PLT Masthead 430

Masthead Local Govt - Governance and Risk

Ports and good governance

Port 41440953 s 146x219Local authorities that manage municipal ports need to consider and implement the government's new Ports Good Governance Guidance, writes Lara Moore and Ione McGregor.

There are approximately 60 'statutory' ports in England and Wales that are operated by local authorities. These local authority-run statutory harbour authorities are known as municipal ports. Local authorities must accommodate underlying statutory requirements (both in local government legislation and in any specific local harbours legislation) in their approach to management of municipal ports. They should also take account of key industry government guidance.

In our last article 'Any Port in a Storm' we set out some of the fundamental legal considerations for local authorities running municipal ports. Since the date of that article, the key government guidance for local authority ports, the 'Municipal Ports Review' (Opportunities for Ports in Local Authority Ownership: A REVIEW OF MUNICIPAL PORTS IN ENGLAND AND WALES May 2006) has been replaced by the new Ports Good Governance Guidance which was published by the Department for Transport on 5 March 2018.

The guidance is of significant importance to the Industry and in a change to previous guidance 'Part A' now applies to all statutory harbour authorities (SHAs) in England irrespective of port ownership model, i.e. private, trust or municipal ports. The guidance only applies to all SHAs in Wales until the devolution settlement comes into effect in April 2018 after which it will only apply to reserved trust ports in Wales.

The guidance sets out the principles of openness, accountability and fitness for purpose in managing harbours in the broad public interest, and is set out into three main parts:

  • Guidance for all SHAs (Part A) provides guidance on corporate governance, stakeholder engagement, provision of information, safety and other duties, harbour dues and security;
  • Guidance for Trust Ports (Part B); and
  • Guidance for Local Authority Owned Ports (Part C).

Guidance for Local Authority Owned Ports

Part C of the Good Governance Guidance sets out more detailed guidance for local authority owned ports, and should be read in conjunction with Part A of the Guidance. Part C covers aspects of governance, Harbour Management Committees and other issues such financial matters and business planning, reflecting the SHA's position as part of a wider public sector organisation.

Part C is set out into four sections:

  • Section 1 - Corporate Governance;
  • Section 2 - Stakeholder Engagement;
  • Section 3 - Provision of information; and
  • Section 4 - Other issues

Two of the key areas that local authorities should consider in the guidance are:

1. Harbour Management Committees

In line with previous guidance, Section 1 (Corporate Governance) sets out the principle that local authority owned ports should be governed in the interests of stakeholders including the local community. The guidance encourages local authorities to bring openness and additional accountability to port decisions by considering establishing a Harbour Management Committee (HMC). A HMC can also bring more expertise and experience to the port, as a skills audit should be carried out prior to the board members being appointed. Since the previous guidance was published, the British Ports Association has produced guidance on the formation and membership for local authorities that have or are planning to put in place HMCs.

2. Use of Harbour Funds

In our previous article, we highlighted the issues associated with use of harbour funds, where a municipal port is required by its statutory harbour legislation to reinvest all harbour revenue in the harbour. As we explained, if this is the case, harbour revenue should not be used to cross subsidise other local authority services, even if the harbour is making a surplus.

The previous guidance ('the Municipal Ports Review') did recommend the introduction of ‘assured accounts’ (i.e. protected from having surplus funds or receipts from assets sales transferred to other parts of the local authority not connected with the port) and the making of prudent and adequate provision for capital asset replacement and future development. However, it did not make reference to the potential statutory constraints on use of harbour funds.

However, with the increased financial strain that local authorities find themselves under, there has been greater concern in recent years about some local authority ports using harbour funds for non-harbour related purposes (even where this is prohibited by statute). The new guidance now expressly highlights that where local harbour legislation contains provisions relating to the use of the income generated by the statutory harbour authority, this can mean that income from the harbour is only to be used for purposes related to the harbour and that the local authority will be legally precluded from transferring income generated by the harbour for use on other LA provided services.

Under the Harbours Act, local authority owned SHAs are required to submit accounts and reports to Department for Transport in the format required for businesses submitting accounts to Companies House, in the same way that other SHAs are required to. The new guidance makes clear that as part of this, they should be audited by qualified auditors and made available for public inspection. For the first time the guidance also highlights the rights of local electors to make objections to local authority accounts at audit under the Local Audit and Accountability Act 2014 27(1). Such an objection may result in an auditor making a public interest report or applying for a declaration that expenditure is unlawful.

Other guidance

In our previous article we highlighted that a new addition of the Port Marine Safety Code ('PMSC') had been released by the Department for Transport and the Maritime and Coastguard Agency on 3 November 2016. We strongly recommending that the duty holder (usually those members of the local authority, both individually and collectively, who are ultimately accountable for marine safety) and all officers involved in marine safety, should familiarise themselves with the updated PMSC and review any implications for their marine operations. Since our last article, the associated Guide to Good Practice on Port Marine Operations, has also been updated and the latest version (dated February 2018) was released on 27 March 2018. Both documents should be considered in full and can be accessed here (https://www.gov.uk/government/publications/port-marine-safety-code).

Lara Moore is a Senior Associate in the Marine and Transport Team at national law firm Ashfords LLP. She specialises in marine planning, licensing and regulation. Lara can be reached on 07736 295582 or This email address is being protected from spambots. You need JavaScript enabled to view it. (This email address is being protected from spambots. You need JavaScript enabled to view it.).

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