Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Memorandum by the Freight Transport Association (IT 121)



  FTA welcomes the Committee's inquiry into the Transport White Paper. This is the first formal statement of national transport policy for nearly 20 years and comes at a vital time for industry as its competitive position is being eroded by global events outside its control. Transport policy is an area where Government action can make a real difference to reducing the overheads and inefficiencies that industry has to bear.

The Freight Transport Association

  The Freight Transport Association represents the transport interests of 12,000 British businesses, ranging from small family firms to multi-national, blue-chip companies. All members have a common interest in the efficient movement of goods regardless of mode. FTA members operate over 200,000 heavy goods vehicles, about half the total number of lorries on the road, and are responsible for more than 90 per cent of the freight carried on Britain's railways. FTA also represents the interests of exporters using deep-sea container shipping and air cargo services.

  FTA welcomes the White Paper as a much needed strategic vision and statement of Government priorities. However, we do not agree with all of its proposals and reasoning and we do not believe that its policy initiatives can make the required difference to congestion levels and predicted traffic growth forecasts in the short term.

  Most of White Paper's proposals are likely to take effect in the long term, especially those requiring primary legislation. In the meantime traffic levels on the country's road and rail networks will continue to increase with consequent delays and inefficiencies to freight movements. This will increase the costs of distribution and transport for British industry and weaken its competitiveness at a time of increasingly difficult trading conditions.

  FTA has identified over 140 separate actions in the White Paper that would affect the transport of freight. We recognise that this is a high level document and that the detail of specific initiatives will be the subject of separate consultations and supplementary statements. Nevertheless, many of these proposals raise immediate concerns and questions regarding their effectiveness in tackling traffic congestion and environmental problems and their effects on industry's supply chains.


Fuel Duty

  The Government restated in the White Paper its intention to continue real increases in fuel duty to help its carbon dioxide reduction targets (paragraph 4.121). The message to goods vehicles operators is clear, that the tax burden is going to increase with the intention of lowering emissions by a combination of more efficient utilisation and better technology.

  In essence, the Government has not thought this approach through. The scale and frequency of the increases are so great that no operator can possibly make sufficient improvements in fuel efficiency to keep pace with the rising cost of fuel, which is the second biggest cost item in running a commercial goods vehicle. The means of improving efficiency inevitably involve investment, in equipment, new vehicles or driver training. The fuel duty escalator is removing much of the cash available in firms which could otherwise be invested in to invest in such measures.

  For example a typical small business (turnover about £0.75 million) operating 10 38-tonne goods vehicles would have been spending about £207,000 a year on fuel up until the date of the last Budget announcements in March of this year. Following the Budget and its further escalation of fuel duty the fuel bill for this company would have risen to about £226,000 a year, an increase of £19,000. This additional tax is on top of the existing levels of tax raised from each vehicle that currently stands at £22,000 a year. This sum needs to be found within the current budgets of the business with immediate effect, since fuel duty increases are normally applied within a few hours of the Chancellor's Budget statement. This is in contrast to other business taxes, which are levied on profits, are assessed periodically and levied annually with notice given to pay.

  The sums involved should be contrasted with the cost of various environmental improvement measures:

    —  Equip a third of the fleet with a catalytic converter/particulate trap

    —  Cost: 3 vehicles @ £5,000 per converter = £15,000

    —  Train each driver in defensive driving with refresher course

    —  Cost: 10 x 1 day course at six monthly intervals @ £80/day = £1,600

    —  Inspect and test each vehicle for exhaust gas emissions and related performance items, three times a year

    —  Cost: 10 x thrice yearly inspections @ £225/vehicle = £2,250

    —  Total cost = £18,850

    The fuel duty escalator is an unfair, ineffective and highly aggressive form of taxation. The Select Committee should challenge the Government to justify the effectiveness of this policy to achieve its environmental objectives given the demonstrable damage that is being caused to businesses and the negligible effect on traffic levels and carbon dioxide emissions.

Review of Vehicle Excise Duty

  A promised review of the basis for setting rates of vehicle excise duty (VED) is already underway (paragraph 4.126), with the stated intention of ensuring that heavy goods vehicles cover their environmental costs. Whilst industry accepts the need for its vehicles to contribute their fair share to the upkeep and maintenance of the road network, there is no justification in singling out lorries for this arbitrary and highly theoretical tax treatment. Similar costs are not borne by any other mode of transport or in any other sector of business. The imposition of these costs would be a further tax burden on industry and would be unlikely to result in improved environmental performance.

