Examination of Witnesses (Questions 220
WEDNESDAY 14 APRIL 1999
D ARCHER and MR
ROBERT M ARMSTRONG
220. I just want to get the order of your
(Mr Norris) That is it.
(Mr Armstrong) Chairman, I would agree with that
as an approach. The word "harmonisation" does tend to
mean we want exactly the same as the figure on the other side
of the border, but I think we would be happy to see a significant
move towards that even. We have a very good reputation in the
United Kingdom and in Northern Ireland in particular of being
pretty effective at distribution and logistics in general and
we can stand competition with any Continental competitors, but
the differential being paid in fuel duty terms is so wide now
that it is extremely difficult to maintain competition.
221. To avoid any possibility of misunderstanding,
there is no other solution you are putting forward other than
the ones which I have summarised?
(Mr Archer) The problem will get worse because
of the fuel escalator. This is going to recur at next year's Budget.
(Mr Norris) It is important to point out that
our proper order of priority, recognising that harmonisation,
even if it were to be accepted by the Government, would be difficult
to achieve in the short term, would be to stop the use of the
escalator and to review the overall Exchequer demand on fuel.
Without boring this Committee or moving outside its terms, there
would need to be a comprehensive review of the application of
fuel duty generally.
222. I understand that and of course I appreciate
its place in the exchange, but were the escalator to continue
and assuming you had not got harmonisation of taxation, you would
still be back to the user rebate?
(Mr Norris) It is the only alternative on offer.
It is true to say, of course, we ought not to exclude an interest
in seeing better levels of enforcement as far as Customs &
Excise are concerned. We do find it slightly perverse that when
it is abundantly clear that more Customs & Excise officers
would amply pay their own way in terms of offences detected and
duty recovered, that those officers are not in place. I stress
we now think the problem is probably of such proportions they
would not be able to deal with the totality of it, and they certainly
cannot deal with the quasi-legitimate and entirely legitimate
aspects of this but then they are not for this precise inquiry.
As smuggling is central to your inquiry today, it does defy logic
that where an officer could recover many times a multiple of his
or her salary, and where it is clear the numbers employed by Customs
in this area are extremely small (we understand less than a dozen,
I do not know the exact number) but, certainly as far as fuel
operatives are concerned, that is surely something that Government
ought to examine, if only on good housekeeping grounds.
223. To revert to your own observations,
and I am speaking to Mr Norris' observations, that, if you are
seeking to secure harmonisation, there is going to be perhaps
a difference of opinion between those who are harmonising upwards
and those who are harmonising downwards, and given the nature
of EU rules concerning harmonisation, do you actually think there
is a sensible prospect of securing unanimity in order to achieve
(Mr Norris) I do not think there is any doubt,
Chairman, that, over the long term, within a single market duty
rates generally harmonise. But there is equally no doubt that
it is quite impractical for a Government to contemplate immediate
harmonisation when the fiscal consequences are so serious, because
fuel duty is now a major earner for the Government. Motoring taxes
generally in the United Kingdom raise currently in excess of £33
billion and it would be unreal to expect therefore any immediate
move of a substantial impact on harmonisation. But, over time,
if a national government does not harmonise in this way, then
the consequences in terms of job loss and revenue loss are precisely
the consequences that we are seeing in Northern Ireland. We believe
there is therefore a considerable incentive on governments to
consider whether the game of keeping your own duty rates extremely
high but seeing business haemorrhaging away is not better played
on a different wicket where you accept the reality of the single
market's duty rates and thus allow your own indigenous business
224. Given the immediate nature of the problem,
which is what in principle prompted this inquiry, we really ought
to be looking beyond harmonisation of tax, on the grounds that
is a long-term issue, towards the fuel escalator, on the one hand,
and the user rebate, on the other?
(Mr Norris) Yes.
225. I do not think there is disagreement
between us on that. You did stress the issue was a European-wide
one and not purely one across the Irish border, but is it not
a fact that the Irish Government were given a dispensation under
the Kyoto rules which means that they are actually operating under
different pressures from other countries in Europe on the petroleum
duty or diesel duty issue?
