Official Report: Minutes of Evidence

The Chairperson (Mrs Erskine): I welcome to the Committee Ms Sian Kerr, director of transport planning and policy, Department for Infrastructure; Mr Seamus O'Hare, head of gateways branch, Department for Infrastructure; and Mrs Adele Campbell, gateways branch, Department for Infrastructure.

Do members agree to the evidence session being reported by Hansard?

The Chairperson (Mrs Erskine): Thank you for coming to the Committee today. We really appreciate your time this morning. As is usual, you will have five minutes to make a brief opening statement — we have some written evidence — and then we will come to members' questions. Thank you.

Ms Sian Kerr (Department for Infrastructure): Thank you, Chair, for inviting us here today to brief the Committee on the ports policy review. As you mentioned, I am joined by my colleagues Seamus, who is head of the gateways team, and Adele, who works in the gateways team. If you are content, I will begin by giving an overview of our ports and why we are doing a review of ports policy. Then I will talk specifically about the main areas that have been identified for further consideration.

Our ports play a vital role in our local economy and are important regional drivers of economic growth. Not only are ports the main gateway for our imports and exports, but we are heavily dependent on them for our day-to-day provisions and supplies. Four out of the five main commercial ports — Belfast, Foyle, Warrenpoint and Coleraine — are known as "trust ports". The fifth, Larne port, is privately owned. Trust ports are independent statutory bodies. Each is governed by unique statutes and controlled by a local independent board. The chair and members of the Belfast, Foyle and Warrenpoint boards are appointed by the Minister for Infrastructure following a public appointments process. There are no shareholders or owners, and any surplus is reinvested in each port.

It has been several years since the Department reviewed its policy relating to ports. It is fair to say that the context in which our ports now operate is very different from that a few years ago, with issues such as climate change playing a significant role in future port plans. That being the case, it was felt useful to revisit the ports policy and to explore the opportunities that may exist to improve the economic prospects of our ports and, in turn, the local economy. Following engagement with our trust ports, several areas have been identified as starting points for further consideration. Those areas include the Office for National Statistics (ONS) classification, extended commercial powers for trust ports, the harbour order process and new marine safety measures.

In April 2005, our trust ports were reclassified by the ONS from private non-financial corporations to public non-financial corporations. That is an ONS classification only. The reclassification has no legal effect on the statutory powers, functions or ownership of the trust ports. The main issue that the classification change created was an accounting one. It meant that any borrowings by trust ports, irrespective of where the funds came from, now had to be counted against the Department's capital departmental expenditure limit (CDEL) budget. That effectively means that trust port borrowings need capital budget cover from the Department, so that borrowing is competing with other DFI projects, such as road schemes, for scarce capital resources. The proposed solution to changing the ONS classification will require the removal of some of the legislative controls exercised by the Department.

Extending the commercial powers available to the ports appears to be a relatively straightforward issue. It received significant support in the 2006 ports policy consultation and during the consultation on the strategic framework for Northern Ireland ports in 2014. Given the passage of time and changing circumstances, the issue would benefit from further consideration. If greater commercial powers are granted, it will be important to ensure that appropriate safeguards and practices are in place, so that the Department can ensure that ports are efficient and competitive, while still operating in the public interest.

On the harbour order process, presently only the Department can make harbour order changes for any harbours. The orders are all subject to affirmative resolution in the Assembly. We are considering amending the process of how harbour orders are made by bringing them into line with the process used in GB, where the majority of harbour orders are initiated by harbour authorities. That means that the initial drafting and work is done by the applicant and not by the Department. Simplifying the legislative process around amending harbour orders for statutory harbour authorities that are not regionally significant would speed up that process. That simplification would be consistent with GB and would make a harbour order revision a less time-consuming and costly process for the Department.

Lastly, on marine safety measures, the ports — in particular, the Port of Belfast — have written to the Department about the general power of direction that GB ports have under the Marine Navigation Act 2013. No similar power exists for trust ports here. The ports all want that power, which, they say, will enable them to direct ships and improve safety at our ports.

We have held pre-consultation engagement with our trust ports. Comments and feedback from the ports have been positive and have informed the development of the consultation. We ask you to note the ongoing work to inform a future consultation and seek your involvement in the consultation process. If there is support in the consultation for progressing some of the issues that have been identified, new legislation will be required. The Committee will, of course, be included in the process around any legislation that may be required following completion of the consultation.

I hope that that overview has been helpful. We are happy to answer any questions that you may have.

The Chairperson (Mrs Erskine): Super. Thank you very much.

What impact or benefits would that have for the operations of the ports?

Ms Kerr: From the ONS reclassification?

