Memorandum by the Department of the Environment
Transport and the Regions (RH 48)
INTRODUCTION—THE
GOVERNMENT'S
SUSTAINABLE DISTRIBUTION
STRATEGY
1. The Government set out its policies for freight
transport, including road haulage, in the Integrated Transport
White Paper and in the follow-up document "Sustainable Distribution:
A Strategy", published in March 1999.
2. The Government fully recognises the vital
role of the freight distribution and logistics sector in supporting
economic growth. Government objectives are to promote an efficient
distribution industry, working within a fair market, supported
by good transport infrastructure and observing high standards
of safety and environmental protection.
3. The Government's view, set out in "Sustainable
Distribution" is that there is no inherent, long-term conflict
between economic, social and environmental objectives. Efficient
logistics practices can meet all three of these objectives through
minimising the use of vehicles, fuel, waste, land take and other
assets. The UK is fortunate in having established a world leading
position in logistics. However, Government and industry studies
of operational efficiency show that the gap between the best and
the least efficient companies in the sector is large, indicating
there is room for improvement. Continuous improvement is needed
in order to sustain our competitive advantage.
4. The Sustainable Distribution Strategy
details a wide range of initiatives designed, as a package, to
help achieve our economic, social and environmental goals. In
implementing the strategy, the Government is working in close
partnership with industry to promote best practice, such as reductions
in energy intensity and improvements in vehicle utilisation. The
Government can play an important facilitative role in helping
to spread best practice; in effect, helping the industry to learn
from itself. Examples include the Energy Efficiency Best Practice
Programme, the Department's work on operational performance indicators
and the new "Improving Business Performance" sub-group
of the Road Haulage Forum.
5. The Government continues, in parallel,
to promote alternative modes of freight transport, including rail,
shipping and inland waterways. These have an important contribution
to make to reducing local congestion and pollution. However, under
any realistic scenario lorries will continue to carry the large
majority of freight moved, so the aim of promoting efficient,
safe and environmentally responsible practices within the road
distribution sector is critical to the achievement of overall
transport policy aims.
The role of the road haulage industry, the way
in which it operates, its contribution to the economy of the United
Kingdom
6. The distribution sector as whole includes
a range of activities that are wider than transport, although
transport is obviously the major element. The term logistics describes
the management of the supply chain in the wider sense and extends
from the delivery of raw materials for manufacturing, through
the management of the production process, warehousing, handling
and packing to final distribution to the point of consumption.
Insofar as it is possible to separate the transport elements of
logistics from retail, commercial and industrial activities, they
account for at least four per cent of GDP, valued at around £55
billion a year. There are over one million jobs in commercial
transport and warehousing activities, three per cent of total
employment. The principle economic importance of transport is
as a contributor to economic growth by giving manufacturers access
to a wider range of supplies from different sources and consumers
access to a wider range of goods and services, both domestic and
international. This is particularly important to the UK because
20 per cent of our economic activity comes from international
trade in goods.
7. There are about 108,000 licensed heavy
goods vehicle[35]
(HGV) operators in Great Britain, 90 per cent of whom have fleets
of five or fewer vehicles and 50 per cent of whom have one vehicle.
In 1998 there were 419,000 licensed heavy goods vehicles—the
numbers of which have been declining since 1989—and two
million light vans[36].
The number of HGVs has remained in the 4-600,000 range since the
end of the Second World War. But over that period HGVs have got
larger and heavier and are used more intensively and efficiently.
Over the same period, the number of cars has increased from 2
to 22 million. About 60 per cent of HGV activity is haulage, those
who move others' goods for hire or reward, and the rest is own-account—companies,
such as BP or Tesco, who move goods in their own right. Road freight
accounts for 65 per cent of UK freight movements (tonne-kms),
water 23 per cent, pipeline 5 per cent and rail 7 per cent.
