Memorandum by The Shadow Road Haulage
Forum (RH38)
BACKGROUND
The Shadow Road Haulage Forum was set up in September
1999 as a means for real hauliers, rather than representative
organisations, to express their opinions to politicians and the
media. The haulage industry was concerned that the government
had held just three meetings of their own Road Haulage Forum,
each chaired by a different transport minister, and that there
was no apparent evidence that the government was any more aware
of the problems facing real hauliers.
Large and small-firm hauliers were invited to
a meeting in London with the Conservative Shadow Transport Minister,
Bernard Jenkin, and the Shadow Chief Secretary to the Treasury,
David Heathcoat-Amory. Many views and opinions were expressed,
but the main point raised was that the UK haulage industry cannot
survive with fuel taxes and the road tax for heavier trucks being
so high.
The Leader of the Opposition, William Hague,
also met those who attended the meeting and pledged that the Conservative
party would listen to their petitions.
Over the last few months, the following report
has been drafted using the evidence submitted by those who attended
the September meeting. This report was edited and amended by a
committee of five people with real-life experience of the haulage
industry and who were nominated by the initial meeting. They are:
Edward Stobart, Chairman and Chief Executive
of Eddie Stobart Limited
Jim Dodd, Group Managing Director of Dodd's
Transport Limited
Edward Roderick, Group Chief Executive, Christian
Salvesen PLC
John Newton, NWT Transport
Vaughan Woolfitt, representing British International
Freight Association
This report was created at the initiative of
Bernard Jenkin, the Shadow Transport Minister, but it is not a
Conservative policy document. Instead it is a contribution to
the debate and may provide valuable evidence to MPs, the DETR
Select Committee and members of the media about the current competitive
state of the UK haulage industry.
INTRODUCTION BY
HON BERNARD
JENKIN MP, SHADOW
MINISTER FOR
TRANSPORT
The haulage industry plays a massive role in
the UK economy. A million people are employed in haulage. Freight
companies transport more than 1.5 billion tonnes of goods each
year—they really are the "wheels of the economy".
The industry needs a government that thinks that UK road hauliers
should have a future.
But the current government is pursuing a punitive
tax assault on the haulage sector by forcing up transport costs.
This inevitably forces up the price of goods in the shops. Government
policy is bad for consumers and bad for businesses.
Britain now has the highest fuel tax in Europe.
The road tax on five-axle 40 tonne trucks is 11 times that of
other EU countries. Current government policy is not reducing
the number of trucks on the road. Foreign registered trucks on
UK roads increased last year by 31 per cent. It is a sad fact
that Labour's taxation policy is forcing UK hauliers out of business
and letting foreign lorries replace them.
The Labour government has failed to understand
the true problems that face the road haulage industry. They established
the Road Haulage Forum but it has shown no real evidence that
the government have been listening. How can it, when there have
been three different transport ministers in the nine months that
the Forum has existed?
The first meeting of the Road Haulage Forum
was held in April in reaction to the truckers' demonstration in
London. When it met in July, the meeting was, according to attendees,
"a great disappointment" and "appeared to lack
urgency[31].
At the meeting in September, a representative of the government
admitted they did not have the data to conduct a proper analysis.
This report will give them much of that data.
The haulage industry needs a government that
has some common sense. We responded to the crisis by bringing
together our Shadow Haulage Forum that has drawn up this report
on the costs facing the industry. It is meant to be fair and transparent
and will help shape the transport debate in the run-in to the
next Budget.
This is not a Conservative policy document but
we will pay serious attention to the arguments raised in this
report. We have already acted to help the haulage industry by
introducing our policy for a charge on foreign vehicles using
UK roads and recognising that the annual increases in fuel duty
must end. Gordon Brown has hinted that he has recognised the same
fact but his colleagues have been spinning otherwise. We shall
see what he does at the next Budget. We have also listened to
the arguments for a fuel rebate and will consider the matter further
when more data is available.