(Mr Norris) It is technically true that they have
a derogation, but if you look across the other countries of the
European Union, the Irish Republic has by no means the lowest
duty rate. As I said earlier, no other country actually employs
the fuel duty escalator. So the practical consequence is that
they actually do not appear to be at variance with pretty much
every other country in Europe in relation to their duty price.
It is only the United Kingdom that stands out as being so different
in its application of fuel duty policy.
(Mr Armstrong) In the Republic of Ireland, the
fuel duty level is just under 26p. The equivalent duty level in
Belgium is just over 10p, in France it is nearly 26p, almost the
same as in Ireland, Germany 22p, Italy 27p, Netherlands 23p, Spain
18p and Britain 50p.
(Mr Archer) For the record, in the Republic of
Ireland it is 26 Irish pence, which equates to about 22p sterling.
(Mr Norris) There is an issue around Kyoto. It
essentially is a commitment to reducing CO2 levels
and levels of other pollutants, our industry has long argued that
the major impact the UK Government could have generally is to
cut down on the amount of coal burned in power stations. If you
look at the totality of CO2 which we produce, a relatively
small proportion of it is produced by diesel road transport, so
to apply the escalator as logic for meeting the Kyoto targets
we think is disingenuous.
226. How much use is there of Northern Ireland
hauliers to take goods into Great Britain?
(Ms Smith) Substantial.
227. Assuming there was a user rebate in
relation to the Irish border, how would you handle in terms of
competition with hauliers in Great Britain the fact that you were
operating on a lower cost basis than they were?
(Mr Norris) We would see the rebate operating
throughout the United Kingdom. In other words, because, precisely
as Mr Armstrong says, there are even greater duty differentials
with France, Belgium, Luxembourg and so on, the same logic applies
there. So there would not a problem of traffic between Northern
Ireland and the mainland.
228. So your user rebate proposal is somewhat
unlike the Dutch example?
(Mr Norris) Yes. The Dutch creation of a kind
of buffer zone is not one that we think is terribly practical
in this particular case.
229. So the earlier discussion about 30
km was, while important, not actually related to the user rebate?
(Mr Norris) No, not to the user rebate.
230. Finally a question which does not relate
to your solutions but to what you regard as the consequences,
if you were to flag out, which you were describing as a potential
consequence, the whole of the Northern Ireland industry in the
Republic, would you actually be able to conduct your steady business
in the north using Republic plates if you were not engaged on
(Ms Smith) If you want to register your PSV vehicle
in the South of Ireland and if you are doing international journeys,
at present you can put that vehicle on your Northern Ireland operators'
licence. As long as you use it for international journeys, you
can do that already. Flagging out is where you want to flag out
your fleet in Southern Ireland to enable you to do UK-Northern
Ireland based work solely. But if you want to do international
journeys you can currently go down, pay your vehicle excise duty
in the South of Ireland, put your new number plates on your vehicle
and register that vehicle in the North on your operators' licence,
and you can do that legally.
231. Maybe others on the Committee have
got the slight difficulty I have in following exactly what is
being said to us in terms of change of plates.
(Mr Norris) First of all, I ought to point out
that cabotage restrictions, in other words restrictions on the
ability of a haulier registered in Country A within the European
Union to do work in Country B, other than literally just delivering
there and leaving, were abolished in July of last year. Since
then, it has been open to a haulier from the Republic of Ireland
to bring a vehicle to the North delivering goods and then subsequently
not return to the South immediately but act in effect as if it
were a Northern Ireland vehicle and ferry goods around Northern
Ireland for a period which can probably be up to 60 days at least
without any need to return south. The current best legal advice
we have is that it is probably under European Union cabotage rules
necessary to make about half a dozen journeys a year back to the
country in which you were registered. However, to take your example,
if you are a Northern Ireland haulier, it is extremely unlikely
you will not make at least half a dozen journeys south of the
border, bearing in mind the sort of geography we are talking about.
