Examination of Witnesses (Questions 20
- 39)
WEDNESDAY 8 MARCH 2000
MR J BRIDGE
AND MR
R KING
Chairman
20. I am not asking for confidential information
but was it somebody you could say would have used 100 per cent
British hauliers the year before?
(Mr Bridge) Yes, it is the Ipswich dock itself, the
actual dock authority and the port services would have used 100
per cent British hauliers.
Miss McIntosh
21. What evidence is there the other way of
your members now competing, for example, with Dutch hauliers on
Dutch routes and German hauliers on German routes?
(Mr Bridge) The difficulty we have is that with international
hauliers, if they run from the UK, even if they run on the fuel
which they buy only in continental Europe, which they do, for
instance Scottish international hauliers have not brought fuel
in the UK for some two or three years because if they did they
could not survive, so they buy all their fuel in France. Secondly,
what we do find is that because of the high vehicle excise duty
costs they cannot compete in mainland Europe because they have
those inherent costs built into their trucks. Within some of the
reports and even information which has been included in the latest
one by the Ulster University, it shows that the difference in
the VED rates takes the whole of the profit out of that situation.
It is not possible for even international operators to operate
profitably.
22. Why then was there such a big lobby five
or ten years ago for British road hauliers to have access to cabotage
routes in other European countries?
(Mr King) Fuel was considerably cheaper then and so
was VED.
23. Just to get this on the record, what you
are saying is that VED and fuel excise duty have grown dramatically
over the last three years.
(Mr King) Yes, by enormous amounts.
(Mr Bridge) Yes; that is the main disadvantage. What
we have to remember is that the UK had derogation on 40 tonnes
until 1 January 1999 when it introduced the penal rate of £5,750.
Of course that is the workhorse of Europe. They only operate with
five axles; they do not operate with six axles in Europe. The
workhorse is 40 tonnes on five axles and the Government itself,
when it introduced that rate, introduced the six-axle 41-tonne
vehicle to the UK on environmentally friendly suspension with
VED at £2,500. The question we asked them was what they expected
us to do with those trucks because when we arrive in France or
Belgium with them, they are illegal because there is a maximum
40-tonne limit use of construction of vehicles on the road. International
operators cannot take advantage of that six-axle combination at
41 tonnes because they cannot take them to most of the countries
in Europe.
24. Without being too technical, what percentage
of the UK fleet is actually paying that £5,000-odd rate?
(Mr Bridge) It is difficult to assess. There are 80,000
vehicles registered as over 38 tonnes out of the vehicle park
of some 420,000 heavy commercial vehicles.
25. Some of those will be the 44 tonnes .
(Mr Bridge) Yes. Of course, because of the fact that
it was only introduced in January 1999 and the Government did
not introduce the rate for it until the budget and April of that
year it has not been possible to collect many of the statistics
because many people registered vehicles at 38 tonnes prior to
the change in the budget in order to gain advantage so that they
could run at the 38-tonne rate on their 40-tonne vehicle if they
had it re-plated at that time. It is very difficult at the moment
to know the answer to that question until we get through the cycle
in April.
Mr Stevenson
26. May I clarify the points you have just made
about cabotage and costs? I thought I heard Mr King say that the
amount of business which has been creamed off by this cabotage
activity was a relatively low percentage but that the threat is
there. Yet you, Mr Bridge, were quoting substantial amounts of
business which was creamed off from the example you gave to us.
Which is correct?
(Mr Bridge) May I just say that Mr King is quoting
in terms of what the Government is looking at in overall terms
through the Road Haulage Industry Forum of which I am a member.
One of the things with which I have always taken issue is that
they were producing figures showing 0.04 per cent of the billions
of tonnes carried which were relative to cabotage. We got a bit
frustrated because all of those figures were calculated prior
to July 1998, so they have no real relevance and bearing on the
situation which completely changed at that time. We have been
asking them for figures since that time and we wanted to get a
proper survey done and the DETR decided to take that up for us.
They were supposed to do a survey during December and January
but regretfully that has been delayed and although they have done
a certain number of vehicles, we have not yet been given the outcome
of their overall survey, although they have said that they consider
it will only have increased from 0.04 per cent to 0.1 per cent.