Hauliers must also continue to press their argument
before the next Budget. Last year, Gordon Brown didn't mention
the haulage industry at all in his Budget speech and failed to
mention his 12 per cent increase in diesel duty. This time, after
a year of active campaigning from hauliers and politicians, he
cannot avoid the issue.
FUEL DUTY
The problem
The so-called fuel duty escalator is one of the most
pressing concerns for the industry. When it was first introduced
in 1993, it increased the tax on fuel by three per cent per year.
UK fuel prices at that point were lower than many in Europe.
Labour promised not to increase tax. In 1997,
Gordon Brown increased the escalator to six per cent and held
three Budgets in 18 months. Now we have the highest fuel prices
in Europe, if not the world.
Labour disclaim any responsibility for the escalator
but each Budget is a separate policy decision for which they are
accountable. For instance, at the last Budget Gordon Brown ignored
the escalator limit and increased the price of diesel by nearly
12 per cent.
Labour are now taking £6 billion more per
year in fuel duty than the last government.
The current situation
Over 99 per cent of lorries are diesel fuelled.
In the UK, the pump price of diesel is now about 27 pence more
expensive per litre than the EU average—that is a huge 53
per cent more expensive. Yet the pre-tax price of UK diesel is
the same as the EU average. It is tax, therefore, that makes all
the difference. The road freight industry is the only industry
which pays an operating tax—fuel duty—beyond normal
tax requirements.
DIESEL PRICES AND TAXES
EU MEMBERS, 3 JANUARY
2000
| | Pump price
| Taxes and duties
| Pre-tax price |
| | Per litre
| Per litre | % of
pump price
| Per litre |
| Belgium | £0.45
| £0.26 | 57%
| £0.19 |
| Denmark(a) | £0.54
| £0.32 | 60%
| £0.21 |
| Germany | £0.49
| £0.30 | 62%
| £0.19 |
| Greece | £0.40
| £0.22 | 55%
| £0.18 |
| Spain | £0.39
| £0.22 | 57%
| £0.17 |
| France | £0.50
| £0.32 | 64%
| £0.18 |
| Ireland | £0.48
| £0.29 | 60%
| £0.19 |
| Italy(b) | £0.52
| £0.33 | 64%
| £0.19 |
| Luxembourg | £0.39
| £0.21 | 53%
| £0.18 |
| Netherlands | £0.50
| £0.30 | 60%
| £0.20 |
| Austria | £0.46
| £0.26 | 56%
| £0.20 |
| Portugal | £0.34
| £0.20 | 59%
| £0.14 |
| Finland(a) | £0.50
| £0.28 | 56%
| £0.22 |
| Sweden(a) | £0.54
| £0.30 | 56%
| £0.24 |
| United Kingdom(a) | £0.78
| £0.59 | 75%
| £0.19 |
| EU average | £0.51
| £0.33 | 64%
| £0.19 |
Notes: Prices converted to sterling on basis of exchange
rates on 3 January 2000.
Comparisons between countries require care because of differences
in product quality, marketing practices, market structure sales
of other types of fuel.
(a) Ultra low sulphur diesel (less than 0.005 per cent).
(b) Figures for 13 December 1999.
Source: EU Weekly Oil Bulletin.
The Future?
By 2003, the £1 litre will be a reality if prices continue
to increase at the same rate. Labour's policy will then be costing
industry £5 billion per year. In his pre-Budget report of
9 November 1999, Gordon Brown suggested that the fuel duty escalator
would end, but the industry is concerned that the Chancellor was
saying one thing and will do another.
Gordon Brown actually said: "We are now in a position—instead
of the pre-announced 6 per cent—to make our decisions Budget
by Budget, with the following commitment: if there are any real
terms rises in road fuel duties they will be lower and the revenues
will go straight to a ring-fenced fund for the modernisation of
roads and public transport".
However, in a letter dated 4 January 2000 to Christopher
Gill MP, the Financial Secretary, Stephen Timms, said: "The
continuing commitment to the road fuel escalator (meaning that
duties will be increased on average by at least 6 per cent each
year in real terms) is another part of the Government's policy
to reduce emissions of greenhouse gases". Was this a slip
or a moment of honesty, mirroring similar comments made by ministers
in the weeks before the Chancellor's announcement?
