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10.20 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Keith Hill): As is conventional, I begin by congratulating my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on obtaining this debate on the future of just in time. Indeed, I read with interest his Adjournment debate of 23 April 1998. Some of the issues that he raised then are of relevance today.

The Government recognise the importance of a healthy distribution system. The introduction of just in time has had huge consequences for the competitiveness of United Kingdom industry and the economy of the country as a whole. The use of the just in time philosophy has led to a radical reshaping of our major manufacturing and retail industries, reducing wastage and costs and improving the quality of production. The reductions in working capital that industry has been able to achieve over the past 10 years have released nearly £30 billion of resources at manufacturing and retail levels for productive investment. That has helped to maintain our competitiveness in a challenging global market place.

Furthermore, the UK is rightly recognised as a world beater in efficient supply chain management--of which just in time forms the philosophical basis. We can boast that logistics as a proportion of gross domestic product in the UK is the second lowest in the world at 10.62 per cent., beaten only by the United States at 10.49 per cent. Europe averages 11.79 per cent., and the global average is 11.74 per cent. The Government are committed to maintaining the UK's position at the competitive edge.

My hon. Friend is right to point out that we need a distribution system that is sustainable and that will serve our economy in the decades to come. That is why we stated in our freight policy paper "Sustainable Distribution: A Strategy":

This is a multi-pronged strategy, which makes better use of our roads as well as our rail and water networks. Clearly, the freight transport industry has a strong role to play in improving the efficiency of its services and developing the new logistics and supply chain opportunities that keep British business on track.

The Government recognise that short sea shipping is a generally safe, environmentally friendly and sustainable mode of transport. We actively support its further development. The shipping sector can make an important contribution, either in its own right or as part of an intermodal system, to the economy of this country. As set out in our shipping policy paper, "British Shipping: Charting a New Course", the Government want to encourage short sea shipping and are keen for the industry to look at ways in which shipping might overcome some of its disadvantages. Measures might include logistical and technical innovation, research and development programmes to investigate the potential contribution of new shipping designs and technologies, better intermodal freight connections and innovation in equipment and design to reduce handling.

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With the development and deployment of faster ships, there is the increasing potential for short sea shipping to be able to meet the just in time requirements of modern industry and to break into new markets. It can reach some outlying parts of the European Community that other transport modes cannot reach. At the same time, we recognise that better marketing and promotion of short sea shipping and better communication between the various service providers could encourage more shippers and forwarding agents to consider sea freight as a real option. The Government will liaise with the industry regarding possible initiatives to encourage the short sea and coastal shipping sectors that help us to meet our environment and transport goals.

The use of just in time shuttles is an interesting idea. I note that Ford already operates such a system, and clearly finds it a viable option. However, it would be for industry itself to establish whether, given the time constraints associated with road congestion and the consequential costs associated with that, the continuous conveyor belt of goods that can be achieved by short sea shipping would be a better option.

The Government are committed to extending the freight facilities grant scheme to include coastal and short sea shipping to encourage the transfer of freight from roads to this more environmentally friendly mode of transport. We will be consulting on the details, including the costs that would be eligible for grant, and the criteria to be used in assessing applications.

The United Kingdom will also continue to be involved in European initiatives to support short sea shipping. We warmly welcomed the European Commission's second progress report on this subject, and were pleased to support the adoption of the Transport Council resolution on the promotion of this mode of shipping last month. A number of the recommendations in the report are already in place in the United Kingdom. We are examining the others to determine whether they can be taken forward by Government initiative. Some are clearly for industry action, but we will be keeping in close touch with the shipping industry to discuss the Government's role in creating a climate favourable to the development of short sea shipping.

The efficiency of our ports is vital to our industry and our distribution networks, as my hon. Friend pointed out. Increases in port traffic bring pressures on ports themselves, and on the road and rail links to ports as part of wider transport networks. Ports are distribution centres not only for primary products moved in bulk, but increasingly for higher value manufactured goods moved in boxed cargoes--both deep sea container traffic and ro-ro trailers and containers on shorter sea routes. Increases in ship sizes and the growth in boxed cargoes are increasingly associated with gateway ports, including those mentioned by my hon. Friend.