8. The movement of freight is a direct result
of other economic activity giving rise to the need to supply raw
materials, goods or services. Over the last 10 years HGV traffic,
measured in tonne/kilometres, has grown. There are a number of
reasons for this:
— since the mid 1980s there has been
a major change in the way distribution is organised—with
larger vehicles taking advantage of the motorway system to operate
from a smaller number of regionally based distribution centres;
— larger and more specialised manufacturing
plants which require more inter-plant transport and can be further
from supply source and markets;
— additional products (eg, high value
products and pre-prepared and chilled foods);
— wider national and international
sourcing which has enabled producers to develop new products and
sell to more dispersed customers, and;
— demands for more frequent and reliable
deliveries as stockholdings have been reduced throughout the supply
chain.
9. None of the above are unique to the UK.
The UK is generally recognised as a world leader in logistics
supply chain management. The size of our logistics sector as a
whole, as distinct from the transport component, as a proportion
of GDP is the second lowest in the world at 10.62 per cent, beaten
only by the USA at 10.49 per cent. Europe averages 11.79 per cent.
10. The Government is committed to maintaining
the UK's position at the competitive edge.
The impact of the road freight industry on the
environment
11. The activities of the road haulage industry
have a major impact on the environment, in terms of air quality,
noise and climate change.
12. On air quality, HGVs accounted for a
third of all emissions of particles (PM10) and (NOx)—the
two air pollutants of most concern—from road transport in
1999. Significant progress in reducing emissions from new lorries
is being made to meet progressively tighter European vehicle emission
and fuel quality standards. This will mean that by 2005 all new
lorries will be fitted with particulate traps which can reduce
PM10 emissions by up to 80 per cent. Overall, emissions of PM10s
from HGVs are expected to halve nationally by 2005, while NOx
emissions will decrease by a third.
13. Noise from HGVs can be intrusive, especially
at night or in sensitive urban areas. Tighter vehicle noise standards
have halved engine noise from HGVs over the last decade, and steps
are being taken to reduce body rattle. There are also other solutions,
for instance HGVs powered by natural gas are up to 6DbA quieter
than their diesel counterparts.
14. On climate change, HGVs were responsible
for 24 per cent of carbon dioxide emissions from road transport
in 1997, making them the second largest source after cars (seven
per cent of total CO2 emissions and one of the few
sectors will growing). Although the fuel efficiency of both rigid
and articulated lorries has improved by ten per cent over the
last decade, this has been off-set by the growth in traffic and
further improvements are needed. These improvements will need
to be made by a combination of technological changes—such
as the development of more efficient heavy duty engines and the
greater use of aerodynamic styling—and action by road hauliers,
for instance better driving training.
15. More information on the environmental
impact of the road haulage industry is contained in Sustainable
Distribution: A Strategy.
The impact on the road freight industry of current
and past rates of vehicles excise and fuel duty
16. Changes to vehicle excise duty (VED) and
road fuel duty affect the costs incurred in operating HGVs. These
vehicle operating costs will in turn affect the cost of road haulage
operations and are one of the factors which determine the competitiveness
of UK hauliers.
Effects on UK industry
17. It is estimated that, together, fuel
duty and VED account for approximately 25 per cent of HGV operating
costs. In turn, road transport accounts for approximately 5 per
cent of end-product costs in the UK. Changes to costs in haulage
will therefore have a small effect on end-product costs, though
the degree varies with products transported. (Using a very simple
analysis, the removal of all taxes for fuel would reduce end-product
costs by only 1.25 per cent.)
18. This demonstrates that the demand for
end-proudcts is relatively unaffected by vehicle operating costs.
Marginal changes in fuel duty and VED are unlikely to have a significant
effect on the demand for goods which use road haulage.
Effect on UK hauliers
19. The highly competitive nature of the
road haulage market means that firms have strong incentives to
improve fuel efficiency. Interestingly, the DETR and FTA fuel
consumption guide shows that the best performing fleets achieve
almost double the fuel efficiency of the worst. It appears, therefore,
that there is considerable scope for improvements in fleet fuel
consumption rates; this is one focus of DETR's best practice programme.
20. Of paramount importance to hauliers
will be costs per tonne/kilometre. Therefore, haulage operators
who can manage to secure more backloads will be able to save on
fuel costs per tonne/kilometre (even if they had somewhat lower
fuel efficiency). Large firms are most able to restructure their
logistics systems to minimise empty running and to pay for the
fixed costs of fleet and fuel-management systems but there are
also examples of smaller firms who have been very successful in
achieving these objectives.