The Chairperson (Mrs Erskine): The ONS classification and the marine safety measures.

Ms Kerr: OK. I will pick up on the ONS reclassification, and then I will ask Adele to come in on marine safety.

The impact of the ONS reclassification is really on the ability to borrow. Belfast port has plans to improve its facilities for the purposes of helping the cruise sector and the renewables sector. That will require borrowing. At the minute, that is not enabled because we have not got the CDEL cover, as you know, due to the Department's financial situation and how other projects have asks on the capital budget. That is the main issue with the ONS classification.

Adele, do you want to say anything on marine safety?

Mrs Adele Campbell (Department for Infrastructure): In 2013, the Marine Navigation Act was brought in to amend various legislation throughout all ports. Sections 5 and 6 gave ports the power of direction over vessels. However, it does not apply to Northern Ireland because it amends only the Harbours Act 1964. Therefore, when the ports have had audits under the port marine safety code, it has been raised as an issue, and it is now on the risk register that they need to have that legislation brought in to allow them to direct vessels around the ports.

The Chairperson (Mrs Erskine): What ports in Northern Ireland are not trust ports? Will there be differentiation for those ports?

Mr Seamus O'Hare (Department for Infrastructure): The market in Northern Ireland is slightly different from the rest of the UK. The only private port is Larne. There will be no differentiation. We seek to change the status of the trust ports and free them up commercially. There are no commercial restrictions on the port of Larne, so there is no conflict between that port and the trust ports.

The Chairperson (Mrs Erskine): What about marine safety? Will they have a lesser —? I do not want to use that term. How will marine safety be impacted?

Mr O'Hare: Ironically, the harbour order for the port of Larne is from 1998, and it is the only harbour that has the power of direction that the trust ports seek. It will have no impact on safety at the port of Larne, as it already has what is required.

The Chairperson (Mrs Erskine): OK. I will move to members' questions.

Mr Stewart: Thank you very much for the presentation. What is your thought process on the legislative time frame should it take the direction of travel that you wish it to have? I assume that, ideally, it will before the end of the mandate. When might we see a first draft?

Mrs Campbell: We still have to finalise the consultation with the Minister, and then that will go out for a 12-week consultation. That will take us to early next year. We have a slot in the legislation programme for 2025-26. We admit that we will be up against it with that time frame, but we are hopeful that we will be able to hit it. We will have a bit of legislation, no matter what, for marine safety, because that has to be brought forward. Depending on what the consultation brings in and the ideas that come in, other legislation may be added to it. Hopefully, by March, we will be able to give something to the Committee.

Mr Stewart: Sian, am I right in saying that there was a previous version of this and that a consultation was carried out?

Ms Kerr: Yes.

Mr Stewart: I assume that it is still reasonably relevant because most of the space has not changed much. Can you talk me through the consultation responses that, at that time, were potentially negative or at least constructively critical?

Ms Kerr: It is a while ago. [Laughter.]

Mr Stewart: Maybe you can give it to us in writing.

Mr O'Hare: I will pick that up. The consultation was in 2006.

Mr Stewart: Yes, I knew that it was a while ago.

Mr Boylan: A wee while ago now.

Mr Stewart: Yesterday in Northern Irish terms.

Mr Boylan: It is a memory test.

Mr O'Hare: You are right that the issues raised in the responses are very much still relevant.

Mr Stewart: Exactly. It has not really changed.

Mr O'Hare: I do not recall any negative responses to the proposed changes. Post consultation, a legislative process was brought forward and taken to the Committee at that time. In 2009, we got as far as having draft legislation, but there was not enough time to bring it through as the mandate finished in 2010. The measures had broad support from the Committee at the time, the ports and port users. I am not aware of any critical voices.

Mr Stewart: OK. There is no reason to assume that there will be any untoward feedback this time. That is grand.

You referred to ports in other areas of the UK. Can you give an example of best practice? Where similar changes have taken place, what have been the benefits?

Ms Kerr: I will start and then bring in Seamus. As was alluded to, we have a higher proportion of trust ports than other areas. In GB, there is a higher proportion of commercial ports, and there are some trust ports. When the ports were reclassified, it brought them into the same situation as us. Scotland took action to change the legislation, and the ports have been reclassified by ONS back into the private classification.

Seamus, do you have any more detail on that?

Mr O'Hare: Departments in Scotland and England faced the same issue with trust ports. In 2015, Scotland brought in new legislation that removed it. If you look at the debates that happened there when that legislation was going through, you see that the port of Aberdeen wanted to make a significant investment of £400 million in offshore renewables. The Scottish Executive said that they could not afford it and did not have the money because of competing priorities. That was the driver for them to change the status, and they introduced the necessary legislation.