They are taking it and measuring it against the billions of tonnes
which are actually carried each year. If you are involved in an
operation of unfair competition, that is a 100 per cent effect
on you. If you look at the people who are operating on east coast
ports where it is most relevant, it might be a small percentage
but it is closing businesses down because when it affects you,
it affects you 100 per cent.
27. I see that point but in your submission
there is a whole section dealing with cabotage, quite rightly,
where you do not give those figures at all. There is no reference
to percentages whatsoever which I think was an omission. You have
partly explained that by saying you have left it to the DETR,
which is very brave of you, but a lot of research has gone into
your submission. Why have you not taken it upon yourself to research
this if it is so important?
(Mr Bridge) We were going to and we were asked by
the DETR if they could take it over and do it for us. I very much
regret that we allowed that to happen because we would not have
allowed it to get behind and not get the figures. In particular,
they are doing a very small strand and when I brought this up
with Lord Macdonald at the last forum meeting he said they had
to deal with that first and they could not muddy it by looking
at other things. The point I have made to them is that you cannot
just do it at one focal point through Dover. You have to look
at all the east coast ports, you have to look at the other side
where it is being affected from southern Ireland and in particular
with vehicles which are now across here and stationed here on
Dutch registered plates; they are taking no account of the work
they are doing for cabotage whatsoever.
28. Your answer indicates presumably that the
RHA has done some work on this.
(Mr Bridge) Yes.
29. It would be useful if we could have that.
You seem to indicate that there was no great problem until 1998
in terms of fuel costs in your evidence but come 1998 and the
problems began. You did say that the reason for that, if I paraphrase
you correctly, is that over the last three years the situation
has deteriorated so badly that it has become a real problem in
terms of fuel costs. By implication you are suggesting that ten
years ago the differentials between these types of costs available
in the UK and available in mainland Europe were either not significant
or not as wide as they are now. I see no reference to that in
your submission in terms of figures. I personally should like
to see that because I remain a little sceptical that the situation
has become so much worse over the last three years. I was in the
European Parliament along with Miss McIntosh and I seem to remember
hauliers saying to us in those days that the difference in costs
is enormous. I cannot put my hand on evidence to back that up,
but that would be useful. May I go onto the overall costs because
we did have Government Ministers standing up in the House of Commons
saying that the cost of operating a fleet of four different vehicles
was lower in the UK if you took overall costs. Your evidence seems
to dismiss that almost out of hand. In the submissions you have
made you take about the operating costs for a 40-tonne lorry in
the UK, in Belgium, in the Netherlands and in France and in all
cases they are cheaper. Does that take into account all the costs
and not just corporation tax, social costs, national insurance,
everything, or is that based on a narrower definition?
(Mr Bridge) It takes into account all the costs which
we have looked at and certainly we shall be able to show you those
figures. May I say that we could never get the substantiation
from the Government regarding the figures they quoted to us? All
the independent surveys which have been done, and Ernst &
Young did a report subsequent to that, showed totally the contrary
and all the figures which have been done, Motor Transport, one
of the leading trade magazines produced its own figures, show
exactly the same situation. The figures of the Freight Transport
Association, who will be giving evidence and with whom we work
closely, concur very much. We just could not understand how and
where the Government got their figures from, nor could they substantiate
them to us.
(Mr King) Before you pay corporation tax you obviously
have to make a profit in the first place. Although the UK does
have a very advantageous corporation tax in comparison with the
Republic of Ireland where it is higher in terms of corporation
tax, though not by much of course, in terms of diesel fuel there
is something like a 60 per cent difference in fuel costs between
those two countries. It is the cost of operating across a wide
range of factors, not just diesel fuel. In answer to the question
about excise duty over the last ten years, ten years ago in the
UK it was 17.2p/litre, in 1990 in pence/litre. It was 51.4p the
last time we had figures done—it will probably be a little
more than that—compared with the next highest which is half
that. The impact on fuel has been colossal over that ten years.
Chairman
30. Could you give us the ratio of profits between
the United Kingdom and France, Belgium and Netherlands? Do you
have that and a profit margin which you quote?
(Mr Bridge) Profits are shown but the critical factor
is not the profitability of the companies, it is what they can
charge the customer. That is what we compete against.
31. Except if they are not profitable for very
long it does not quite matter what they offer the customer, they
are not going to do it for any length of time.
