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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 218-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE TRANSPORT COMMITTEE
Wednesday 12 January 2005 MR RICHARD TURNER, MR ROGER KING and PROFESSOR ALAN MCKINNON MR EDMUND KING and MR DAVID HOLMES CB MR MIKE LAMBDEN and MR MARC SANGSTER Evidence heard in Public Questions 1 -213
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Transport Committee on Wednesday 12 January 2005 Members present Mrs Gwyneth Dunwoody, in the Chair Mr Brian H Donohoe Mrs Louise Ellman Ian Lucas Miss Anne McIntosh Mr John Randall Mr Graham Stringer ________________ Examination of Witnesses Witnesses: Mr Richard Turner, Chief Executive, Freight Transport Association, Mr Roger King, Chief Executive, Road Haulage Association and Professor Alan McKinnon, Heriot Watt University, examined. Chairman: Good afternoon to you, gentlemen. We have one small piece of domestic housekeeping before we begin, and then I shall give myself the opportunity to welcome you. Members having an interest to declare? Ian Lucas: Member of AMICUS. Mr Stringer: Member of AMICUS. Chairman: Member of ASLEF. Mr Donohoe: Member of the Transport and General Workers' Union. Mrs Ellman: Member of the Transport and General Workers' Union. Miss McIntosh: Member of the Public Policy Committee of the RAC Foundation. Q1 Chairman: Gentlemen, you are most warmly welcome this afternoon. May I ask you firstly to identify yourselves for the record? Mr Turner: My name is Richard Turner, Chief Executive of the Freight Transport Association. Mr King: I am Roger King, Chief Executive of the Road Haulage Association. Professor McKinnon: Alan McKinnon, Professor of Logistics, Heriot Watt University, Edinburgh. Q2 Chairman: Thank you very much indeed. Did any of you have anything you wanted to say before we begin? Mr Turner: Madam Chairman, we agreed beforehand we did not want to make an introductory statement other than just to emphasise a point which might help the discussion subsequently, that lorry road user charging, which I am sure we will discuss, is more about how we apply taxation to lorries, and road pricing, which is the main theme of this inquiry, is more about how we manage demand and how we raise money to pay for infrastructure. We wanted to apply that distinction before we started. Q3 Chairman: I think that is helpful, I have no doubt we shall be asking you about both of those. Before I come to the Professor, can I ask you, Mr Turner and Mr King, do you agree it is impossible to build our way out of the congestion problem without limiting traffic growth? Mr Turner: I agree that road building is not going to provide the ultimate solution. We do need to do some more road building but ultimately we do have to look at ways of managing demand. Mr King: I think, Chairman, we can go a lot further towards providing infrastructure. We have never really predicted and provided, because predictions have always been wrong and we have never attempted to provide. It would be wonderful to think we could have a system of predicting and providing. Whilst I would say we do need to improve the existing infrastructure with additional build on motorways, attention to pinch-points within the system, ultimately with unbridled access to the roads by all those who want to use them we will have to find another way of being able to control traffic flows. Q4 Chairman: Do you have a kind of scale you could give us? Mr King: I would think technically, as we understand it, it would be difficult to see a system of road pricing for everyone to be introduced within the next ten or 15 years. Q5 Chairman: I am thinking in terms of road building. What size would the road building programme need to be in your estimation? Mr King: In our view, a fairly modest exercise in road building. That would mean widening some of the existing motorways as well as improving road junctions within the strategic road system. One would want to distinguish between the needs of the strategic road system run by the Highways Agency, which needs a rolling investment programme and not one which stops and starts, and all the roads run by local authorities where obviously it is in their gift of decision as to how they invest in those. Q6 Chairman: Surely if you widen these strategic points, particularly the pinch-points, that space would be occupied almost immediately by private cars, which would not benefit the freight industry, would it? Mr King: I think one needs to be very careful in putting that argument forward because whilst traffic growth is increasing nevertheless the capacity of the road with an additional lane to accommodate even a third more traffic is quite considerable. You have only got to look at some of our motorways which were built as two-lanes in the late 1950s and were widened to three-lanes in the mid-1960s to see that they have stood the test of time for nearly 40 years. So it would not be unthinkable to suggest another lane to bring them up to four-lanes would last another 40 years. Q7 Chairman: What is the biggest problem? Is it the average travel time or the unpredictability of trying to travel on congested roads? Mr Turner: For industry, predictability is important. Speed is not the issue, predictability is important. The loss of productivity because of congestion for industry is currently estimated to be in excess of £20 billion a year. That is just unacceptable in a modern economy, and I know of no other modern economy that has congested inter-urban roads - urban areas are different - roads between urban areas which are not planning to widen and improve them to cope with that. That is what I believe we should do. That is what the RHA, the FTA and the motoring organisations put forward last year as a solution in terms of widening our key trade routes by