Furthermore, table B9 in the pre-Budget report reveals that
the government will increase revenue from fuel duties by £1
billion next year—slightly more than the increase last year
when there was a 6 per cent escalator. So, is the escalator still
here or not? The table below shows how rapidly the amount of fuel
tax that the government takes has increased over the last 5 years.
And where is the money going?
While some of the additional cost has been passed ultimately
onto the consumer, industry has had to absorb most of the costs
increase. The road haulage sector is highly competitive, with
low margins. The fuel escalator has actually had the reverse effect
to that desired by the government. Companies cannot afford to
spend money on upgrading their fleet to new, less polluting vehicles.
Company owners spend more time examining how to keep existing
costs down rather than looking for new, more efficient ways of
organizing distribution.
And it is not as if the industry enjoys any benefit for these
high taxes. Of the £32 billion that the government took from
road users in tax last year, less than £6 billion was spent
on maintaining and improving the road network. That means that
the government has done next to nothing to counter the problems
of congestion and bad road surfacing that push up costs further
on the road haulage sector. Gordon Brown may promise to spend
all the money that he raises in additional taxation on transport
but that would still leave a deficit of £26 billion between
what he taxes and what he spends.
How could hauliers spend this money?
The FTA have used the following example to show how the taxation
could be better spent:
"A haulier operating ten 40 tonne gvw articulated vehicles,
averaging 70,000 miles each year will pay a total of £198,000
in fuel tax this year.
The March 1999 Escalator increase added £18,000 to the
cost of running the fleet. For this money he could:
Equip a third of the fleet with a catalytic converter/particulate
trap. Cost: 3 vehicles @ £5,000 per converter = £15,000
Train each driver in defensive driving with refresher course.
Cost: 10 x 1 day course at 6 monthly intervals @ £80 per
day = £1,600
Inspect and test each vehicle for exhaust gas emissions and engine
performance. Cost: 10 x thrice yearly inspections @ £225
per vehicle per year = £2,250. Total cost = £18,850
Had fuel duty increases since March 1993 been pegged at inflation,
the haulier would be paying £82,000 less in fuel duty each
year, equivalent to the purchase costs of two new, low emission
tractive units at £40,000 each[32]."
The rising price of crude oil
The haulage industry is also hit by the rapidly escalating
price of crude oil. It is this that led to French truckers recently
blockading French ports in protest at high transport costs.
An essential user rebate
In advance of the 1999 Budget, the Road Haulage Association
submitted a proposal to the Chancellor of the Exchequer for an
"Essential User Rebate" for the haulage industry. This
scheme already exists in some other EU countries, including France.
The UK industry was dismayed that the recent French blockade of
the Channel ports resulted in the French government extending
yet further the amount of money that French hauliers can claim
back on their fuel duty. This means that the competitiveness deficit
facing UK international hauliers grows wider.
After the pre-Budget report on 9 November 1999, the RHA sent
an updated proposal for the essential user rebate to the Chancellor.
The proposal was backed up by data from Professor Douglas McWilliams
at the Centre for Economic and Business Research that seemed to
show that the Treasury would actually benefit from granting this
rebate by restricting the amount of money lost to the Exchequer
in foreign cabotage.
The following calculation is based on a price differential
of 31.9 pence per litre between UK prices and the average price
of diesel in France and the Benelux countries.