(Mr Bridge) No; we understand. The critical factor
is that the latest survey shows that in the haulage industry in
the UK, the average return has reduced from 3.3 per cent to 2.8
per cent on average. If we look at what Roger King said at the
beginning, that fuel is over 22 per cent up year on year in both
January and February, that is going to knock between seven and
nine per cent from the bottom line of those haulage companies.
You can see that the vast majority who are unable to get that
kind of increase from the customers will now be going into a loss
situation and that is something which is being reported to me
regularly.
Mr O'Brien
32. I want to probe a little further on that.
If the European hauliers were to take a further slice of the market
here in the United Kingdom, what would be the economic terms and
safety terms if that were to happen? We are talking now of them
using our services at a reduced cost. What would be the impact
economically and in safety terms on your industry?
(Mr Bridge) The independent research from Professor
Douglas McWilliams of the Centre for Economic and Business Research
shows that during the lifetime of that parliament, in terms of
the impact of job losses in our industry, there are some 26,000
from our industry directly and some 27,000 indirectly. He considers
it to be some 53,000 and in fact going up to 2002 he shows and
substantiates that the GDP could be affected by some £2 billion.
33. How do you judge the proportion of hauliers
from Europe in the United Kingdom now? Look at all these job losses
and the impact it is having. There must be a base. They must come
from somewhere. How do they arrive at it?
(Mr Bridge) He looks at the impact relative to the
fuel costs and the detail of it. Certainly if you wish to have
that we shall get Professor Douglas McWilliams to do it.
Chairman
34. It is terribly helpful for us to have any
facts and figures which you have. I have to say, Mr King, it would
have been nice if we had had that report before you came here.
(Mr King) It would have been but we only received
it today. That is why. The Committee might like to know that we
did submit a report, Fair Play on Fuel. This has now been updated
to take into account the latest movements in fuel prices. We should
be pleased to leave a copy of this with you.
Chairman: Please give them to the Clerk before
you go.
Mr Bennett
35. Are there not too many lorries on the roads
anyway? Would we not be much better if we had a third fewer lorries?
I understand it would not be good for your members but it might
be much better for the United Kingdom.
(Mr King) You have to ask the customer. We are an
industry which is driven by the customer. The customer wants goods
delivered. The history of this country is to disperse employment
throughout all the corners of the kingdom. Manufacturing depends
these days on a very complex tier arrangement of suppliers, all
of which have to get their products down the assembly chain to
the final assembly point. That requires a very, very sophisticated
and productive haulage industry to find the goods and services
for that. It is not a question of whether society would benefit
by a reduction in the level of movement of goods throughout the
country. We are responding to what society clearly wants. It wants
more goods provided, it wants more products moved around the countryside
and we are an industry which will respond to that.
36. Thirty years ago in my youth, most of the
beer drunk in Greater Manchester was brewed either in Greater
Manchester or within 30 miles. Was it not just as satisfactory
for people to get a local product like that than to have beer
shipped all round Europe on your members' lorries?
(Mr King) I could not agree more; we all feel very
sad at the loss of many of our local breweries and we now get
a catalogue beer which is available very often the length and
breadth of the land. It does seem in many ways strange that we
ship beer to the continent and beer is shipped to us, but that
is the choice people have made. There is a market for it. The
customer, that is us, wants that market, responds to that market,
so we are there to provide the transportation for those products.
37. If the haulage costs had been slightly higher,
then people might have preferred to stick with local breweries,
might they have not?
(Mr King) I do not see that there is any evidence
of that. Haulage costs have not risen by a great deal as a result
of the highly competitive state of the market. You would have
to ask whether prices in the high street and the supermarkets
reflect good value or not. That is a judgement which the customer
would make. The customer decides whether they are going to buy
these things wherever they come from.
38. Do you think a tomato which would originally
come from somewhere near Fleetwood to Manchester and on to a greengrocer
is much nicer because it now goes down to somewhere near Spalding
and one of your haulier's lorries then goes back to somewhere
near Wakefield for Asda's distribution and it finally gets back
to Manchester? Is that really good for the economy?
(Mr Bridge) We do not operate as UK PLC in isolation,
we operate in a European and an international marketplace.
39. I understand that.
(Mr Bridge) It is our customers who determine what
they do and where they make their goods. We just respond and deal
with it. The fact is that if we are within the European Union,
as we are, and we are on the periphery, if we have the highest
costs, as is being imposed on us now, it gives us even more of
a disadvantage than all of the other European competitors and
the other countries who may well—
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