an extra 12 feet. That would mean that over about a five year period an extra £1 billion would have to be spent on road building and that would, I believe, get us into a position where we could afford to wait for a solution that managed demand, and that would keep our economy moving in the meantime. Q8 Chairman: Are you really saying some sort of road pricing is inevitable as a management tool? Mr Turner: Personally I believe it is, because I believe we will get to the stage where we need to modify behaviour and encourage people to behave in a slightly different way, and price I believe is the only way we are going to do that, but it is not possible in the short-term. It is not possible in the short-term I believe partly because of the politics, because I do not think any of you would want to go into a general election saying, "We are going to charge the motorists more to use roads", and secondly because of the technology, which is just not there. Whilst you might think it is there, just think of the spectre of trying to retrofit 28 million vehicles with it; you just could not do it. The road pricing feasibility study with which I was involved with the Department of Transport and many others looked at this issue and said the only way it would be practicable to apply road pricing to all vehicles would be if you allowed time for this equipment to be built in by the manufacturers at the start. Q9 Chairman: How short is the short term? Is it ten years, 30 years? What is your short-term? Mr Turner: I think you are talking up to about 2015, 2020. Q10 Chairman: Do you agree with that, Mr King? Mr King: I do indeed. I think the systems themselves have still to be technically evaluated. It is one thing, as the Government intends to do, to levy a road user charge on 425,000 heavy goods vehicles, it is entirely another to levy a charge on 28 million other road users which will have sophistication, variable time charging, zone charging, regional charging, added to it. So we would suggest the technology is still yet to be devised. It may be available in two, three, five years' time, in which case vehicles need to start to be produced with the system in for switching on ten years later. Q11 Chairman: Do you have a comment on that, Professor? Professor McKinnon: Merely to add that it seems to me once you extend electronic road pricing to all categories of traffic, with 28 million vehicles covered the collection costs are going to be huge relative to the current systems we have for collecting tax from transport, namely fuel tax and vehicle excise duty. There are figures like collection costs of £5 billion as opposed to the total revenue of £9 billion, so the net tax then is a lot less than we currently get, and I simply wonder how we would make up the shortfall in taxation. Q12 Mr Donohoe: If national road pricing was introduced, should the tariffs be fixed locally or nationally? Mr Turner: Are we talking about national road pricing for all vehicles? Q13 Mr Donohoe: Yes. Mr Turner: I think they have to be fixed by the people managing the road. There is a case for local pricing in urban areas, but if you are putting in pricing, and if the purpose of putting in pricing is not about raising money but is about managing demand, then the person who should be fixing the tariff should be the person who is managing the demand. That would be nationally for some roads and locally for others, but clearly they would have an impact on one another. Mr King: I would add to that that the unpredictability for the road haulier in knowing what the journey is going to cost, because they are going to have to understand dozens and dozens of different area pricing schemes, is going to make the operation of the transport sector in the UK a very difficult challenge indeed. Understanding that, what does that do to the UK's productivity and competitiveness in Europe if you cannot get an understanding of what your transport costs are going to be? Q14 Mr Donohoe: Do you think part of this charge should be peak-period charging as well as charges outside the peak hours? If there was variance when you were sitting on the road, that would help you, would it not? So part of this should be off-peak tariffs as well as peak tariffs? Mr Turner: A reduced off-peak tariff as well as a peak tariff? Q15 Mr Donohoe: Yes. Mr Turner: It has its attractions. Obviously if everybody was subject to the same pricing regime, cars as well as trucks, obviously taking account of the weight of the vehicle, then if at peak periods other motorists could be priced off the road, road haulage operators might be prepared to access those roads at that time of the day in the knowledge they were not going to be held up in congestion. But one wonders at what level that charge would have to be to get commuters off, say, the M25 in the morning and evening. It would probably be almost a penal rate, in which case paying that sort of high tariff is not something anyone would particularly welcome. Q16 Mr Donohoe: Does the Professor want to add something? Professor McKinnon: The issue here is whether we would be varying tolls just for trucks or for all categories of traffic. I think it would be quite wrong to impose congestion charging on trucks in isolation without doing it for all categories of vehicle. For one thing, road hauliers would feel that if they are paying premium tolls at peak times they might like something in return for that, namely freer flowing traffic, and that will never be achieved until the same charges are imposed on cars. Q17 Mr Donohoe: How successful has the new M6 toll road been for your members, Mr King? Mr King: I do not think it has been successful or unsuccessful. The take-up by road hauliers on that particular road was negligible when the rate for one journey, for the 27 miles or so, was set at £11. Now it is reduced to round