So it is perfectly open to you to be a Republic of Ireland haulier,
who is essentially doing 80 per cent of his work in the North
perfectly legitimately under cabotage arrangements, rather than
a Northern Ireland haulier doing 20 per cent of his business in
the South. I hope that is clear, Chairman.
232. I am glad I asked the question.
(Mr Norris) You are in good company. Ms Smith
then introduced a second gloss, which if I may say so is a slight
complication, which is that under certain circumstances it is
possible for a company in Country A to register vehicles in Country
B but to use them on its operating licence in Country A. But that
is only possible either for a temporary period or under very specific
restrictions. The flagging out proposition is actually in a sense
breath-takingly simple. You simply do what the merchant marine
fleet did in this country when it faced a similar problem, you
do not bother to register in the United Kingdom, you go to somewhere
cheaper. So if you are a haulier in the United Kingdom and particularly
in the Province, you move your company, you buy a company off
the shelf in the Republicyou do not actually have to physically
move premises to do that although you no doubt have to file an
annual return once a yearyou have to have a qualified person
to supervise your fleet, you have to show you have the money under
European rules to operate the truck and you have to be of good
standing, but once you have satisfied those criteria you can become
a Republic of Ireland operator, and then you simply operate all
your vehicles north of the border perfectly legitimately.
(Mr Archer) I do not see any insurmountable difficulties
at all in that procedure. Your vehicles would be PSV-ed in the
Republic, I see no problem with that. You would have Republic
of Ireland number plates on the vehicle, I do not see that a problem
operating in Northern Ireland with a HGV fleet.
233. It has been explained and the further
information given explained why it was not a problem. One concluding
question which does not flow out of the evidence you have so far
given, would a system of licensing of fuel suppliers by Customs
& Excise help to reduce, if not eliminate, the problem?
(Mr Norris) I doubt it, Chairman. I offer this
view only reflecting on what you have said, not having studied
the issue. The abuse of the regular procedures is so widespread
in the Province and now so endemic that I doubt that a system
of licences does any more than, as we have often seen, license
the legitimate, impose bureaucracy on the legitimate, but be ignored
by those who are going to circumvent the rules in any event. So
my reaction, and I have to say it is not a studied reaction just
an instant reaction, is that I doubt any more licensing or regulation
is going to deal with the problem.
Chairman: We are considerably
in your debt, in particular that you have given evidence together
because we have had an almost full evidence session taking evidence
from you both. It may well be that there are others beside myself
who want to ask final questions arising out of what we have heard
234. Until seven or eight minutes ago I
thought that the witnesses were arguing or recommending a buffer
zone rebate system, but now we understand that is not the case.
That raises a question of practicality in my mind. Are you meaning,
therefore, you are advocating a rebate system for hauliers consuming
diesel? How would you differentiate the various users of diesel
who are outside haulage?
(Mr Norris) Yes, there are some slight complications
in that the system of licensing in the Province is slightly different
from that elsewhere in the United Kingdom, although there are
extant proposals to bring the two systems into line. Broadly,
the system in general in the United Kingdom works on the basis
of identifying legitimate operatorsand on the mainland
that is by means of their possession of a valid operators' licenceand
only paying rebate to operators who can show they have a pre-existing
valid operators' licence and only pay against their legitimate
tachograph discs, in other words therefore ensuring at the same
time substantial road safety benefits. One of the issues for the
citizen generally is the safety of the commercial vehicle fleet
and naturally those sorts of criteria are routinely undermined
by the present arrangements. We see the introduction of the rebate
as being an opportunity for the Vehicle Inspectorate, the Traffic
Commissioners and indeed for the regulatory authorities in the
Province, to exercise greater control on the legitimate industry,
because it suddenly becomes worthwhile to operate entirely legitimately
if you can then take advantage of the rebate and no longer suffer
the competitive disadvantage. We have researched the practicability
of the scheme very thoroughly and I am happy to send to Mr Hunter,
Chairman, and indeed other members of the Committee, a copy of
our submission which explains in detail how this would be achieved.
