Executive Summary
National Audit Office Report
Background
1 Our report focuses on how the Maritime and Coastguard Agency
(the Agency) has responded to growth in the UK registered merchant
shipping fleet, following a government drive to increase its size.
The Agency is an executive agency of the Department for Transport
and is part of the UK Maritime Administration. Its principal
responsibilities are: promoting and enforcing high levels of
maritime safety and security; preventing pollution from ships; and
maintaining the quality of ships on the UK Ship Register anywhere
in the world. It does this through its own in-depth surveys of some
aspects of UK vessels, its assurance of the work of independent
bodies such as classification societies in surveying other aspects
of UK vessels, and general inspections to check that UK vessels
comply with all relevant standards. It also monitors the quality of
foreign ships visiting UK ports; maintains a register of seafarers
qualified to UK standards; and issues certificates of competency to
seafarers who qualify in the UK.
2 In 2000, the Government introduced tonnage tax as part of a
package of measures designed to reverse the long-term decline in
the UK registered merchant shipping fleet. Tonnage tax allows a
company operating a vessel controlled from the United Kingdom to
opt to pay tax on the basis of its tonnage rather than the profit
on the vessel’s trading activities. Since then the number of
merchant vessels joining the UK Ship Register has increased
substantially, reversing the decline in the UK trading fleet and
changing its character with implications for the volume and
location of the Agency’s work.
- By the end of 2007 the UK registered merchant fleet had grown
from 1,050 to 1,518 vessels. Of these, 646 vessels were trading
vessels compared with 417 vessels in 2000.
- Ships are larger, with the average gross tonnage increasing
from almost 11,000 gross tonnage to over 19,000 tonnage.
- The trading pattern has changed: over half of the fleet did not
visit a UK port in 2007 against a third in 2000. The Agency carried
out one quarter of its survey and inspection work for merchant
vessels overseas in 2007-08 compared to 5 per cent in
2000-01.
- The Agency issued 4,722 Certificates of Equivalent Competency
to seafarers trained overseas in
2007-08 compared with 3,244 in 2003-04, an increase of 46 per
cent.
3 The rate of growth in the fleet slowed to 10 per cent in 2007,
compared with 40 per cent between 2001 and 2003 and future growth
is vulnerable to factors outside the Agency’s control. Some
shipping companies told us that they are deferring decisions on
whether to flag to the UK until a European Union review of tonnage
tax regimes and proposed legislative changes affecting the terms
and conditions of seafarers working on UK registered ships
are resolved.
Key findings
4 This report is not an evaluation of the success of the UK’s
merchant shipping tax policy, but evaluates how the Agency has
handled associated growth in the merchant fleet while continuing to
assure the quality of the UK flag. Following the drive to increase
the UK registered merchant fleet, the Agency faces significant
challenges as its capacity to meet ship inspection targets is
stretched; international competition for skilled mariners
intensifies; and competing flags improve their performance, eroding
the UK’s quality advantage.
On planning for and responding to growth in the UK Ship
Register
5 Increasing workloads and shortages of marine surveyors mean
that the Agency needs to improve its planning of work and
resources.
- Prior to the introduction of the tonnage tax in 2000, the
Agency did not make specific plans for handling the workload
associated with potential growth. The Agency responded as growth in
the fleet increased its workload by implementing a series of
measures such as delegating more of the survey work related to the
construction of a vessel to classification societies. It still
retains in house the survey work related to safety standards and
all the inspection work. Since 2000, it has conducted more surveys
and inspections and met or exceeded most of its targets for these
with fewer marine surveyors (around 160) than it employed during
the 1990s (180). However it missed some of its targets for
inspections of UK vessels for the first time in 2007-08, and
expects to miss them again in 2008-09. Failure to meet its targets
will increase the risk that UK vessels which do not comply with
regulations operate without detection in UK ports and waters.
- The Committee of Public Accounts recommended in 2002, that the
Agency should gear recruitment and training strategies to meeting a
potentially higher demand for well-qualified surveyors. That demand
has materialised and increasingly the Agency is carrying vacancies
for marine surveyors. The pool from which it recruits surveyors is
diminishing and there is increasing competition for suitably
skilled candidates.
6 The Agency has consistently failed to achieve full cost
recovery from fees to owners for its survey work.
On the quality of the UK flag
7 There are signs that the quality advantage of the UK flag,
which came from its high standing in international rankings, is
starting to erode, even though the Agency’s strategy is to attract
quality ships, and it has increased the proportion of surveys and
inspections carried out on UK registered vessels. Increasingly the
UK is competing with other Flag States to attract merchant ships to
the UK flag. The proportion of UK vessels detained overseas because
they are not fit to go to sea remains amongst the lowest for any
flag state, but the rest of the world is catching up. Overseas
administrations in the North Atlantic trading area, the main
trading area for UK flagged vessels, are finding a greater
proportion of UK merchant vessels with shortcomings compared with
international standards (known as deficiencies). This increase has
been greater than for other flag states.