about £6, the take-up has been a little more significant. I do not think we can learn a lot from the M6 toll because, right from the early stage, no estimations were ever made about traffic flows, about the percentage of trucks which were travelling from the South East to the North West which were not in the position of dropping off goods in the middle of the West Midlands conurbation and then picking up more goods to go up on their journey north. There are very few through-traffic figures - I know because I asked the question in the late 1980s - which have ever been kept or arrived at by the Department of Transport to identify the traffic flows around the West Midlands conurbation, because if there had been a significant case for it we would have seen the road being used far more than it is at the moment. Q18 Mr Donohoe: Notwithstanding that, have you had feed-back from your members? Have you done surveys of your members to establish whether or not they think it advantageous to have the road, whether they still use the original M6, whether that has improved? Have you had any feed-back? Mr King: The feed-back is that motorists are using the M6 toll, thus reducing the congestion on the existing West Midlands link, which road hauliers continue to use. Q19 Mr Donohoe: That has been to your advantage? Mr King: That has been to our advantage. Mr Turner: From my members' point of view, they see this as a marvellous new road asset. No mistaking, the West Midlands was an absolute mess until this road was opened and now it is not and is much better. How long it took and whether or not it should have been constructed from private money from Australia is another question. Q20 Chairman: Your members have a view about where money comes from, do they? Mr Turner: I think the question is whether, in constructing a new road, it is faster and more expeditious to use public money or private money, and I do not think this example shows us it was faster. Equally, I do not think it shows us it was cheaper. So in terms of an example for the future, we would have to look at those two questions. In terms of an on-the-ground solution to a problem we had, it is a marvellous solution, and we can have different views about whether the tolls were right, but it has actually solved for sometime the problem in that area. All my members who use it are grateful that road exists. Q21 Mrs Ellman: Mr Turner, you said your members find the toll road very successful, what are they basing that on? Mr Turner: The point that was made earlier, that everything was trying to go along the old M6 before, now there is a choice and whether that choice is being exercised by motorists or, to a lesser extent, trucks means there are fewer vehicles on the old road, which means the enormous delays which were there almost every day of the week, sometimes all day, are no longer there, and travel through the area is much more reliable than it was. That is what they are basing it on. People will have different views on whether they should pay a toll and how much, but the reality on the ground is much better. Q22 Mrs Ellman: Has any assessment been made by the industry of the cost of congestion? Mr Turner: There is a generalised cost which was done sometime ago, where we estimated the cost of congestion being something like £20 billion a year, which is an enormous amount of money, but it is based on the aggregate of delays over the whole network. Q23 Mrs Ellman: If road pricing were to become more extensive, do you think industry has done enough work to make a rational assessment of what would be worth its while in financial terms and which roads to use? Mr Turner: If we introduced road pricing across the board? Q24 Mrs Ellman: Yes. Mr Turner: The issue is that if all the work that has been done, the study work and modelling which has been done, is correct, it suggests that introducing a charge - quite a modest charge - for using a road at a particular time of the day could actually change the demand for the use of that road. If the lorry is paying to use that road, we would expect the value that the operator gets from reduced congestion to far exceed the cost of payment. Industry makes choices about payments in very different ways from individuals, and industry is driven by what the cost is and all the costs associated with it and if there is a cheaper way. So therefore paying something to save more is always what industry would choose to do. Q25 Mrs Ellman: Do you think enough work has been done throughout industry to assess what the cost is? Professor McKinnon: Industry has been responding to the increase in daytime congestion. If you look at the proportion of lorry kilometres which are run between 8 o'clock in the evening and 6 o'clock in the morning, 20 years ago that was about 81/2 per cent, today it is about 20 per cent. So companies are changing their operations. Q26 Chairman: Only 20 per cent, it seems much bigger. Professor McKinnon: There has been about a two and a half fold increase in the amount of running of trucks in the evening and during the night over 20 years. Q27 Ian Lucas: Going back to the M6 toll road, from my own personal experience of driving on the toll road what was very striking to me was, firstly, the lack of lorries on the road and, secondly, when one returned to the original M6 the immediate impact of the huge number of lorries which were on that road. I was wondering whether any assessment had been made by the haulage contractors using the road about the time which would be saved as compared with the cost of using the M6 toll road. It seems to me those contractors were simply not taking into account the increased speed with which the journeys would be carried out if they used the new road. I calculated about 30 minutes was taken off the journey I was undertaking as a result of using the new