Impact on tax revenues of the (excluding VAT) diesel price differential
(a) With a price differential of 31.9 pence per litre
and no rebate:
| | £ million
|
| Tax revenues excluding "leakages"
| 3,461 |
| Leakages: |
|
| Cabotage in the UK by foreign hauliers |
1,212 |
| UK hauliers' loss of international business
| 127 |
| Loss from Northern Ireland cross-border fuel purchases
| 85 |
| Loss from UK hauliers' purchases of fuel abroad
| 82 |
| Macro effect of forecast job losses | 810
|
| Impact on fuel usage | 5.2
|
| Impact on fuel efficiency | 1.5
|
| Actual revenue | 1,139
|
(b) With a rebate of 31.9 pence per litre:
| | £ million
|
| Tax revenues excuding "leakages" |
1,313 |
| Leakages: |
|
| Cabotage in the UK by foreign hauliers |
41 |
| UK hauliers' loss of international business
| 0 |
| Loss from Northern Ireland cross-border fuel purchases
| -4 |
| Loss from UK hauliers' purchases of fuel abroad
| 0 |
| Macro effect of forecast job losses | 0
|
| Impact on fuel usage | 0
|
| Impact on fuel efficiency | 0
|
| Actual revenue | 1,275
|
These figures suggest that if the Government offered a rebate
of 100 per cent of the current competitive difference, then the
Exchequer would actually benefit by £136 million per annum.
There are however questions about how the "leakages"
figures were reached.
The haulage industry is the only industry that pays an operating
tax—the fuel duty levy. It would make common sense to introduce
an essential user rebate to restore the UK industry's competitiveness.
The challenge has been laid down to Gordon Brown to look carefully
at such a scheme. We shall see if he decides to introduce it at
the next Budget.
VEHICLE EXCISE
DUTY
The problem
The UK haulage industry is the most overtaxed in Europe. Not only
do British companies have to face the highest diesel prices but
also, at the last Budget, many haulage companies were rocked by
an increase of £2,500 in their vehicle excise duty.
And this doesn't just affect small companies. Brian Yeardley
International of Featherstone in Yorkshire runs 100 trucks. On
Budget day last year the Chancellor presented him with an extra
annual up-front tax burden of a quarter of a million pounds.
Many companies will have no option but to register their
fleet abroad ("flagging out") to save money. Thus, the
government are actually encouraging tax evasion. Minister for
Roads, Lord Whitty, admitted as much in February 1999 saying:
"all hauliers who operate internationally can take advantage
of lower prices elsewhere[33]".
In the last two months of 1999, 1700 trucks were re-registered
in Holland at a saving of £4000 each. That's a loss of £7
million to the Exchequer.
Giving other countries a competitive advantage
Road hauliers in the EU must pay vehicle excise duty to the
government in which their vehicle is registered. Under the Geneva
Convention, a vehicle is entitled to operate in a country other
than the one in which it is licensed. This has had the effect
of allowing EU companies to operate in the UK at a competitive
advantage because of their cheaper transport costs.
The figures on the next page show what a huge gap there is
between the VED set on a 40 tonne lorry in the UK and in the rest
of Europe. In June 1998, the Chancellor was asked what plans he
had to bring VED into line with average levels in EU countries
and the reply was "none" (HC Dec 23 June 98 cc 451-2W).
In fact he went in the opposite direction, increasing VED on 40
tonne trucks by £2,500.
VEHICLE EXCISE DUTY RATES DECEMBER 1998 FOR 40 TONNE TRUCK
(MARCH 1999 FOR UK)
| | VED (£)
|
| Austria | 2,123
|
| Belgium | 929
|
| Denmark | 498
|
| Eire | 1,384
|
| Finland | 1,084
|
| France | 486
|
| Germany | 1,856
|
| Greece | 428
|
| Italy | 634
|
| Luxembourg | 358
|
| Netherlands | 670
|
| Portugal | 308
|
| Spain | 328
|
| Sweden | 1,909
|
UK
(UK price from March 1999) | 5,750
|
Source: FTA.
False incentives on VED rates
The government has been trying to encourage a transition
from four wheeler to six wheeler tractive units by using the tax
system. At present a four wheel 40 tonne truck has a VED of £5,750
while a six wheel 41 tonne truck can be registered for as little
as £280 if it meets new requirements for reduced emissions
levels.
However, many hauliers (including Edward Stobart) have not
found this enough of an incentive, as the table below suggests.
