mediation proposal and therefore it was not carried forward to the bill. 9

15. The UK Chamber of Shipping was still supportive of proposals to include a mediation stage in the bill and reiterated its support during the Committee’s consultation 10 The Scottish Government, however, confirmed that many stakeholders felt that a mediation step for this purpose “could be achieved through non-statutory guidance” and that people need to be aware of the formal appeal process under section 31 of the 1964 act. It confirmed that it would bring forward such non-statutory guidance in due course. 11

16. The Committee notes that there was a mixed response to the introduction of a mediation stage for harbour due disputes using legislation, but also notes that stakeholders expressed an interest in non-statutory measures being in place to develop mediation under section 31 of the Harbours Act.

17. The Committee notes the Scottish Government’s comments that people need to be aware of current processes in place to facilitate harbour dues dispute mediation. The Committee would welcome an update on steps taken by the Scottish Government to better promote current processes and an update on the development of non-statutory guidance on harbour due dispute mediation, currently in preparation.

The Bill: overview of provisions and evidence received

18. The Bill has two principal sections. These are explored, along with the evidence received, in more detail below.

Section 1 – Modification of Ports Act 1991

19. The purpose of Section 1 is to repeal sections 10 to 12 of the Ports Act 1991, to remove Scottish Ministers’ powers to require trust ports (over a certain annual turnover threshold, currently circa £9 million) to prepare privatisation proposals. 12 The Scottish Government considers that this, in turn, will encourage the ONS to reverse its decision to classify these trust ports as public corporations and ensure that any borrowing undertaken will not score on the budgets of the Scottish Government. Section 1 also makes minor amendments to sections 20 and 37 of the Ports Act 1991 to take account of these repeals. 13

20. A SPICe briefing sets out details of the powers to be repealed in each section—

Section 10: To require a trust port authority, which has an annual turnover above a specified amount, to establish a company. The trust port authority must then submit a scheme to Scottish Ministers setting out how it would transfer its property, rights, liabilities and functions to that company.

Section 11: Specifies the annual turnover requirement mentioned in Section 10.

Section 12: Gives Scottish Ministers the power, where a scheme submitted to them by a trust port authority does not meet accord with advice given to that authority, and Ministers cannot modify the scheme to accord with their advice, to make such a scheme themselves. 14

21. The Scottish Government stated that these powers had not been used since devolution and reiterated that removal of these powers would remove uncertainty for ports affected and reaffirm its “support for the trust port model as part of the diverse range of ownership structures in Scotland.” 15

22. The Scottish Government also confirmed that the ONS continued to reclassify trust ports as public corporations, despite assurances from the Scottish Government that it had no intention of using the powers set out above. The Minister’s predecessor therefore made a commitment to bring forward legislation to repeal the powers. 16

23. All those who responded to the Committee’s consultation agreed with the proposals. For example, the British Port Association stated—

To enable growth and development trust ports should have the ability to borrow money commercially without causing budgetary issues for Transport Scotland. As Section 10 is one of the triggers for this classification its removal could therefore take them out of this classification and clarifies their financial status. This is a fundamental problem to which we hope the Bill will contribute a solution. 17

24. The Policy Memorandum confirms that the measures would not prevent trust ports bringing forward a voluntary privatisation scheme under section 9 of the Ports Act 1991. 18 The British Port Authority and Montrose Port Authority also expressed their support for the retention of this provision. 19

25. Whilst it has emerged from evidence that the Scottish Government has not had a guarantee from the ONS that it will reverse its decision following the passage of the Bill, its discussions with the ONS have suggested that it should satisfy its needs on classification. The Scottish Government confirmed how it hoped to resolve the issue—

I hope that discussions will be concluded by stage 2 of the bill, but that is in the hands of the ONS and, potentially, the Treasury. We will share further information with the Committee if we do not get the assurance that the matter will be resolved. All the early indications from the discussions we have had are that, if we legislate as proposed, it should be sufficient to remove the ports from the classification. If issues emerge, they will have to be addressed. 20

26. Aberdeen Harbour currently has proposals for a large redevelopment which could involve considerable borrowing. The Scottish Government explained the consequences if it continued to be classified as a public corporation—

Essentially such classification would mean that the borrowing that a trust port may undertake would count against Scottish Government budgets and be deemed as our borrowing. We would have no control over that and it would affect the public purse substantially. For example, the very exciting proposals around Aberdeen harbour could mean investment of £300 million and a significant amount of borrowing. It would therefore have an impact on the Scottish Government’s accounts and potentially our borrowing. This is only a technical matter of bureaucracy and clarification, and we want to resolve it so that it does not have an impact on our Government’s ability to borrow and spend. 21

27. The Scottish Government advised that a solution was “all the more imperative” given the proposals at Aberdeen Harbour and “on-going investment at the other two ports.” It, however, was unable to put a timescale on how quickly changes are likely to take effect, as this was ultimately in ONS hands. 22

28. The Committee welcomes the policy objectives behind Section 1 of the Bill, particularly the intention to remove uncertainty for those ports affected and reiterate their status as independent of Government control. The Committee acknowledges that this view is shared more widely given the broad support received in written evidence from key stakeholders.

29. The Committee notes that a key driver in enacting this legislation is to ensure that the ONS reverses its decision to classify eligible trust ports as public bodies and ensure that future borrowing by these ports does not score against the Scottish Budget. It notes, however, that the ONS has not as yet provided a guarantee that the legislation will bring about this change.

