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

Supplementary Memorandum by the Department of the Environment, Transport and the Regions (IT 175)


  At the meeting of the Select Committee on Wednesday 18 November, Mr Donohoe asked at question 320 about the impact which increased fuel duty could have on the "flagging out" of freight haulage vehicles. Mr MacDonald of DETR undertook that someone from the Department would write on this matter, and I am pleased to do so.

  I might begin by explaining that the strategy of increasing fuel duty by 6 per cent a year above inflation is one of the most cost effective ways the Government has of reducing carbon dioxide emissions from road transport, which is one of the main causes of climate change. Higher fuel taxes encourage all motorists to reduce their fuel consumption through the purchase of more fuel efficient vehicles, adoption of greener driving styles, or less vehicle use.

  Furthermore, although the British road haulage industry is already one of the most efficient in the world, there is still considerable scope for many British hauliers to reduce their fuel consumption, through improved driver training, minimising empty running, and better logistics management. A recent survey by the Freight Transport Association indicated that, on a like-for-like basis, the best haulage fleets were almost twice as fuel-efficient as the worst.

  Of course, we recognise that diesel prices, as a result of the fuel duty strategy, are significantly higher in the UK compared to continental Europe. However, there is little evidence of foreign hauliers undercutting domestic hauliers for domestic business: cabotage accounted for less than a tenth of one per cent of domestic business when it was abolished in July.

  Turning to the specific question asked by Mr Donohoe, the Department is well aware that some hauliers are considering registering their vehicles overseas. They will no doubt consider the total costs of doing so, which can be significant; they should not concentrate solely on differences in fuel duty. Indeed this tends to be of little relevance to the question of flagging out, VED rates would be more important. But hauliers would also want to consider differences in social and capital taxes, which are generally lower in the UK.

  The Department is also monitoring the extent of cabotage in the UK; any substantial increase could add pressure on UK hauliers to register overseas. But as indicated earlier, that is not the case at present.

Parliamentary Branch

11 December 1998

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