Six wheelers have a fuel consumption that is at least eight per
cent worse than four wheelers. The deterioration in miles per
gallon would have to be less than 0.5 mpg on a six wheeler in
order to break even with a four wheeler. Each 0.1 mpg costs on
average £32 per month or £484 per annum. That means
that a 0.8 mpg disadvantage as shown on the DAF truck below costs
£3,072 per annum in fuel alone.
FUEL EFFICIENCY COMPARISONS—FOUR WHEELER vs SIX
WHEELER
| Truck type | Weight
tonne
| Four wheeler
mpg |
Six wheeler
mpg |
| DAF85 380 | 38
| 8.7 | 7.9
|
| Volvo FH12 | 38/41
| 8.8 | 7.8
|
Source: Operating Accounts for Eddie Stobart Ltd.
There are other additional costs relating to running tractor
units on an extra axle that must be factored in. Not least of
these is the fact that there are two more tyres to replace—thus
increasing the maintenance costs on each truck. Furthermore, because
of the lower power/weight ratio on a six wheeler tractor unit,
they are in fact slower. Over one thousand miles they require
an extra 45 minutes of journey time—one and a half extra
hours per week. This increases the likelihood that a driver's
legal driving time expires before completion of the journey so
that a relief driver has to be called out—thus increasing
costs further.
The government is quite right to try and address the environmental
impact of trucks on UK roads but the current taxation system does
not give hauliers any incentive to change to the six wheeler lorries.
Furthermore, the six wheeler lorries are actually more polluting
than the four wheelers. The current policy therefore shows that
the government does not really understand the challenges and problems
facing the UK industry.
CORPORATION TAX
What the government says
The government have half-heartedly tried to pass over the
vastly high levels of fuel duty and VED in this country by claiming
that they are offset by cheaper rates of corporation tax in this
country:
RATES OF CORPORATION TAX IN THE EUROPEAN UNION
| EU Member State | Main Rate %
| Small Companies
Rate %
|
| Austria | 34
| |
| Belgium | 40.17
| 28.84 |
| Denmark | 34
| |
| Finland | 28
| |
| France | 36.66
| 20.9 |
| Germany | 31.65
| |
| Greece | 35
| |
| Ireland | 28
| 25 |
| Italy | 37
| |
| Luxembourg | 31.2
| 20.8 |
| Netherlands | 35
| |
| Portugal | 34
| 20 |
| Spain | 35
| 30 |
| Sweden | 28
| |
| UK | 30 |
20 |
However, this does not particularly affect the haulage industry
as corporation tax is only paid on profits above a certain rate.
If our lower rate of corporation tax made such a competitive difference
then why is there not a deluge of Continental firms rushing to
register in the UK? This is yet another example of the government
trying to deflect attention away from the real problems. A sop
on corporation tax—when it barely affects most haulage companies—is
not an excuse for the punitive fuel and VED costs.
The UK costs of running a 40 tonne truck are some 15 per
cent higher than on the Continent. In an industry that makes an
average profit margin of two per cent, the marginal differences
in corporation tax are not relevant.
TWO OTHER
HURDLES THAT
INTERNATIONAL HAULIERS
FACE: EVIDENCE
FROM INTERNATIONAL
HAULIER JOHN
NEWTON OF
NWT LTD
The strength of the Pound
In basic terms: there are two ways in which a manufacturer sells
his products—"Ex Works" which means that his customer
pays the freight charges, or "Free Domicile" in which
case the manufacturer pays the freight charges.
Over the past 12 to 18 months we have seen a notable increase
in export cargo from the UK going over to Ex Works because of
the strength of the pound, so that they can make major savings
when buying British goods. For example, back in May 1998 the pound
against the lira was around 2650:1. Currently it is 3140:1.
As transport rates have not increased to any extent over
the past two years a rate of £900 from Birmingham to Milan
is about average. At 1998 prices an Italian would get L2,385,000
as revenue for that rate. At current prices he can do the same
job still paid in lire for about £759—£150 lower
than a British truck can or wants to do it. This is causing a
lot of lost business for the UK international haulage industry.
European Operators using non EU labour
The operating practices of some international companies such
as Willie Betz has created a situation where they are cracking
not only British transporters but also EU hauliers in general.