30. The Committee notes that the Scottish Government expects discussions with the ONS to conclude by the conclusion of Stage 2 consideration of the Bill and requests an update on the outcome of these discussions.

31. The Committee requests an update from the Scottish Government on what contingencies it will put in place to mitigate the uncertain position of the ONS on the outcome of this provision and the consequence of forthcoming investments at eligible ports, particularly Aberdeen Harbour.

Section 2 – Orders and schemes relating to harbours

32. Section 2 of the Bill (“amend Schedules 3 and 4 to the Harbours Act 1964”) removes an administrative requirement for six copies of a draft harbour revision or empowerment order to be submitted along with the application for the order. In addition, it reduces the requirement to submit six copies of a harbour reorganisation scheme to Scottish Ministers seeking confirmation of the scheme, to one copy.

33. The Policy Memorandum states—

With modern technology the submission of multiple paper copies is no longer necessary – it will conserve resources, reduce the impact on the environment and reduce the bureaucratic burden of the application process. 23

34. All stakeholders, including those who responded to the Scottish Government and the Committee’s consultation agreed with the removal of this requirement.

35. The Committee welcomes the provisions in Section 2 of the Bill.

Conclusions

Policy and Financial Memorandum

36. The lead committee is required under Rule 9.6.3 of Standing Orders to report on the Policy Memorandum which accompanies the Bill. The Committee considers that the level of detail provided in the Policy Memorandum on the policy intention behind the provisions in the Bill was extremely useful in assisting the Committee in its scrutiny of the Bill.

37. The same rule requires the lead committee to report on the Financial Memorandum (FM). The Committee notes the Finance Committee chose not to report on the FM.

38. Although the Finance Committee chose not to report on the Financial Memorandum, the Committee is satisfied with the Minister’s confirmation that that the Scottish Government expects that no costs would be incurred on the Scottish Administration, Local Authorities, other bodies, individuals and business.

General Principles

39. Under Rule 9.6.1 of Standing Orders, the lead committee is required to report to the Parliament on the general principles of the Bill.

40. The Committee has made a number of requests for information from the Scottish Government on issues related to certain aspects of the Bill which are set out in the main body of this report. However, the Committee is content that the Bill provides appropriate and proportionate measures to meet its primary purpose.

41. The Committee therefore recommends that the Parliament agrees the general principles of the Bill.

Annexe A

Extracts from the minutes of the Infrastructure and Capital Investment Committee

8th Meeting, 2015 (Session 4), Wednesday 1 April 2015

1. Decision on taking business in private: The Committee agreed to take item 3 in private.

3. Harbours (Scotland) Bill: The Committee agreed its approach to the scrutiny of the Bill at Stage 1.

10th Meeting, 2015 (Session 4), Wednesday 29 April 2015

1. Harbours (Scotland) Bill: The Committee took evidence on the Bill at Stage 1 from—

Derek Mackay, Minister for Transport and Islands, Chris Wilcock, Head of

Ports and Harbours, Pauline McMillan, Policy Manager, Ports and

Harbours, Transport Scotland, and Stuart Foubister, Divisional Solicitor, DLS, Scottish Government.

12th Meeting, 2015 (Session 4), Wednesday 3 June 2015

3. Harbours (Scotland) Bill (in private): The Committee considered a draft Stage1 report. The report was agreed for publication.

Annexe B

List of written evidence

Brian MacIver

British Port Association

Dunbar Harbour Trust

Montrose Port Authority

UK Chamber of Shipping


Any links to external websites in this report were working correctly at the time of publication.  However, the Scottish Parliament cannot accept responsibility for content on external websites.

Footnotes:

1 Harbours (Scotland) Bill, as introduced (SP Bill 62, Session 4 (2015)).

2 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Col 6.

3 Harbours (Scotland) Bill. Policy Memorandum (SP Bill 62-PM, Session 4 (2015)), page 1.

4 Scottish Parliament Information Centre. (2015) Harbours (Scotland) Bill. SPICe briefing, SB 15/22, page 7.

5 Links to ONS Review of the classification of Major Trust Ports (Para 1B), September 2013 and ONS Classification Decision, October 2013.

http://www.ons.gov.uk/ons/dcp171766_328685.pdf

http://www.ons.gov.uk/ons/rel/na-classification/national-accounts-sector-classification/classification-update--october-2013/monthly-update--october-2013.xls

6 Harbours (Scotland) Bill. Explanatory Notes (and other accompanying documents) (SP Bill 62-EN, Session 4 (2015)), page 6.

7 Explanatory Notes, page 3.

8 Harbours (Scotland) Bill. SPICe briefing, page 4.

9 Harbours (Scotland) Bill. SPICe briefing, page 4.

10 UK Chamber of Shipping Written Submission.

11 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Cols 2-3.

12 Policy Memorandum, page 2.

13 Policy Memorandum, page 2.

14 Harbours (Scotland) Bill, SPICe briefing, page 3.

15 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Col 3.

16 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Col 4.

17 British Ports Authority Written Submission.

18 Policy Memorandum, page 2.

19 British Ports Authority and Montrose Port Authority Written Submissions.

20 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Col 5.

21 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Col 4.

22 Infrastructure and Capital Investment Committee. Official Report, 29 April 2015, Cols 5-6.

23 Policy Memorandum, page 2.

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