Ports must play their full part in taking active measures to improve the efficiency of operating berths and moving cargoes to customers, eliminating hold-ups and improving delivery times and reliability. The Government will also play their part, as we said in our White Paper "A New Deal for Transport: Better for Everyone". We aim to encourage provision of multimodal access to markets, make best use of existing port infrastructure and promote best environmental standards in the design and operation of ports. We are also aiming to address the issues raised by changes in trading patterns and their effects on

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demands for port capacity. We recognise that some ports may need to increase capacity to meet future demand. We aim to say more about our strategic approach in this area in a ports policy paper on which we are currently working.

As my hon. Friend has said in the House before, congestion threatens our economy. Even if we were to divert freight via coastal shipping to its nearest port, roads would still be needed to transfer the goods to and between our factories and shops. That is why a competitive, thriving road transport sector will still form a linchpin in our economy; that is why this Government will be spending £1.4 billion over the next seven years on major trunk road schemes; and that is why we increased spending on roads maintenance by 10 per cent. this year. That compares with the record of the previous Government who cut spending by 9 per cent. over a four-year period.

We are also improving choice for the commuter. The Transport Bill will enable local authorities outside London to introduce road user charging which can help to tackle the problems of traffic congestion that cost the economy billions of pounds every year. Then there is the £750 million that we have allocated to local authorities so that they can put their local transport plans into action. That is all part of a £2.4 billion cash injection for local transport over three years. But that is not all: on 13 December 1999, my right hon. Friend the Deputy Prime Minister launched his 10-year investment plan to transform Britain's transport systems, and which will tackle congestion on our roads, improve journey times and make life easier for British industry.

Through our promotion of the use of key performance indicators, we have been able to demonstrate the importance of transport provider-customer relations in reducing delivery delays and improving efficiency. However, there is much room for improvement, especially in the reduction of carbon dioxide emissions from freight distribution. That is why the Government are working with industry to improve the efficiency of distribution and to reduce its energy consumption. Through the energy efficiency best practice programme, we have been promoting best practice in road haulage and logistics. The new sub-group of the Road Haulage Forum, established by my noble Friend Lord Macdonald of Tradeston, will tackle the environmental and business challenges associated with improving business performance.

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Industry has not been a complacent partner in these matters. I offer the House some examples of best practice, where efficient supply chain management has reduced transport demand, while retaining the basic philosophy of just in time. Tesco has integrated its primary and secondary distribution activities. By sharing both types of activities with its suppliers, the company has been able to reduce empty running and, more important, the total mileage of the vehicle fleet. Together with new packaging technologies, those measures have combined to improve the efficiency of vehicle utilisation, saving about 3 million miles per year--equating to 4,600 tonnes of carbon dioxide emissions.

Excel Logistics, a third-party logistics provider, operates a consolidated just-in-time supplier collection system for Rover Group. Vehicles are shared by the factory and the suppliers, visiting each supplier in turn, before returning to the factory to de-stuff and then repeat the cycle. That has resulted in a saving of 3.9 million miles--equivalent to 5,400 tonnes of carbon dioxide emissions.

The automotive industry is recognised as being at the forefront of just in time in the UK; we are seeing the development of supplier parks, whereby suppliers of volume components are encouraged to set up manufacturing operations on sites that are literally next door to the assembly plant. That is resulting in huge savings in transport costs and has removed any concerns regarding road congestion on the timing of deliveries.

By these examples, I hope that I have been able to show my hon. Friend that just in time does not mean a profligacy of vehicle miles. Companies that have adopted that approach consider transport as part of the whole supply chain and do their best to ensure that that part of the chain operates as efficiently as possible--maximising vehicle utilisation and minimising vehicle mileage.

In conclusion, I reiterate that we are committed to ensuring that we do not lose the competitive edge that we have gained through the use of just in time. As my right hon. Friend the Deputy Prime Minister has pointed out, good transport is key to our economic ambitions. With our new transport package delivering the policies for an integrated transport system, as set out in our transport White Paper, we intend to develop the framework within which British businesses can thrive.

Question put and agreed to.

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