They are "aligned" to one major producer of trucks
in Germany and, because they are now operating more than 5,000
vehicles, they are getting a much reduced cost for keeping production
lines going in Germany.
Then they are employing Eastern European labour on, so we
understand, around £60 per week—a pittance in Western
Europe but an average to good wage in Romania—thus saving
themselves a fortune in labour costs and boosting their competitiveness.
This, as in the argument above, means that foreign companies can
do an international haul for £150-£250 less than British
companies.
For safety reasons, UK companies are unwilling to employ
drivers from outside the EU, even if this would save money. Once
again the foreign companies are bending the letter of EU law to
suit themselves while Britain remains honest and suffers.
WILL THESE
EXTRA TAXES
HELP THE
ENVIRONMENT?
What is the purpose of the fuel duty escalator?
The current and previous government have both tried to use the
environment as a pretext for raising transport taxes, but this
ignores the fact that, despite increasing numbers of vehicles
on UK roads, the volume of toxic pollutants has decreased dramatically
in recent years and CO2 has levelled off and will also
start to decline. Britain's trucks now produce a tiny three per
cent of all CO2 emissions compared with 17 per cent
from cars and a staggering 33 per cent from the UK power stations
that the government are supporting.
It is technology, not taxation, that will reduce global warming,
but in the current tax climate companies cannot afford to invest
in replacing old vehicles with more environmentally friendly ones.
No other EU country has a fuel escalator as part of its national
strategy for achieving its environmental commitments under the
Rio treaty. But Gordon Brown himself even admitted in his pre-Budget
report that the fuel increases had not been primarily for environmental
reasons saying "the escalator has been needed to reduced
the £28 billion deficit that we inherited".
This rare honesty goes against the spin from the Treasury
Minister, Patricia Hewitt, in February 1999 when she said, "the
road fuel duty escalator is estimated to reduce carbon dioxide
emissions[34]".
Lorries cause damage to roads and bridges and are part of
the cause of congestion. Vehicle emissions have an impact on air
quality and public health. The road haulage industry is taking
measures to reduce noise and pollution and to minimize such things
as empty running but road traffic is nonetheless forecast to increase
by at least 38 per cent over the next 20 years. The government
must realise that their taxation policies are not working.
All that is happening is that UK companies are going out
of business, losing their place on the roads to foreign companies
that can operate at a competitive advantage. These trucks are
paying cheaper fuel tax and cheaper excise duty to other governments
and are not subject to the same stringent regulations on pollution
control as are British trucks. The government policy therefore
is actually leading to worse pollution.
Nearly one in ten of the heaviest lorries on UK roads is
a foreign vehicle running on low tax fuel. Foreign fuel, which
is also burnt in many UK trucks, is dirtier and more polluting
than UK "green diesel". Each month 8000 more foreign
lorries come to the UK than in the same period a year ago. Since
1997, the number of UK-registered haulage vehicles taking freight
from Britain to Europe has increased by only 2.8 per cent. This
comes nowhere near the explosion in foreign-registered trucks:
— Danish-registered freight has increased by 125
per cent
— Belgium-Luxembourg registered freight increased
by 69 per cent
— Dutch-registered freight has increased by 36 per
cent
— French-registered freight has increased by 25
per cent
The government have offered a "reduced pollution certificate"
which gives a £1000 rebate for what they class as "cleaner
engines". But this has been poorly aimed. The certification
scheme favours Euro2 engines over the cleaner Euro3 engines.
The EU's enhanced environmental vehicle exhaust emission
standards was introduced to avoid individual EU states deciding
their own pollutant levels on which to base financial incentive
schemes. This was designed to avoid manufacturers having to divert
their research and development resources away from the Euro3 and
Euro4 targeted development programmes.
Consequently there is consternation in Brussels over the
UK's reduced pollution certification scheme which seems to go
against EU standards. It arbitrarily ignores NOX and other emissions
since it requires compliance only with a sliding scale of particulate
matter.
