Memorandum from Railway Development Society
The Railway Development Society (RDS) is an
independent national organisation campaigning for a better rail
network, to enable more people and freight to travel by rail rather
than road. Together with the members of many rail user groups
affiliated to RDS we represent 20,000 rail users.
RDS is pleased to give evidence to the Environmental
Audit Committee on the matter of the pre-budget report 2000.
In 1993 the government introduced a fuel duty
escalator. The objective was to ensure that "motorists should
bear the full costs of drivingnot only wear and tear and
congestion on the roads, but the wider environmental costs".
(HC Deb, 26/11/96, col 167)
It is useful to look at what effect this has
had on the use of transport up to the present date, or at least
as far as data is available.
From 1993 to 1995 the increase in road freight
was 11 per cent (all figures relate to tonne/kms). During the
same period rail continued its steady decline from previous years
reducing by some 6 per cent, whilst water borne freight rose by
nearly 4 per cent. It could be said that in the first two years
the impact of the escalator was still to be felt.
From 1995 to 1998 road freight rose from 150
billion t/km to 160 billion t/km, a rise of 6 per cent. During
this period rail freight rose from 13 billion t/km to 17.4 billion
t/km, a percentage rise of 34 per cent. Water borne freight rose
by 7 per cent in the same period. Whilst it is true that rail
freight was privatised in 1995 it would be too simplistic to assign
all the growth in rail freight to that one factor.
During the same period water freight has increased
its percentage take without any similar external factor. If the
rise in rail freight was all due to privatisation, it would be
reasonable to expect that rail would have won traffic from coastal
shipping as well as road, but the figures indicate that both rail
and water are winning traffic at the expense of road. Early indications
for 1999 statistics show that, for the first time in a number
of years, negative growth has been experienced in road freight,
whilst figures for rail show a continued healthy growth. This
is against a background of a steady increase in GDP. It has to
be concluded that the fuel duty escalator has reached the stage
where it is beginning to affect modal shift.
It is therefore ironic that the government has
chosen this moment to reverse its policy. In the 1999 budget the
escalator was not applied and VED rates for HGVs were cut. In
the recent pre budget statement real cuts were made in the price
of fuel and further massive cuts in HGV VED rates were announced.
According to the government the combined effect of these measures
is equal to a cut of 8p per litre in the price of diesel. This
will equate to a possible 3 per cent increase in the productivity
of HGVs vis-á-vis rail.
However, all this pales into insignificance
against another measure announced in the 1999 budget, the unrestricted
use of 44 tonnes lorries on our roads. This one measure alone
is estimated to give a 12-15 per cent boost to road productivity
and result in a loss of 20 per cent of rail traffic totally negating
the spurious environmental gains claimed by the government in
its statement. The losses to road from coastal shipping seem to
have been forgotten in the rush to make comparisons with rail,
but as water currently carries three times as much as rail and
is equally susceptible to a cheaper road competitor, it can be
reasonably assumed that those losses will be even greater than
rail. Far from heavier lorries equalling fewer lorries, it is
confidently predicted that there will be many more, as well as
heavier, lorries after February 2001. Even pipelines have to compete
on price with other modes and there is every reason to suppose
that some products currently conveyed by this mode will also be
susceptible to cheaper road competition.
HGVs account for 33 per cent of the emissions
of particles (PM10) and NOx from road transport. Therefore each
1 per cent fall in road haulage will result in a reduction of
.33 per cent of those pollutants. Conversely each 1 per cent rise
in road haulage will result in a corresponding rise of .33 per
If the recent gains in traffic by rail and water
had not taken place, and the goods moved by road, the percentage
increase in road traffic would have been more than doubled at
12.6 per cent. This would have increased emissions by over 3 per
cent. (An allowance has been made for the fact that rail and water
are not completely pollution free.) The figures for 1999, referred
to earlier, indicate a fall in road freight of some 3 per cent,
saving 1 per cent of the accompanying pollution.