In England, there is not the same driver because there are not as many trust ports. The Department for Transport (DfT) is the sponsoring body, and, from the latest accounts, it has a budget of £22 billion. Therefore, it is probably not as hard for it to find the financial cover. I am not aware of whether any of the trust ports are doing such significant investments at the same time. That is the situation in the UK.

Mr Stewart: I have a question arising from that, but I will come back to it in the end, unless you want me to ask it now, Chair.

The Chairperson (Mrs Erskine): Is it quick?

Mr Stewart: It is very short. Will that have any impact on how the board of the Belfast Harbour Commissioners is set up or how it functions?

Mr O'Hare: When it comes to the legislative change that is needed, at the moment, the Minister appoints all board members. Changing the ONS classification would mean that that position would need to change to the Minister appointing a minority of the board.

Ms Kerr: It would not change how the board functions.

Mr O'Hare: It would not change anything else to do with the business.

Mr Stewart: That is fine. That is all I needed to know, Chair.

Mr Boylan: I think that all the questions have been asked. That effective questioning has worked. [Laughter.]

When we legislate, we have to make sure that we get it right. It was a number of years ago, and, Seamus, you should do quiz questions, if you can remember that far back. The thing for me about legislative change is that there is a requirement to take what you often hear being referred to as the "carrot-and-stick approach" when you introduce new regulations. My main question is this: what are the main benefits that will support the trust ports across all the areas? You outlined some of the things, but, primarily, what would the benefits of the legislation be when it comes to competitiveness, safety or anything else?

Ms Kerr: The ports are assets for Northern Ireland. They play a very important role. In looking at it, we have to be careful about balancing the ability to be players in a commercial market, protecting the public interest and safeguarding Northern Ireland assets. That is very much front and centre when it comes to how we are taking forward the review. Yes, on one hand, the ONS classification is about not constraining the ports around worthy things that they want to do that will ultimately help Northern Ireland; at the same time, however, we have to make sure that the public interest is protected.

Mr Boylan: When it comes to legislation, you mentioned all the rules around consultations. John indicated that a lot of preparatory work has been done. We are looking at a time frame that will be within this mandate, yes?

Ms Kerr: Yes.

Mr McReynolds: Thank you, everyone, for coming in today. I am trying to get my head around all of it. What are we looking to transfer to that trust port? What model are we looking to transfer it to?

Ms Kerr: The trust port will still be a trust port. There is no change of status. It will still be a trust port. The issue is one of accountancy rules and a technical change. It is about how its borrowing is reflected in the Department's books. That is it. It is about the impact of that technical change. The day before the change, it could borrow and it did not show on the books, but, the next day, when it was looking to borrow, it was competing against other capital pressures. That is the issue when it comes to the ONS classification. The reason for the reclassification was that ONS deemed that there was a level of departmental control that meant that it should be on the books. The issue is now about how we do not remove but lower that control, so that it enables it to not be on the books and frees up its ability to borrow again.

Mr McReynolds: You mentioned positive feedback that you had received so far. You said to John that there had not been much negative feedback. Have the ports been calling for that for a while?

Ms Kerr: Yes.

Mr McReynolds: OK.

Ms Kerr: There was an attempt before the one that we talked about with John. We looked at the matter before. It has been a consistent ask, and, certainly, work had begun on it in the absence of Ministers, with the thinking, "Look, maybe now is the time to look at it again". When we looked at the future plans for Belfast port, we saw that there would be a clear call on the budget from the Department, and we were aware that, with everything else, it would be difficult. We were keen to look at it again. The ports have worked with us to improve our understanding of the impacts, of where the room for manoeuvre is and of what their priorities are versus the things that we can leave aside.

The issue becomes that we will probably get only one chance to legislate. We have tried several times before, and it is about trying to work out what we definitely want to do in the legislation and what else is worthy of that slot.

Mr McReynolds: At this early stage, does climate change factor into the thinking at all? Concerns have been raised with me about the quality of some of the fish in Belfast lough and shellfish specifically. Does that factor into it?

Ms Kerr: That is not part of it at all, but climate change is, because, in the case of Belfast and probably Foyle, the ports see the opportunities that are in offshore wind, for example, and that bringing together the turbines in the port is critical for Northern Ireland to meet its climate objectives. They are very much trying to play their part in providing those facilities; those ideas are very much the ports' future plans. Given the nature of the port, that is an opportunity that they can avail themselves of, so it is a good thing.

Mr McMurray: Thank you for coming along. I am trying to get my head around some of the information. If we remove legislation, will we lose oversight of the ports?