  Industry is further frustrated that having waited until almost the last moment for the Government to make up its mind on the vehicle weights issue, it still has no clear indication when the related tax decisions will be made. This preventing urgently needed decisions on vehicle acquisition and future contractual arrangements.

  Vehicle excise duty already sends effective price signals to vehicle operators about the impact of their vehicles on the road. The White Paper confirms the Government's intention to tax vehicles with particularly road-wearing configurations at a high rate. An urgent action for the Government is to specify the new rates of vehicle excise duty that will be applicable for the new weights of vehicles permitted from 1 January 1999. A simpler system of changing the taxable weight of vehicles to allow these signals to be more easily responded to should also be introduced.

    VED should be used as a fiscal price signal to guide the selection of less road wearing vehicles and to differentiate between vehicles with lower emissions levels. The Committee should test the justification for arbitrary increases to cover other environmental costs.

Motorway tolling and urban congestion charging

  The Government's proposals on these issues are vague and subject to further consultation. Both require primary legislation to be enacted. The pricing of road space for goods vehicles, especially in congested areas, needs to balance the value of the space occupied by the vehicle and the importance to the national and local economy of efficient goods distribution.

    There is a strong economic case that goods vehicles should pay less for road space than other categories of vehicles, given the essential nature of their business. The Committee should test the Government's recognition of these arguments.

Workplace parking levy

  The purpose of these vaguely defined proposals appears to be to create a locally levied charge on businesses to discourage commuting to work by car and provide funding for local transport plans. Primary legislation is required and consultation is promised before implementation. However, all discussion of this proposal has so far failed to recognise that many businesses, especially in the transport and distribution sector, work unsocial hours and require staff to travel at times when public transport is not running. Furthermore, because of the nature of their business, these sites are often situated in locations that are not well served by public transport.

    The Committee should test the Government's appreciation of these aspects of its proposals. We note press speculation that the House of Commons will be exempt from such a tax because of the unsocial hours worked by members. We expect similar considerations to apply to the rest of industry.

Hypothecation of funds

  Nearly all of the proposals in the White Paper require the expenditure of new money at national or local level. The public's acceptance of new taxes and charges will depend largely on the efficiency with which those funds are re-invested in the transport infrastructure and systems. Industry, too, is willing to pay a fair price for improved transport conditions. The Government's commitment to its new policies will be measured by the extent to which transport is allowed to self-fund its own remedies or whether it must continue as a cash cow for other public services. Securing satisfactory hypothecation of any new funds will be essential in establishing the trust of the public and industry in these policies.

    The Committee should test the arrangements that are in place between DETR and the Treasury to hypothecate any new funds raised from transport.


Lorry weights

  The Government's decision not to raise maximum lorry weights to 44 tonnes for general operations was a bitter blow to industry. The move would have delivered immediate reductions in journey frequency and numbers of vehicles required, especially in the petroleum, drinks, steel and bulk sectors. The reason given was because of an adverse impact on rail freight. However, the scale and nature of this impact has never been disclosed.

    Increasing the payload of vehicles within existing dimensions allows vehicles to be more efficiently used, resulting in fewer journeys. This is an undeniable efficiency gain that the Government again refused to let industry benefit from. The Committee should establish the precise grounds for the Government's decision so as to inform future debate of this issue.

Impounding and vehicle notification

  The White Paper confirms the intention to bring forward legislation for the detention of illegally impounded vehicles. The proposals were the subject of a full consultation earlier this year and included the introduction of a modern system for the notification of new vehicle acquisitions to Traffic Area Offices. This would enable vehicle records to be computerised and kept up to date. FTA sees this as an essential pre-requisite for the introduction of impounding powers. Proceeding without this change will fail to close the loophole which many illegal operators exploit so as to remain undetected.

    The Committee should establish the Government's intentions over the introduction of impounding powers and the new vehicle notification system. The Committee should obtain assurances that the full package of proposals will be implemented.


"Quality Freight Partnerships"

  We welcome the Government's recognition of the value of partnership groups in addressing local transport issues. The White Paper cites FTA's joint initiative with the Local Government Association, entitled "Delivering the Goods", in which goods vehicle delivery issues were studied in four major cities, Aberdeen, Birmingham, Chester and Southampton (paragraph 3.170). FTA and LGA believe that this formula can be successfully applied in other locations and are extending the work to 10 other local authorities this year.