road. Mr Turner: I would be surprised if it was as much as that but it is significant. Of course, not all lorry drivers and operators make the right decision every time, and there will be exceptions, but generally I am really confident that the right decisions are made. If you looked at that road when the toll was £10, lorries were as rare as hen's teeth on the M6. Now it has been reduced to £6, there is an increasing number of vehicles using it. Bear in mind that the real incentive to use it would be that the old road is really solid, but in fact the old road is not now because of the car transfer, so therefore the experience on the old road is generally much better than it was. So lorry drivers and operators are experiencing that and benefiting from that. Mr King: I would just point out that Birmingham is a hub-and-spoke part of the national distribution system and many lorries are coming into the conurbation to exchange goods and move on. Secondly, not all can use the M6 toll, some are heading off down towards the M5 whether they are coming up from the South or North, but there are many other factors which impact on this. For instance, you would not pay to use the road at night time when the existing road is relatively clear. Off-peak during the daytime the M6 Link, as it is called, is still quite clear. If the matrix signs which the Highways Agency have conveniently put up are not suggesting there are any delays or hold-ups, the driver will not divert and pay extra money to use the toll road. Q28 Ian Lucas: Even if it takes less time? Mr King: Well, it does not, it is a slightly longer route actually by a mile and a half or so, which is really neither here nor there. Going through a conurbation at 50 mph is no different from using an M6 toll route at 50 mph if the former road is closed. Q29 Chairman: It might have a slight difference because it might be illegal. Mr King: 50 mph? Q30 Chairman: Yes. Mr King: On a motorway? Q31 Chairman: No, through the conurbation. Mr King: Where the M6 goes through the conurbation, that is still on the motorway. Q32 Chairman: As long as we make that quite clear because we feel rather strongly about miles per hour on this Committee. Before I call Miss McIntosh, could I ask you both, have you supported the introduction of national road pricing all the way through? Have the views of your members changed in the last five years in the light of all the different things which have happened - congestion charging, the M6 toll, the Transport White Paper? Has there been any change in the view of your members? Mr Turner: If I can respond on behalf of the Freight Transport Association, we put out a policy paper in 1995 recognising that national road user pricing would be an inevitable consequence of the growing demand for road use. So prior to that it was not strong, but over the last ten years we have been stronger on the view that eventually it will happen. However, importantly, adding to that, that is not a substitute for doing what needs to be done in the short-term and can be done to improve the capacity of existing roads. Mr King: I think it would be fair to say, Chairman, that our members were very agnostically inclined towards road pricing of any kind if it was going to be used as a substitute for reasonable road investment programmes. If we get those road investment programmes, then many or most of our members believe in the fullness of time, when the technology is available, road pricing may be the only way forward. Indeed, they themselves may be subject to variable charges and pricing, but it can only be seen in the context of everybody being subjected to the same pricing regime, so there is a real decision to be taken about whether you want to run a truck at peak periods in the knowledge that ordinary motorists, commuters, may have been priced off the road. Q33 Mr Stringer: Would it be true to say that your two associations have become more enthusiastic because the road-user charging for lorries actually levels out the playing field with foreign operators? Is that the driver for your policy? Mr King: There has to be a lot of support for a system which is going to produce that level playing field in operational costs which British hauliers want in competition with their foreign counterparts. There may only be 0.4 per cent of vehicles on the road in the UK at any one time which are foreign-owned, but when you reduce that down to the element of competition those foreigners represent it probably rises to about 3 per cent or so, because obviously the foreign trucks are not competing against dustcarts, petrol tankers, milk tankers and so on, it is general haulage vehicles they are competing against. We recognise that if we can get that level playing field, it will remove a distinct disadvantage for British hauliers, but above all else, it is annoying and irksome to see these foreign operators using our roads absolutely free, gratis and for nothing, when we in turn in Europe have to pay to use many of their roads. So to that extent the LRUC offers us an opportunity to level out that playing field. It is not without its problems and snags, and we have a number of points with which we are dealing with the Department to produce a system which is simple, straightforward, cost effective, cheap and accurate. Mr Turner: Our view has not been substantially affected by the lorry road-user charging scheme. Our view, as I mentioned earlier, has been based on industry always being prepared to buy better if they can get better value out of it. Universally, my members would say they already pay enough in tax and they would expect the road system to be better than it is, but if you start from the point that it is not going to get much better than it is, how do we improve the way in which people can use it, and this is an obvious way of doing it. Q34 Miss