8 Agency surveyors generally identify more deficiencies during
their general inspections of UK vessels than overseas inspectors.
But the opposite is true of pollution-related deficiencies. Ships’
masters were positive about the standard of Agency services but
owners had mixed views about the quality of service they
receive.
Conclusion on value for money
9 The Agency did not plan how it would handle the growth in the
UK merchant fleet prior to the introduction of the tonnage tax. As
growth materialised it relied largely on delegating more survey
work to the classification societies and its existing staff
resources. The level of these resources had not changed over the
years in line with the decline in the fleet. As the fleet
increased, the Agency used its staff resources more efficiently.
Until recently it had met its targets for inspections and its plans
for surveys, but it is now struggling to meet its inspection
targets. The Agency has maintained the quality of the UK flag in
terms of the accident rate for UK merchant vessels and the
proportion detained overseas because of shortcomings relative to
international standards. But its quality advantage in its main
trading area – the North Atlantic – has been eroded as other flags
have improved and overseas inspectors are finding more defects on
UK flagged vessels. Despite these challenges, the Agency’s
achievement in supporting the growth of the merchant fleet without
significant extra resources has been an efficient use of taxpayers’
money.
Recommendations
On growing the flag
10 The Agency did not have a strategy in place to deal with the
potential increase in the UK registered merchant shipping fleet.
Given continued change in the growth and nature of the worldwide
merchant fleet, increased competition from other flags and mixed
customer perceptions of the service they receive from the Agency,
we recommend that the Maritime and Coastguard Agency:
- assesses the prospects for the size and composition of the UK
fleet over a rolling five year period, and develops regularly
updated plans for carrying out its core responsibilities as a flag
state which consider the likely range of scenarios;
- improves customer service, particularly for the operators and
owners of smaller vessels by:
- customer services managers making themselves known to, and
meeting at least annually with, all significant operators assigned
to them;
- gathering feedback from customers on standards for survey,
inspection and registration activity, for example by using
electronic survey methods similar to those employed in this report
to gather the views of ships’ masters, and take account of the
feedback received; and
- allowing ship owners and operators to preview electronic
versions of ships’ registration certificates which the Agency
proposes to issue to give them an opportunity to check for
errors.
On making better use of marine surveyor
resources
11 Higher workloads and vacancies for surveyors contributed to
the Agency missing its targets for inspections in 2007-08. A
competitive labour market in the wider shipping industry makes it
more difficult to fill vacancies. We recognise the need for the
Agency to maintain a credible in-house survey capacity, but it is
also important that the Agency delegates sufficient survey work for
it to be able to handle the remainder effectively itself without
compromising its inspection efforts.
The Agency should:
- develop a recruitment strategy to fill its current surveyor
vacancies, aimed at filling surveyor posts at all levels of
experience, including a graduate recruitment scheme;
- make effective use of surveyors’ time by seeking to schedule
survey work in advance through liaison with ship owners and
operators;
- in the face of difficulties in recruiting and retaining enough
skilled surveyors to meet its workload, the Agency should adopt a
strategic method for delegating more survey work to classification
societies, rather than using delegation to cover gaps as they
arise.
On cost recovery
12 Survey costs have not been fully recovered. Within limits
imposed by regulations and HM Treasury guidance, the Agency should
work with the Department for Transport to review survey and
certification fees regularly and set them at levels more likely to
achieve
full cost recovery.
On improving the quality of the UK flag
13 The gap between the quality of UK flagged vessels and those
of other flags is narrowing. The Agency should:
- use information from its own survey and inspection database and
international databases to monitor differences between the results
of its own and other administrations’ inspections of UK registered
vessels, so as to highlight deficiencies identified by overseas
inspectors which the UK does not appear to pick up;
- analyse and advise surveyors on the reasons for increases in
the deficiency rate of UK vessels in the North Atlantic trading
area;
- integrate those data systems which will make it easier to
identify risk trends and patterns, so
that the Agency can target its survey, inspection and assurance
activities; and
- increase the proportion of inspections of UK merchant vessels
which are performed on high risk vessels.
14 The Agency assures itself of the quality of procedures and
practices of classification societies, but performs limited
monitoring of the outcomes of their work. The Agency should
highlight those deficiencies found during inspections of detained
or heavily deficient UK vessels, which classification societies
should have picked up during a recent survey, to supplement
existing arrangements to assure the quality of societies’
work.