The UK regulation also strangely dictates that the lower
the engine's emissions are to start with, the more they must be
further lowered to qualify for the rebate. The Labour government
acted alone before the EU levels were published and it is now
almost certain that the pollution certificate qualifying levels
will be tightened again to correct the wrong assumptions made
originally. This will mean that those hauliers who made modifications
to their vehicles or bought new vehicles to meet the qualifying
standard will now have to spend a further £5000 per vehicle
in fitting a particulate trap to get the rebate.
The government, by introducing this short termist measure,
has diverted manufacturers' efforts away from long-term environmental
solutions. This mistake will only yet again hurt the competitiveness
of the UK market.
JOB LOSSES
What will be the effect on jobs of these extra taxes
The haulage industry employs about a million people—drivers
and ancillary staff in warehouses, workshops and offices. Because
of the extra taxes on fuel and VED corners will have to be cut.
In some cases this means that the consumer will foot the bill
for the extra costs of transport. In other instances, particularly
among smaller businesses, jobs will have to go.
The RHA commissioned a report from the Centre for Economic
and Business Research about the effects on jobs in the UK industry
of the government's taxation policies. According to the extract
of the report quoted in the joint submission with FTA before the
last Budget, as a result of the government's policies the UK would
suffer job losses of 53,000 and a reduction in GDP of £2.1
billion (two per cent). The RHA and FTA joined other industry
groups such as the CBI and the Federation of Small Businesses
in highlighting this in a letter to The Times.
The CEBR analysis examined the likely loss of jobs for the
next three years taking into account the increase in differential
between UK and European fuel prices if diesel continued to increase
by six per cent. This did not, therefore, factor in the hike of
nearly 12 per cent on diesel at the last Budget.
| Price differential—forecast | Loss of jobs
|
| 1999 differential (24.0 pence per litre) |
10,550 |
| 2000 differential (27.4 pence per litre) |
32,100 |
| 2001 differential (31.1 pence per litre) |
42,740 |
| 2002 differential (35.2 pence per litre) |
52,930 |
THE HAULAGE
CRISIS IN
THE WORDS
OF ONE
INTERNATIONAL HAULIER
What a haulier said
Just after the 1999 Budget—in which Gordon Brown increased
diesel duty by 12 per cent and raised VED on the workhorse of
the industry to £5,750—a major international haulier,
Brian Yeardley, wrote a letter to all MPs.
He broke down the tax burden that his company would now pay:
"We pay £2,800 more per vehicle in GHV Road Fund
Licence than any other European country
"£210,000 per year in extra costs to our company
"To operate at forty tonnes it will cost £390,000
more than Norbert Dentressangle, Willie Betz and all other foreign
competitors
"Buying diesel in the UK, our company would spend at
least one million and fifty seven thousand pounds more annually
than our competitors abroad.
"Each of our vehicles must earn £17,000 more annually
than our European competitors to cover these extra tax costs.
That is equivalent to an extra cost of £340 per vehicle per
week for our company. Even the abolition of Corporation tax, Income
tax and National Insurance could not cancel out this difference".
More recently Brian Yeardley confirmed that he has a voluntary
agreement with receivers to keep his business running.
What the government said
After the Budget, when pressure started to be placed publicly
on the government by the haulage sector and the Conservative party,
the government started citing from a report by KPMG as "proof"
that UK hauliers are not at a significant disadvantage.
This report was intended as a guide for industrial and service
businesses that may be deciding in what country to locate their
operations. It concluded that Britain and Austria were the best
places to locate businesses because of "compact market areas".
It was not aimed at the road haulage sector nor an indication
of its competitiveness. It is completely irrelevant to the costs
per mile of running a UK registered truck on UK purchased fuel
in competition with other EU hauliers on the same roads.
Furthermore, the survey data used in the KPMG report to calculate
road freight costs in the UK was from company records dating back
to the end of the 1996/97 financial year—more than two years
out of date and not reflecting Labour's first three Budgets.
Finally, the data was based on the records of only one UK
transport company and that, by coincidence, was Brian Yeardley
International of Featherstone. The government was therefore trying
to use the one haulier who had so evocatively summed up the problems
of his industry as an excuse to say "crisis? What crisis?"