Mr O'Hare: In the measures that we are looking to change — members have a power of direction in this — there will be a loss of some of the Department's oversight powers. However, when we are looking to free the ports up commercially and free up departmental budgets and remove that ONS link, a balance has to be struck between, on the one hand, the desire to enable the ports to be successful and for businesses to operate commercially and, on the other hand, the public interest. Although we are removing some controls, the consultation touches on all the things that can be introduced. There are remaining controls, but the consultation touches on all the things that could be done.

The Minister is very conscious of public accountability, but we see accountability as being linked very much to transparency, so trying to make the operations and the ports' future plans as transparent as possible and to open them up to the widest audience possible at the earliest stage will help to improve public accountability. We do not necessarily think that changing the controls will make accountability worse, but some things that are there will be removed.

Mr McMurray: Is it OK to ask three questions?

The Chairperson (Mrs Erskine): I will decide. [Laughter.]

Keep going. That was one question.

Mr McMurray: I get that, and that is all good. My colleague Peter touched on the environmental impact. If you removed the controls to increase the commercial side, would that not invariably have an impact on certain environmental and climate points, if you get my meaning?

Ms Kerr: Water quality is outwith this discussion, but, if we look at Belfast port, we see that it has very much embraced the need to decarbonise and play its part in the wider Northern Ireland climate imperative. For example, it has already invested significantly in its fleet. We are interested from a transport point of view in the fact that it has invested £1 million in making its fleet low-carbon, and it recently published an environmental, social and governance (ESG) report outlining all the work that it is doing to help environmental and social issues. It is playing its part.

The changes that we are talking about are things like our appointing a minority of the board rather than the whole board. Each board has councillor representation, so there is already that representative impact on the board. It is things like that that we are looking to remove. It is a balance deciding which is the greater good: removing some of the controls or being able to access the borrowing. We cannot have both.

Mr McMurray: Lastly, you touched on public interest a few times. Some ports operate in close proximity to residential areas. They are the fabric of certain towns, if that makes sense. How will the language about removing legislative control etc impact on the operations, which will then impact on the people who are part of those communities? How will they feed into it? How can they expect to interact with the legislation?

You touched on the transparency. It is all good, but it is about the practice of it too, if that makes sense.

Ms Kerr: This is really important: we are not removing all controls; we are looking at a couple of specific controls that we need to lower. That comes from the experience that we gained from Scotland, where removing those things was to enable the reclassification of ONS. I will just bring Seamus in.

Mr O'Hare: Yes. It is difficult to talk about. We are not removing all the controls. The controls that we have in place are limited. We have talked about one that is about appointing a minority to the board. Obviously, it is difficult, because you have not seen these, but I will just run through them. The other one is the power of direction that the Department has over activities in the port. That was introduced in 2002 but has never been used. The other one is, effectively, the power to privatise — the power to enforce a sale. Those are the only three controls that we are looking at. They are not necessarily ones that are linked to the usages that you mentioned on involvement with the community and such things.

One of the benefits of the trust port model overall, if you look at it, is the fact that you do not have private shareholders. They can take that wider view and do things that a private company would not necessarily see as making commercial sense, because they have that wider remit in public accountability.

Mr McMurray: OK. Thank you.

The Chairperson (Mrs Erskine): Are you content?

Mr McMurray: Yes. Certainly.

Mr Durkan: Thanks to the team for coming in. A lot of what I might have asked has been touched on. I am glad to hear that just some legislative controls are being removed. The way that it was presented to us was as though it is about the removal of legislative controls; it did not say "some". Obviously, I share the concerns about that that some other members spoke of. You can allay those concerns, and you might have already done so, but there are worries that communities as well as Committee members will have.

You spoke of ports doing their bit and going green and what have you. They talked about their own fleets, but, at the same time, those ports are maybe taking in hundreds, thousands or millions of tons of coal and things like that. They can go green and say, "We are a carbon-free port", but then the coal company or whoever will just buy a yard that is as close to the port as possible and therefore possibly closer to where residents live, so there are always implications like that.

There are no free ports in Northern Ireland: is that right? Has the current classification been a barrier to that, and is that driving any of the change?

Mr O'Hare: There are no free ports. Obviously, the free ports proposal has disappeared as far as Northern Ireland is concerned. It has been subsumed somewhat into the enhanced investment zones, as I understand it.

There were substantial discussions with the ports here, but the trust port status had nothing to do with that. It just seemed that DOF was in the lead with the discussions with Treasury on free ports. Those discussions seemed to get bogged down in the detail, so trust port status had nothing to do with free ports and the fact that they did not have any here.