Local Transport Plans

  The role of efficient freight transport in the economic life of urban communities should not be overlooked. Traffic management schemes need to recognise the need for access by goods vehicles to retail and business premises. The paradox that night-time curfews and pedestrianisation schemes force deliveries to be made during the peak hours of congestion must be addressed. The "Delivering the Goods" work has already identified good practices that could be adopted elsewhere.

    The Committee should establish Government recognition of the link between efficient goods deliveries and the economic vitality of town centres. This should be included in planning guidance on the development of local transport plans.


Rail Freight Targets

  Industry is keen to maximise the use of the railway system for freight movement. Deteriorating reliability in the roads network and congestion in urban areas means that rail freight is already playing a more prominent role in industry's distribution planning than in the past. The growth targets aspired to by English, Welsh and Scottish Railway Ltd are therefore realistic assuming typical rates of growth in economic output.

  However, new business needs to be won on its own merits and it would be unfair and unreasonable for rail freight operators to rely on an artificial escalation of road freight costs as the means by which growth in rail freight traffic will be gained.

    The Committee should seek to better understand the areas of business where rail freight operators expect traffic growth to be gained so that the planning decisions taken at national, regional and local level can be fully informed. The ambition to "transfer more freight from road to rail" needs to be translated into a formal strategic plan. Any assumed rates of increase in road freight costs in order to achieve these targets should be established.

Strategic Rail Authority

  We await further details of the powers and the role of the proposed Strategic Rail Authority. For the Authority to be successful it is essential that rail freight customers be represented on it, so that their needs are influential in its decision making process.

    The Committee should establish the Government's intentions in this regard and ensure that its constitution properly reflects the needs and views of customers

Loading Gauge Enhancement

  FTA welcomes the endorsement of the plans to increase the loading gauge on a route from Glasgow to the Channel Tunnel, as promoted by the Piggyback Consortium. The funding for this project now urgently needs to be allocated, including Government grant aid but uncertainty over the size and nature of the future high-gauge market is delaying progress.

    The Committee should seek Government leadership in this project given its strategic importance to national transport infrastructure


Transport corridor and route studies

  The English Trunk Roads Review deferred decisions on 31 road schemes pending further study by Regional Planning Conferences. These studies will examine whether transport demand along the affected corridor and routes can be met by means other than the construction of a new road. However, most of these schemes have been so extensively reviewed in the past that there is little prospect of realistic alternatives being developed that will relieve congestion to the extent necessary to avoid the need for the road.

    The Committee should establish the terms of reference for these studies and ensure that they address the expressed transport preferences of the communities and businesses affected.

Lorry Priority

  The Highways Agency's prime objective has been changed to that of making best use of existing roads rather than the construction of new ones. FTA welcomes the Government's commitment to the maintenance of the existing network. One of the methods for optimising road capacity identified in the White Paper is giving priority to essential vehicles, including goods vehicles. This may range from the shared use of bus lanes in towns to the designation of particular lanes on congested motorways. FTA welcomes this innovative use of scarce road capacity and is working with the Highways Agency to implement practical solutions at sites where this would be most beneficial.

De-trunking of the Trunk Road Network

  Considerable doubt surrounds the proposal to de-trunk part of the road network and hand back responsibility for maintenance and upkeep to local authorities. FTA's concerns include the lack of new money to cover this significant additional burden on local authorities; the risk of different lengths of the same road being maintained to different standards; the gradual break-up of the primary route network; and the introduction of inappropriate traffic management measures on routes intended for heavy through traffic.

    The Committee should establish the precise plans of these proposals and obtain assurances that the technique of de-trunking will not be used as a means of reducing the primary route network intended for lorry traffic.


Commission for Integrated Transport

  The terms of reference for this new body are still vague but it will be necessary for freight interests to be properly represented and for the customer's view to be heard clearly if it is to play a useful role in shaping future policy.

    The Committee should test the Government's plans for the Commission and establish further detail of its role and composition.

Supply chain performance

  We still await the daughter document to the White Paper covering freight transport issues in more detail. However, the White Paper itself recognised the contribution that efficient supply chain management plays in contributing to industry's competitiveness. Up to half a company's worth may be held within its supply chains and small changes in price, reliability or scheduling can produce disproportionate benefits or costs.

    It is by the effect on industry's supply chains that the effectiveness of the Government's transport policies in promoting competitiveness and sustainability will be judged.
21 September 1998

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