Another report was produced more recently by Ernst and Young,
which concentrated exclusively on the road haulage industry. This
report said that there is now "a wider disparity between
the UK and the rest of Europe on vehicle tax and diesel costs".
Compared with UK operation Ernst and Young identified the
costs were 21 per cent less in Belgium and France and 23 per cent
less in Luxembourg.
Ernst and Young admitted that "compared against hauliers
in Belgium, Luxembourg and France, UK operators are at a disadvantage".
And UK hauliers that operate internationally must also pay road
tolls on most European major routes, something that foreign hauliers
that operate in Britain do not face.
The Eurovignette toll was introduced for trucks in Germany,
Denmark and Benelux on 1 Jan 1995. It is a road user charging
scheme whereby hauliers buy a pass that allows them to operate
on those countries' trunk roads. Sweden joined this scheme in
1997 but it applies to all HGVs whether from that country or not.
UK hauliers that operate in those countries must pay an annual
maximum rate of about £840. France, Italy, Austria, Spain,
Greece and Portugal operate road tolls instead.
QUOTES ON
THE HAULAGE
CRISIS
The freight industry is vital for Britain. An efficient distribution
system is the lifeblood of our economy . . . We will listen carefully
to the needs of the industry. Government Transport White Paper,
July 1998.
As a result of the substantial increases in Vehicle Excise
Duty announced at the last Budget we, and many other hauliers,
had no alternative but to consider registering vehicles in Europe.
This does not make sense for either hauliers or the UK economy,
as less revenue will be raised for the Treasury. Unless something
is done quickly regarding the high level of fuel duty in the UK
then foreign vehicles will enter the country in increasing numbers
contributing nothing to the UK economy while putting UK haulage
drivers jobs at risk. Edward Stobart, Eddie Stobart Ltd.
The Chancellor has ensured that we are uncompetitive against
foreign hauliers whilst proclaiming that it is his intention that
the UK should lead the world in competitiveness. Brian Yeardley.
Most hauliers are not earning money through general haulage.
They have been starved of profitable work over the last three
to four years. We are unable in most circumstances to get increased
rates to cover the increased costs thus eroding our margins. The
haulage industry is dying. Jim Dodd, Dodd's Transport.
When we register our company in Holland we gain £2,600
in savings per truck and we come home with tanks full of cheap
fuel. The government will lose £3,200 per truck on excise.
The government loses tax on our cheap fuel. The government loses
tax from the driver employed by a Dutch company. The government
loses our VAT. The government loses our Corporation Tax. Our truck
will still operate in the UK. The government keeps the damage
to roads and pollution. Well done! Quote from H Frost and Sons
(before the last Budget)
It is the duty of government to decide on the levy of tax
and its distribution but this is being disproportionately applied
to the UK haulage industry. We are without doubt the world leaders
in logistics skills and the most efficient logistics market place,
so why are the government endangering the industry and British
competitiveness with this unwarranted attack? Edward Roderick,
Christian Salvesen.
We really do need to be able to compete with foreign vehicles
in a fair market place. This is vital to the existence of UK hauliers
to compete and maintain employment levels. Vaughan Woolfitt, MARU
International Ltd.
Transport costs are one of a number of major determinants
of the costs of getting goods to market, and local cost levels
will dictate the extent to which any one country is a future part
of the European business pattern. The European competitive environment
increasingly encourages hauliers from different countries to compete,
and any major differences in their cost base will clearly impact
on the performance of individual businesses. Alan Waller, Visiting
Professor, Cranfield School of Management.
31
From joint letter from FTA and RHA to Helen Liddell, then Transport
Minister, 20 July 1999 Back
32
From an FTA leaflet produced for the Labour Party Conference,
Bournemouth, September 1999 Back
33
Extract from a letter from Lord Whitty to Peter Atkinson MP, 23
February 1999 Back
34
Parliamentary Question, 25 February 1999, Hansard c 426W. Back
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