21. Vehicle choice by hauliers depends on
a combination of operational need, regulatory requirements and
VED rates. Rates of VED vary with maximum gross vehicle weight
and axle configuration. Registration statistics show that hauliers
tend first to choose their axle configuration dependant upon their
volume carrying and use requirements, an then select the maximum
permissible weight. Fuel efficiency per tonne moved will be a
factor in this decision.
22. Evidence on the impact of changes in
Vehicle Excise Duty on the road haulage industry is limited. This
is largely because the structure of rates has remained similar
over time and, in recent years, most VED rates have been frozen.
It is clear, however, that in general vehicle operators tend to
plate—and therefore tax—their vehicles at the maximum
weight permitted for their vehicle configuration by the Construction
and Use Regulations in order to preserve the maximum operational
flexibility. All the evidence indicates that, at current rates,
regulations are move important in vehicle choice than VED.
Competition between UK and foreign hauliers
23. The Government shares the industry's
aim that UK road hauliers should be able to compete successfully
against foreign operators and has established the Road Haulage
Forum which, amongst other things, looks into the competitive
pressures they face. The Forum has held a series of very constructive
meetings since it was established in April 1999, the most recent
of which was chaired by Lord Macdonald on 9 February. These meetings
continue to provide the opportunity for closer Government and
industry co-operation in assessing the competitiveness of the
industry and discussing ways to enhance it. Competitiveness has
been the Forum's principal task and a subgroup is devoted to looking
at it.
24. The Competitiveness sub-group of the
Forum has examined in detail many of the issues facing the industry,
including cabotage and flagging out. It has also assembled figures
relating to costs faced by British and Continental hauliers. There
remain uncertainties and difficulties of interpretation which
require further work, which the Forum has put in hand. Selective
comparison of costs does not present a balanced picture: in trying
to establish the UK's cost-competitiveness vis-a-vis its continental
competitors it is necessary to have as accurate and detailed a
picture as possible of all costs, including the total tax burden,
labour and other operating costs, and the burden of regulation
faced by haulage companies in different Member States. This the
Forum is still engaged in considering.
25. However it must also be acknowledged
that cost-competitiveness is itself only part of the picture.
It is the haulier's prices, not his costs, that determine the
customer's response, and it has always been open to international
hauliers to quote low, marginally-based prices for return loads
to their countries of origin. At a time when, for various reasons,
there has been an increase in the numbers of continental hauliers
bringing imports into the UK, this factor is bound to place additional
pressures on UK international hauliers quoting for UK export business.
Moreover, relative levels of efficiency and overcapacity within
the UK haulage industry itself plays a significant part in dictating
the relative competitiveness of different UK haulage firms.
26. In developing a mature sponsorship role
towards the industry four other subgroups have been set up—with
extra members from outside—to focus on the following issues.
— Environment and Track Costs—the
Forum has brought under its umbrella the research work being carried
out by the National Economic Research Associates (NERA) for DETR
into the environmental and track costs of goods vehicles, which
is intended to inform decision-making on VED rates for goods vehicles,
as part of the fundamental review of lorry vehicle excise duty
announced by the Chancellor. It is overseen by an Advisory Board
comprising members drawn from the road haulage industry, the vehicle
manufacturers, environmentalists and academics, as well as officials
from the Treasury, DETR and DTI.
— Compliance and Enforcement—this
group will look at the effectiveness and targeting of existing
compliance and enforcement work and recommend changes to increase
effectiveness.
— Improving Business Performance—this
group will take forward the agenda which was set out in the Government
integrated transport paper Sustainable Distribution: A Strategy
earlier this year, and will consider how small hauliers can best
make use of the Small Business Service.
— Working Time Directive—the
Forum agreed at its meeting on 9 February that the UK's negotiating
hand on this difficult and complex issue would be enhanced if
the areas of agreement within the haulage industry social partners
could be more clearly established.
