Select Committee on Treasury Written Evidence

Memorandum submitted by the Road Haulage Association Ltd (RHA)


  1.  The Road Haulage Association (RHA) was formed in 1945 to look after the interests of haulage contractors in various areas of the country, in effect, amalgamating local organisations that had been established. The Association has subsequently developed to become the primary trade association representing the hire-or-reward sector of the road transport industry. There are now some 10,000 companies in membership varying from major companies with over 5,000 vehicles down to single vehicle owner-drivers.


  2.  The RHA gave both oral and written evidence to the Northern Ireland Affairs Committee's inquiries into the related subject of the impact in Northern Ireland of Cross Border Fuel Duty Differentials. Essentially our views remain as set out in that previous evidence.

  3.  In our previous evidence the RHA stated that fuel smuggling between Northern Ireland and the Republic was caused primarily by the huge differential between rates of excise duty applied to fuel in the UK and in Ireland. This remains the case. Excise duty on diesel in the UK is now 47.1 pence per litre (ppl) resulting in an average retail price of around 84 ppl (including VAT). In contrast, on the Continent the price for diesel is now typically around 20-25ppl cheaper than it is in the UK, resulting in a £200-£250 difference per tank of fuel (again based on 1,000l tank).

  4.  Since fuel represents approximately one-third of a haulier's total business costs, there is a huge incentive to obtain fuel at the cheapest rate. There are two main options for achieving this: firstly by making legitimate purchases of fuel in another EU Member State—either by crossing the border to the Republic or whilst travelling on the Continent; secondly by purchasing smuggled or illegally laundered fuel. Although the first option is completely legal (subject of course to some limits on carrying capacity etc) both options result in loss of revenue to the Exchequer.


  5.  The difficulty on putting a precise figure on the scale of the problem remains. However, the RHA is convinced that smuggling is now extremely widespread. Indeed, anecdotal evidence suggests that smuggled fuel is now finding its way into mainland UK (particularly in the North) as well as Northern Ireland extending the problem to hauliers based in that part of the country. The most recently published figures contained in HM Customs and Excise's report "Measuring and tackling indirect tax losses" estimated that the revenue being lost to the Exchequer through fraud on diesel amounted to £1,000 million in the year 2000 plus a further £300 million as a result of legitimate cross-border purchases of diesel. This had risen to £850 million and £300 million for 2001 and £650 million and £300 million in 2002. Although the figures seem to demonstrate some improvement, the RHA believes further significant progress will be hampered by the current high fuel prices which simply increase the incentive to obtain fuel as cheaply as possible.


  6.  Whilst we are aware that extra resources have been made available to HM Customs and Excise for enforcement in this area since the Northern Ireland Committee's last inquiry, the RHA remains of the view that the only way that this problem can be eradicated altogether is to remove the differential that exists between fuel duties within the EU. The European Commission itself has recommended that in order to remove distortions of competition within the road freight industry, duties on fuel used for commercial purposes should be "harmonised" across the EU. The RHA has been campaigning on this issue for some time and although the Government has come forward with proposals to address the unfair competition UK hauliers face as a result of high fuel prices—the lorry road user charging scheme—we believe that this is unlikely to address the problems of smuggling and cross-border shopping for fuel.


  7.  The RHA's main concerns surrounding alcohol and tobacco smuggling/fraud centre on the costs of compliance attached to the enforcement policies and procedures being implemented by HMCE. There are two key areas for concern outlined below:

    —  Vehicle out-turns—currently it is for enforcement officers operating at the ports to decide which vehicles they believe should be thoroughly inspected and whether or not that vehicle should be unloaded (out-turned) in order to facilitate the search. This process can take a considerable amount of time (typically between one and six hours) and attracts a charge. At present, this charge is being levied against the vehicle operator, irrespective of whether any illicit/smuggled goods are discovered. The RHA believes that this policy is unfair. The vehicle operators are not solely responsible for the goods they are carrying—for example, the consignor and/or the driver also have responsibilities. In addition, they are already facing the costs of the delays while the vehicle is being inspected. Whilst we accept that enforcement activity of this kind is necessary, the policy of charging vehicle operators for the out-turn should, we believe, be reviewed;

    —  Lorry drivers—a second area of concern is the policy adopted when lorry drivers are found with more than their "allowance" of goods. We have had many members who have had enforcement action taken against them, even when the driver of the vehicle has stated (and signed a declaration) that the operator had absolutely no knowledge of his actions. This clearly is not a satisfactory position. The RHA has, through discussions with HMCE policy officials, agreed a set of procedures which operators can use to demonstrate that they have done everything within their power to prevent smuggling (for example warnings to drivers in employment contracts etc). But the enforcement officers on the ground do not always accept this. In addition the procedures themselves carry some significant compliance costs and problems, not least of which is that of checking drivers' credentials prior to employment. Unless a driver has been prosecuted for an incident, an employer cannot know that he has been involved in such activity previously. Yet frequently prosecution is not the chosen option for enforcement officers. This situation must be rectified.

  8.  The RHA is supportive of efforts to ensure compliance with the law. But it is essential that such efforts do not carry disproportionate costs. For a haulier, any delay to a vehicle is a cost. The longer the delay, the greater the cost. Enforcement officers must recognise that in doing their job, they must minimise the unnecessary costs imposed on others—particularly innocent parties.

November 2004

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