Memorandum by The Society of Motor Manufacturers
and Traders Ltd (RH 13)
1. INTRODUCTION
The Society of Motor Manufacturers and Traders Ltd
(SMMT) welcomes the Transport Sub-Committee inquiry into the Road
Haulage Industry. The SMMT represents vehicle manufacturers, who
are significant first tier suppliers to the road transport industry,
which is vital to the well being of the UK, its economy and people.
For the purpose of this submission, the road haulage industry
is presumed to refer to heavy goods vehicles (over 3.5 tonnes)
only.
2. THE ROLE
OF THE
ROAD HAULAGE
INDUSTRY
Road haulage industry in Europe and UK
The road haulage industry moves around 1.65 billion
tonnes of goods a year, 81 per cent of all goods moved in the
UK. International movements of freight by road are fundamental
to the UK's role as a major trading nation. The preference for
goods transport by road is a social and economic fact of life,
reflecting the dispersal of manufacturing and commercial activities,
a higher standard of living and demands by consumers for the immediate
availability of goods at the lowest price. Only road haulage has
proved flexible enough to meet these demands. Road transport is
essential for "just-in-time" deliveries—a practice
that has significantly improved productivity and competitiveness
in many UK industries.
Contribution to UK economy
Within Europe nearly six million people are
employed within road transport and a further 3.5 million are employed
in related industries. In the UK alone, there are almost 600,000
directly employed in road haulage. The industry also contributes
a significant amount in taxes to the treasury, over £3.6
billion in total.
Impact on environment
Despite higher weights, significant technological
improvements to vehicles have resulted in greatly increased fuel
efficiency. A new vehicle now uses 34 per cent less fuel per 100
kilometres compared to a 1970s model. When this is considered
in conjunction with the 78 per cent gain in productivity seen
over the past 15 years, the relative environmental improvements
are even more significant.
Improved technologies have also resulted in
a 50 per cent reduction in the emissions of carbon monoxides,
hydrocarbons and NOx and an 80 per cent reduction in emissions
of particulates.
Modern vehicles are also far quieter than those
from the 1970s and 1980s. Noise levels have been reduced by 84
per cent over the past 15 years.
Safety and driver training
Improvements in design and technology have also
reduced the number of drivers and passengers killed or injured
in an accident by 20 per cent in the last decade. Many operators
now undertake driver safety training as a matter of principle.
3. IMPACT ON
INDUSTRY OF
VED AND FUEL
DUTY
The impact of increases in VED
Prior to the budget, the industry annually contributed
more than £500 million through Vehicle Excise Duty, £3
billion through fuel duty and £22 million through Operators
Licences. This figure will now be significantly higher due to
the increases in fuel duty, and VED rates, introduced in the March
1999 budget, that are highlighted below:
| 2 axle rigid | From £1,320 - To £1,600
| 21.2 per cent increase |
| 4 axle artic: 2+2 | From £5,170 - To £9,250
| 78.9 per cent increase |
| 5 axle artic: 2+3 | From £3,210 - To £5,750
| 79.1 per cent increase |
| 5 axle artic: 3+2 | From £2,820 - To £4,250
| 50.7 per cent increase |
| 6 axle artic: 3+3 | From £1,280 - To £2,500
| 95.3 per cent increase |
VED for a five-axle artic in the UK is now more than three
times as expensive as in Germany, more than five times the average
EU amount, and over 20 times as expensive as in Portugal, the
cheapest country in Europe.
Increases in fuel duty
With VED accounting for 6-7 per cent of total operating costs,
these differentials are a significant barrier to the UK haulage
industry's competitiveness. However, with fuel costs accounting
for around 35 per cent of total operating costs, the disproportionately
high level of fuel duty creates an even more significant problem.
The average price of a litre of diesel in the UK is presently
77.4p. This is 72 per cent higher than the European average and
over twice as much as in Spain.