Assuming that the estimates for rail losses
are correct, it would appear that each percentage point increase
in road efficiency could result in a 1.5 per cent drop in rail
traffic. Thus the two measures already put in place by the government,
44 tonnes lorries and 8p/litre equivalent price cut, could result
in losses of 25 per cent of rail carryings or 4.3 billion t/kms.
This represents a gain to road of 3 per cent, or a 1 per cent
increase in total road emissions. As discussed earlier, there
is no reason to suppose that the other modes, water and pipeline,
will be immune to this increased competitive threat and losses
in those sectors could be triple those of rail giving a further
3 per cent increase in total road emissions.
It would be unrealistic to look at the environment
in isolation. We have therefore taken a moment to examine the
haulage industry's economic case for reducing fuel and VED costs.
They have two main planks to their argument.
Firstly, they say that they are unable to pass
on their increased costs to the end user. Any industry that is
unable to do this over the longer term, is unsustainable and this
is an indicator of the major malaise of road haulage, over-capacity
and a lack of law enforcement. Too many operators chasing too
little work means that in order to win orders, the unscrupulous
cut corners compromising safety. The end user is able to beat
down rates by threatening the use of another operator so the honest
man is forced to follow suit. Major changes are needed as to how
this industry operates but that is outside the remit of this report
and has been addressed to other government departments or committees.
Suffice to say that any reduction in fuel costs to the operators
will immediately be taken by unscrupulous operators and end users
as a green light to reduce rates. The end result is that the haulage
operator will not benefit from any cut in fuel duty. This also
assumes that the oil companies will not take the opportunity of
a duty cut to increase their margins.
Secondly, the industry quotes unfair foreign
competition using cheaper diesel and VED etc. Statistics dispute
this assertion. Around 60 per cent of UK/EU accompanied road transport
is carried out by UK registered operators and the percentage is
rising. An equitable distribution of the available work would
be 50/50, so on that basis our companies are winning.
Hauliers also claim that foreign lorries are
coming to the UK and carrying out cabotage (internal domestic
carrying) using cheap EU diesel. In fact cabotage accounts for
0.06 per cent of UK domestic haulage. In spite of cheaper diesel,
EU hauliers find they cannot compete with the cut-throat rates
on offer in the UK.
Much has been said about "flagging out"
lorries to "cheaper" EU regimes. Hauliers have found
that the totality of costs in Europe is more than the UK and you
cannot pick and choose which costs you pick up. If you move abroad
you pick up all the costs of your adopted country. The FTA has
concluded that "flagging out is not a productive avenue to
The true competitor that hauliers fear is given
away by the earlier statistics of rail increases and stagnation
in road figures. Why else would 44 tonnes lorries, and a proposed
use of bus lanes by lorries, placate the industry? These would
be equally available to the foreign haulier who would still have
his tank of cheaper diesel. Why were so many lorries on the original
fuel protests those that face no foreign competition whatsoever?
We refer to lorries such as aggregates carriers who have no foreign
competitors but are under pressure from rail. Thus it can be concluded
that rail is the true competition feared by UK hauliers. If road
haulage can win back some of the traffic they have lost to rail,
they surmise that they can alleviate over-capacity within the
industry with no pain to themselves. The added benefit of 44 tonnes
lorries will enable them to actually increase business at the
expense of rail and water. Unfortunately, the government seems
to have missed the finer points of this debate and given in to
the threat of civil disobedience.
Government now has a choice. If it continues
with a policy of reducing road haulage costs it will result in
transfer of traffic from rail, water and pipeline. Every 1 per
cent increase in road haulage will increase total road outputs
of the major pollutants by .33 per cent. Road is one of the few
growth areas in pollution and this will erode gains made in other
If government concludes that it is not politically
acceptable to maintain fuel and VED rates at levels where they
can affect modal choice then they must provide compensation to
the other modes for their cleaner environmental record so that
they can also reduce rates to compete effectively.
Any other course of action can only be construed
as an abdication by the government of their environmental responsibilities.