27. Since it was set up the Forum has:
— commissioned a survey to establish
the extent to which levels of cabotage (domestic UK haulage performed
by foreign hauliers) have changed since a European Commission
report in 1997 showed that foreign lorries were responsible for
0.04 per cent of domestic UK haulage;
— noted that the extent of overcapacity
is unclear, and exacerbated by increased international competition
and by those hauliers who operate below acceptable standards.
Further work can consider this in more detail. The Government
is committed to legislation to allow the impounding of vehicles
used by illegal operators;
— noted that the complexities of "flagging
out" from the UK are now more widely recognised, as is the
limitation in the scope to which vehicles that have been flagged
out may qualify for exemption from Vehicle Excise Duty (VED);
— agreed that detailed work will continue
to strengthen information about the extent of international competition
in the UK and from low-cost East European haulage firms operating
across the whole EU;
— has appointed consultants (NERA)
to identify gaps in our information.
28. The Forum is continuing to work on various
different areas and in a number of different sub-groups to improve
its collective understanding of the factors affecting competitiveness
and other matters and to collect ideas, information and statistics
which will help to inform Government thinking and the development
of policies affecting the haulage industry.
The regulations which govern the industry and
their impact on the safety record and profitability of the industry.
29. The road freight industry has been deregulated,
in terms of quantitative and price setting restrictions, for over
30 years. Regulation focuses on quality and safety and the following
main areas of regulation impact upon the industry.
Driver Licensing
30. Separate licences are required for medium
sized goods vehicles between 3.5 and 7.5 tonnes and large goods
vehicles over 7.5 tonnes—and in both cases where their trailers
exceed 750kg. The normal minimum age for driving all such vehicles
is 21. These provisions derive from EU legislation.
Operator Licensing
31. The licensing by Traffic Commissioners[37]
of operators of goods vehicles over 3.5 tonnes is intended to
ensure the safe use of such vehicles and fair competition between
operators. A Commissioner must be satisfied that the applicant
is fit to hold a licence; has a suitable operating centre with
proper maintenance facilities and sufficient finance to keep the
vehicles roadworthy.
Access to the Profession
32. EU rules on access to the profession
of goods vehicle operator, which cover good repute, financial
standing and professional competence are incorporated into the
operator licensing system. In 1999 these were revised to require
operators to have greater financial resources and to toughen the
Certificate of Professional Competence (CPC) examination which
must be passed by operators or their transport managers.
Vehicle Construction and Use
33. Construction and use (C&U) regulations
govern the important aspects of vehicle design—brakes, suspension,
weights, dimensions, etc—and are aligned with the relevant
EC Directives. The maximum general weight limit for articulated
vehicles is 40 tonnes on five axles (aligned with the EU limit
for international movements), 41 tonnes on six axles and 44 tonnes
on six axles for certain road/rail movements.
34. Measures implemented by C&U regulations
for goods vehicles include sideguards, rear underrun guards and
spray suppression devices. UK goods vehicle dimensions are harmonised
with those of most other EU Member States and EC Directive 96/53/EC
now sets mandatory dimensions for all Member States.
EU Drivers' Hours and Tachograph Regulations
35. EU Regulations which apply to the drivers
of most HGV operations set maximum limits on driving time and
minimum limits for breaks and daily and weekly rest. These rules
extend into certain Eastern European countries through a UNECE
Agreement known as the AETR. Drivers' hours are enforced using
the tachograph.
Speed Limiters
36. Domestic legislation requires speed
limiters set at 60 mph to be fitted to HGVs between 7.5 and 12
tonnes. EU legislation requires limiters set at 85 km/h (52.8
mph) to be fitted to HGVs over 12 tonnes.
Transport of Dangerous Goods
37. An EU Directive requires Members States
to harmonise their domestic regulations on the road transport
of dangerous goods with the provisions of a UNECE International
Agreement (ADR) on road transport of such goods. A similar Directive
applies to rail transport. The UK implemented the original Directive
with a set of four regulations in 1996 covering the design, inspection
and marking of vehicles; the classification, packaging and labelling
of dangerous goods and requirements for drivers to receive training
and obtain an appropriate vocational training certificate.