Damaging competitiveness
It is estimated that, as a result of further tax increases,
up to 50,000 jobs in the industry could be lost over the next
three years. Pre-tax profit margins at one of Britain's highest
profile transport operators were 5 per cent in 1997, but fell
to less than 2 per cent in 1998. Tax increases in the last budget
are likely to have added £4 million to costs and therefore
put margins under further pressure. Britain's fifth largest operator
has now notified all customers that as they are unable to absorb
the increases in fuel costs, a 3.3 per cent fuel surcharge will
be added to all invoices. It is likely that this cost will be
passed on to the consumer.
As a direct result of Britain's less beneficial tax regime,
jobs are being lost to France, Belgium and other close continental
neighbours who can operate more competitively than UK companies.
Reducing Government income
It is now common practice for UK operators to instruct drivers
on European journeys to refuel prior to returning to the UK. It
is estimated that as a result HM Treasury is losing more than
£415 million in tax revenues from the sale of diesel fuel
per year.
The issue of flagging out has come to the fore over the past
year as a result of the succession of tax increases. Some major
operators have flagged out parts of their fleet while more look
like doing so. Again, this will cause further losses to HM Treasury,
not only in terms of VED and fuel duty losses but also corporation
tax.
4. IMPACT OF
REGULATIONS WHICH
GOVERN INDUSTRY
Impact on safety
The number of HGV drivers and passengers killed or seriously injured
has fallen by almost 20 per cent since 1990, despite a 40 per
cent increase in total distance travelled. However, this is more
related to developments in driver comfort and safety than specific
safety legislation.
Impact of profitability
The current taxation policies of the UK Government regarding
the road haulage industry are significantly undermining the ability
of the UK industry to compete on a level playing field with European
competitors.
5. CHANGES IN
GOVERNMENT POLICY
ON HAULAGE
INDUSTRY REQUIRED
TO BENEFIT
ECONOMY AND
ENVIRONMENT
Whilst it is appreciated that the automatic fuel duty escalator
has been abandoned, there is concern about the legacy of the fuel
duty escalator, in terms of significantly higher fuel prices than
other European countries, and also the possibility of further
increases in the forthcoming budget. Ways of reducing this burden
need to be devised to create a more equal competitive environment.
The introduction of reduced pollution certificates with a
£1,000 rebate is also welcomed as a way of helping to improve
the environmental profile of the vehicle parc without imposing
significant financial penalties.
The SMMT has already responded to the Commission for Integrated
Transport's questionnaire on 44 tonnes. We reiterate our calls
for the general adoption of 44 tonnes on six axles as a way of
further increasing the productivity and environmental performance
of the UK road haulage industry.
Although road traffic has continued to grow, this has not
been matched by investment in the infrastructure. Without a well-maintained
road network, the logistics industry cannot operate at maximum
efficiency and contribute effectively to the UK economy.
Although noise levels have reduced considerably over recent
years, it is the tyre/road interaction, which contributes the
most significant proportion of the noise emitted from vehicles
in operation. If road surfaces are not maintained properly the
benefits of technological improvements to reduce noise are significantly
reduced.
The Government should consider incentives for scrapping of
older trucks to increase the number of cleaner, safer and more
efficient vehicles in operation. It costs over £8,000 a year
more to operate a 1980s vehicle compared to a new model and its
environmental impact is considerably greater.
6. CONCLUSION
The desire to transfer a significant proportion of goods
transported by road to rail is very laudable. However, in reality
it is impossible without increasing costs and delivery times,
two things that would further compromise UK industry's competitiveness
and be unacceptable to most consumers.
Even if the amount of goods transported by rail doubled each
year it would just accommodate the forecasted growth in goods
transported by road. However, transferring goods from road to
rail will have little impact upon congestion. The number of trucks
on the road has stayed fairly constant since 1950, at 0.5 million.
The road haulage industry is vital to the competitiveness
of UK industry and the maintenance of a standard of living we
have all become used to. Manufacturers and operators have made
great strides in improving the environmental and safety performance
of the vehicles and increasing productivity, thereby further benefiting
the environment.
The European haulage industry is becoming increasingly open.
Tax policies of the UK government are benefiting European based
hauliers at the cost of the UK haulage industry. Unless steps
are taken to redress this situation the UK economy will suffer
in terms of increased costs, a loss of jobs and lost tax revenue.
February 2000
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