Mr Durkan: You talked about the financial implications or implications for a departmental budget and how that might happen. Could you give examples of when that has been a problem for the Department?

Mr O'Hare: Going back in time and history, it has maybe not been as much of an issue, but, just two years ago, we turned a port down for a loan that it was looking for and entitled to get through the legislation. The Department did not have budget cover for that. Again, likewise, last year, there was a substantial request for funds, and the Department just had to say, "No, sorry. We do not have the money to cover this." There are practical examples of where we turn ports down and say, "Sorry, no. You cannot have that money."

Mr Durkan: Does the Department derive any income from our ports, and will extending their commercial powers enable the Department to get more out of them?

Mr O'Hare: The ports have the ability to borrow money from the Department, so ,obviously, if they borrow money, it will be repaid.

Mr Durkan: The ports probably have more money than the Department. Can we borrow money off them? [Laughter.]

Mr O'Hare: Belfast, for instance, has some budget cover for some borrowings, but it did not borrow specifically from the Department. That is the anomaly in it. Belfast went to a bank and borrowed money, but the Department had to provide budget cover. The Department got nothing out of that. Nothing was paid back, although, when Belfast pays it back, the Department can draw down that money again. The Department has no commercial interest in the ports.

Ms Kerr: There is something important to say about that. We talked about the cruise capacity that the ports want to build up and the question around renewables. Those all contribute directly to the Northern Ireland economy. The opportunity may not come straight back to the Department, but the benefit to the economy is significant. The ability to grow that is a help not only to the economy but for the Executive's wider goals on decarbonisation and growing tourism, for example. So, not directly, but, on the whole, yes.

Mr Durkan: Finally, are there any current legislative impediments to cross-border collaboration? I am a neighbour of Foyle port, and Greencastle is just across the lough. I know that bits of joint work have gone on there. Might this present an opportunity to enhance that?

Ms Kerr: Foyle is a great example, where you have ports on either side of the border. More widely, for example, Belfast is looking to work with Cork on a potential Shared Island Fund bid. There are opportunities. The cruise business, for example, could be looked at more holistically. The fact that ports are around means that we may be able to look at different cruise offerings around the island and so on. There are opportunities for sure. When it comes to renewables and wind, given the location of Belfast and Foyle, the opportunity to work with the UK and Ireland is there. So, yes, there are opportunities there.

Mr O'Hare: The proposal for enhanced commercial powers the last time included one to allow that sort of financing, so you could get involved in a project in the Republic of Ireland as well as in the North. That was included in the draft legislation the last time. That will certainly be looked at again where the enhanced freedoms are concerned.

The Chairperson (Mrs Erskine): OK. Thank you. Cathal, quickly, please.

Mr Boylan: I will be quick, Chair. We discussed this and talked about going out to consultation. Belfast had big local area plans. This will be a major asset and opportunity for Belfast. In light of all the questions that have been asked, we need to go out to consultation and give people an opportunity. There are good opportunities, but, when you legislate, you need to make sure that checks and balances are always there. That is the important thing. Rather than ask a question, I will make the point that we need to ensure that councils, especially those that are impacted, engage with the process.

The Chairperson (Mrs Erskine): May I clarify this point: where do ports borrow from?

Ms Kerr: If we had budget cover, a port would potentially have the option to borrow from us. It can also borrow privately. In either case, the cover has to come through our budget. There is the very real scenario where, as Seamus mentioned, a port could look to borrow from a bank but the amount that it needs to borrow still has to show in our budget.

The Chairperson (Mrs Erskine): Just so I am clear, what would the risk of those changes be to the Department?

Ms Kerr: The risk with it not happening is the fact that we are not able to provide budget cover for a port's plans. The risks with it happening are limited.

Mr O'Hare: There is no financial risk. The risk comes on the side of the few controls that we are removing. Is there a view that that would reduce public accountability, if it cannot be addressed in some other way? You may want to call that a risk, but the legislative process and consultation will be more than capable of handling that.

The Chairperson (Mrs Erskine): From what I hear today, it seems like all ports have a real willingness to be able to borrow and to do this.

Mr O'Hare: The ports operate commercially. The way that government financing works does not really sit with a commercial business. The Government need to budget in advance in order to know exactly what they will spend this year; the ports would argue that they need to be a bit more agile than that. If they need to purchase a piece of land or whatever, government accounting rules are not really flexible enough for the way that a port would ideally like to operate.

The Chairperson (Mrs Erskine): Members, everybody is content. Thank you very much for your evidence today. We really appreciate it, and we look forward to scrutinising the legislation as it comes forward.

Ms Kerr: Thank you.

The Chairperson (Mrs Erskine): Thank you very much.