ENFORCEMENT
38. The Vehicle Inspectorate (VI) is responsible
for enforcing HGV regulations. Enforcement is also carried out
by the Police and, on overloading, by local authority trading
standards officers.
The Vehicle Inspectorate
39. VI enforcement activity is conducted
through annual testing and roadside checks of goods vehicles.
All testing and checking is aimed at maintaining and improving
road safety and environmental standards. Where offences are found,
prohibitions are issued (in some cases preventing further movement
of vehicles) and, in more serious instances, cases are prosecuted
also. VI report all findings to Traffic Commissioners to enable
them to consider action against the licensed operator.
Annual Roadworthiness Testing
40. Annual testing of goods vehicles is
carried out at VI's Goods Vehicle Testing Stations and in some
cases at operators' premises.
| HGV (Motor Vehicles) Failure Rates
| 1998-99 |
| Initial | 36.6%
|
| Final | 25.0%
|
| Re-test | 12.7%
|
Roadside Checks
41. VI inspections of goods vehicles at roadside checks
cover three main areas:
Roadworthiness
42. Roadside checks broadly follow the same standards
as for annual testing. Examiners issue immediate prohibitions
on vehicles with defects that pose an immediate risk to road safety.
For less serious defects—where there is no immediate danger
but where the defect must be rectified—a delayed prohibition
allows up to 10 days for the repair to be made. Examiners also
inspect vehicles at the operators' premises.
| HGV (Motor Vehicles) | 1998-99
|
| Inspected | 69,718
|
| Immediate Prohibitions | 8.8%
|
| Delayed Prohibitions | 12.8%
|
Drivers Hours and Tachographs
43. Examiners inspect tachograph charts and vehicles
for compliance with tachograph and drivers' hours rules. Targeting
for these and other traffic offences has been improved by the
introduction of an Intelligence Unit gathering information on
likely offenders from other sources.
| | 1998-99
|
| Vehicles Examined | 148,231
|
| Charts Examined | 1,417,646
|
| Reported for prosecution | 11,595
|
Weighing
44. Weight checks are carried out at fixed weighbridge
sites. In addition, VI use portable weighpads at other locations.
Minor overloads are punished by prohibition (the vehicle is prevented
from further movement until the overload is rectified) and more
serious offences by prohibition and prosecution.
| | 1998-99
|
| Weighed | 54,875
|
| Prohibited | 3,284
|
| Prosecuted | 3,765
|
Since maximum lorry and axle weights were aligned with the
rest of the EU on 1 January 1999, there has been a marked reduction
in the number of overloaded vehicles detected.
The funding of enforcement
45. The funding of VI's enforcement and other activities
is paid for out of the revenue raised by operator licence fees.
HM Treasury has now given permission for this revenue, together
with Court awards for costs, to be hypothecated. This will allow
DETR to authorise the raising of "O" Licence fees to
fund additional enforcement.
De-Regulation and liberalisation within Europe
46. Although the UK moved from quantitative to qualitative
operator licensing in the 1960s, many other European countries
continued to restrict their haulage industries until relatively
recently. Greece and Spain still apply quantity licensing regimes.
47. For many years international road haulage operations
within the EU were regulated by bilateral agreements between governments
which guaranteed rights of access to visiting hauliers but limited
the number of journeys which could be made within a given period.
In 1993 permits and quotas within the EU were abolished and replaced
with the Community authorisation. In the UK Traffic Commissioners
issue these to all holders of international goods vehicle operator
licences. An authorisation enables hire or reward operators to
operate freely within the single market.
48. Liberalisation of the international haulage market
has been accompanied by progressive liberalisation of cabotage—the
operation of national services by non-resident carriers. Full
liberalisation of cabotage, the abolition of permits, was achieved
on 1 July 1998.
Accidents
49. Lorries are less likely to be involved in injury
accidents than cars because there are far fewer lorries on the
roads. Where lorries are involved in accidents they tend to be
more serious because of the mass of the vehicles, particularly
compared with cars. Taking account of distance travelled, lorries
are more likely to be involved in fatal accidents than cars but,
over all roads, are less likely to be involved in serious accidents.