235. That would be useful.
(Mr Norris) I ought to have said that perhaps
the introduction of the Dutch-German example was more misleading
than helpful. It was actually simply a recognition of the fact
that elsewhere in Europe, where there is evidence of a disparity
in duty rates both sides of the national border, one country at
least feels the need to do something about it. Although you choose
a mechanism which may or may not prove to be effective, our view
is a mechanism has to be in place.
(Mr Armstrong) I would add that I think it is
an entirely practical one which is being suggested because the
really close precedent is in the bus industry where it has been
operating for a long number of years perfectly satisfactorily.
236. The rebate is what you might call your
plausible solution to the situation, but you have an ideal solution
above that, if you could get it, which is that of harmonisation.
As Mr Armstrong indicated, that did not have to be exact harmonisation
but could be sufficient harmonisation in order to allow things
to work. What area are we talking about when we are talking about
harmonisation? Ideally we are talking about throughout the European
Union and that is a long-term objective, but then there is potential
harmonisation which could be UK-Republic of Ireland harmonisation,
or you could talk about an island of Ireland harmonisation taking
place. Which is it that you would really want?
(Mr Norris) We think it is UK versus near competing
economies. Taking Mr Barnes' earlier question about the distances
which make this purchasing policy worthwhile, we do not believe
for example the duty rate in Spain or Andorra, which is actually
technically the cheapest in Europe, is desperately relevant in
this particular context. But we do think the rebate ought to have
in mind duty rates in the Republic of Ireland, France, Luxembourg,
Belgium and Holland, because those are the countries in which
fuel is currently purchased to be brought into the United Kingdom.
You will note I specifically refer to the Republic of Ireland.
If the rebate were to be applied only within the island of Ireland,
then the difficulties which were hinted at earlier by Ms Smith
in response to a question from, I think, the Chairman, would arise.
Namely, you would then transfer the smuggling activity across
the Irish Sea rather than over the land border, and I do not believe
that is any more permanent a solution than the one to the problem
we already have now.
237. But the smuggling activity across the
Irish Sea might be an easier thing to contain than the smuggling
activity which takes place between the Republic of Ireland and
Northern Ireland. It might also be that in terms of some sort
of short-term solution to try and handle the problem on harmonisation
grounds, doing it on an all-Ireland basis and ring-fencing Northern
Ireland is a possibility.
(Mr Norris) I think there is truth in what Mr
Barnes says, Chairman, it is unquestionably easier to detect when
we are talking about only a certain number of points of entry
using ferries. Indeed on the basis that one should never let the
perfect be the envy of the good, whilst we would like to see the
rebate applied to users of fuel in England and Wales and Scotland,
who currently face competition from other European countries,
if it were to be practical within Northern Ireland as a kind of
pilot, temporarily excluding the rest of the United Kingdom, then
we would certainly warmly welcome that.
(Mr Archer) As a Northern Ireland operator, Chairman,
I would endorse that, obviously!
(Ms Smith) I think we both would!
238. Before finally concluding, is there
any question we have not asked you whose omission has surprised
(Mr Norris) I think your generosity in actually
allowing us to slightly transgress across the border which you
originally set has allowed us to explore the issue fully, Chairman.
I would just stress in conclusion perhaps that you will have recognised
this is not merely combating a particular form of crime and dealing
with it in the way the haulage industry, for example, deals with
Customs & Excise detecting drugs. If you had asked us about
that, we would have told you about the drugs hotline, about the
Anti-Drug Alliance in which the RHA and the FTA are both members
with Customs & Excise, and about the enormous amount of covert
information that we pass on those issues. We have a genuinely
constructive relationship but this is not drug smuggling involving
organised gangs, this is absolutely endemic in the Province and
is only being exacerbated by the current widening gap in duty
rates and it needs to be tackled at source rather than just have
the occasional elastoplast applied.
239. I did say to my colleagues, Mr Norris,
before you joined us that though I might set a border, I had very
little doubt that you would find a way of crossing it! Thank you
warmly for your patience in answering our questions, it has been
a thoroughly worthwhile session from our point of view and we
are much in your debt.
(Mr Norris) Thank you.