50. It should not be assumed that accidents involving
lorries are necessarily caused by lorries. The data held on injury
accidents do not enable any systematic evaluation of accident
causation to be carried out.
VEHICLE INVOLVEMENT RATES IN INJURY ACCIDENTS BY VEHICLE
TYPE, ROAD CLASS AND ACCIDENT SEVERITY (RATE PER 100 MILLION VEHICLE
KILOMETRES)
| |
| Fatal | Fatal or serious
| All severities |
| HGVs | Built-up roads | 1.8
| 13 | 78
|
| HGVs | Non built-up roads |
2.6 | 12
| 45 |
| HGVs | Motorways | 1.0
| 5 | 23
|
| Cars | Built-up roads | 0.8
| 16 | 142
|
| Cars | Non built-up roads |
1.5 | 11
| 58 |
| Cars | Motorways | 0.3
| 3 | 25
|
| All motor vehicles | Built-up roads
| 0.9 | 18
| 145 |
| All motor vehicles | Non built-up roads
| 1.7 | 12
| 58 |
| All motor vehicles | Motorways
| 0.5 | 3
| 25 |
Source: Road Accidents Great Britain.
What changes to Government policies affecting the road haulage
industry are needed to benefit the economy and the environment
51. Sustainable distribution is the right objective both
for industry and for Government, and a close working partnership
is the right way to achieve it. As stated earlier in this paper,
there is no structural or longer-term conflict between economic,
social and environmental objectives. Indeed, they are mutually
supportive, as economic growth cannot be sustained if it is delivered
at the price of environmental degradation or unfairness to important
sections of society. A concerted and sustained focus on promoting
best practice throughout the industry—in operating efficiency,
in environmental protection and in safety—is the way forward,
as set out in the Government's strategy document.
52. As indicated, a number of policy areas are subject
to EU legislation, these include: technical and safety standards
for vehicles, lorry dimensions and international lorry weights;
drivers' hours and tachographs; the transport of dangerous goods,
speed limiters and standards for entry to the profession of road
haulier. EU legislation on front underrun guards for lorries is
likely to be implemented from 2003. A new Directive limiting working
time for mobile workers is under consideration.
53. In addition to the areas being considered by the
Road Haulage Forum described above, there are a number of areas
of domestic policy undergoing, or about to undergo, review.
54. The Commission for Integrated Transport (CfIT) is
considering the case for raising the maximum general lorry weight
limit for six axle lorries from 41 to 44 tonnes. CfIT has been
asked to consider the best solution consistent with the Government's
approach for integrated and sustainable transport. CfIT have considered
a range of evidence and responses to consultation and commissioned
a detailed study.
55. The impact on the haulage industry of transport expenditure
and investment will be considered by the Government in the context
of the 2000 Spending Review and the 10-year Integrated Transport
investment plan.
56. The NAO have commenced work on a Value for Money
Study on Large Vehicle Safety. They will examine the work of the
Traffic Commissioners, VI and the police in reducing road accidents
involving large vehicles. They will consider whether:
— Enforcement activity is well co-ordinated and
targeted at areas of greatest risk;
— Enforcement activity is effective in promoting
compliance with regulations; and
— The operator licensing system makes an effective
contribution to road safety.
We expect the findings of the Preliminary Study by the end
of February. This may include a recommendation to carry out a
more comprehensive study.
57. The Government's Transport Bill will enable local
authorities to introduce road user charging to manage traffic
and tackle congestion as part of a local transport plan.
58. All taxation measures are considered by the Chancellor
of the Exchequer in the overall context of the Budget. When making
his Budget judgement, the Chancellor takes into account the impact
on the haulage industry, the impact on the environment, the impact
on the UK economy as a whole, and a wide range of other economic
and social factors. The Government believes that the best way
of helping the UK haulage industry is by ensuring sustainable
economic growth and long-term investment in business.
February 2000
35
Goods vehicles over 3.5 tonnes. Back
36
Goods vehicles less than 3.5 tonnes. Back
37
A Traffic Commissioner is an independent person appointed by the
Secretary of State to issue operator licences and administer the
operator licensing system. Back
| 