McIntosh: Mr Turner, you say your members broadly welcome the M6 toll road, are there any other roads which you think would be suitable for that kind of exercise? Mr Turner: The welcome we got for the M6 toll road is because of the fact it is there, it is a bit of infrastructure we can use and it has improved everything. Whether a toll facility of that nature, constructed in that way out of private money is the right solution, I do not know. One of the topical questions at the moment is whether we should have another toll road north of Birmingham up to Manchester. My answer, and the answer of my members, is yes, we do not mind what sort of road it is but the important thing is to choose a route and build it quickly. What is important is getting it available because day to day I can guarantee that road comes to a standstill because of too much traffic, so the sooner we get it the better. Our support would be, if a toll route would deliver it quicker than any other route, let us have it because we need a solution. Q35 Miss McIntosh: How long do you expect the M6 toll road to remain congestion-free? Mr Turner: I would imagine forever, because the M6 toll road will be managed by Macquarie who operate it in a way which maximises their revenue and they will not get any revenue if it is congested because nobody will use it. So they will price it to keep it free-moving. Q36 Chairman: So we are contemplating a £20 toll, are we? Mr Turner: There is on control on it. There is no control on what toll they charge at all, they can charge what they like. Chairman: They might have a nice empty road then. Q37 Miss McIntosh: I do not think that was quite the intention. Mr King, in your memorandum you expressed uncertainty about the technology which is being proposed, the CBI have said in their memorandum that they think satellite position-fixing technology is the most reliable. Would you like to share with the Committee what your reservations on the technology are? Mr King: Reservations on the technology are the technical solutions which will have to be arrived at which will take into account every single road in the UK being subject to the lorry road-user charge. The different scales of charge - based on axles, weight, euro (?) condition of a truck, environmental regulations of the truck, night or day, type of road, whether it is a motorway or ordinary road - and then the collection of the charge have to be effective if, for each truck available and accessible by the operator, he is to know which truck has run up what bill. Then, coupled with that, the fuel duty rebate system will have to be available for each truck so he can set his lorry road-user charge against his fuel duty rebate and then settle with the Government, or the Government settle with him, at the end of the accounting period. That is in our view a big challenge. There is also the challenge of Northern Ireland, with 130 roads across the border with the South, as to how actually you get this system to work at all. As far as we know, you cannot have one system for one part of the UK and ignore the other part. Until that position is resolved we do not see at the moment how the technology is there to accommodate that requirement. We are told it is. Q38 Chairman: I thought we were doing that all the time. Do you want to comment on this, Professor? Professor McKinnon: My feeling is that the LRUC as currently proposed is much more complex, costly, elaborate than is required at this stage. I think we should go back and think about what the objectives are for doing this. The industry's main desire is to level the playing field for foreign operators, there is also the desire to decouple the taxation of trucks from cars, and a third one is to move to a distance-based system of taxation. My feeling is that those three fundamental objectives can be achieved with a much simpler, cheaper, less risky system. Q39 Miss McIntosh: What is that? Professor McKinnon: I could describe that in a moment. The only reason for going for a LRUC as currently proposed is if you want to vary the toll by type of road, by time of day, by geographical area, and you only want to do that if you are going to congestion-charge trucks. My argument is that it does not make sense at this stage to impose congestion charging on a single category of traffic which only accounts for 14 per cent of all traffic and only 5 per cent of the growth of traffic up to 2010. The alternative way of doing it is a very simple way of converting fuel taxes into a distance-based system of taxation, so we would avoid the need to track the vehicles. What we propose to the Committee is an alternative way of taxing trucks which will meet those first three objectives fairly cheaply, quickly and easily. If I can take a few minutes to describe our system? Q40 Chairman: Very briefly. You were kind enough to give us a very detailed explanation, but perhaps you could encapsulate it. Professor McKinnon: I will do my best. Trucks have an annual MOT test, and when they go in for that test you would record from the tachograph the distance the vehicle had travelled in the previous year. The Government would have worked out a per kilometre toll rate for vehicles based on the weight, the type of vehicle, the emission standard, and you would multiply distance travelled by the per kilometre toll rate to work out what the total tax burden of that vehicle should be. You then look at how much fuel duty that vehicle has paid over the year, and at the end of the year you will have a simple reconciliation. So if a vehicle is very fuel efficient, the haulier might actually get some money back. If it is less fuel efficient, he would have to pay something. One of the key elements of our system is that the rebating of fuel duty against the per kilometre toll would be done with respect to benchmark levels of fuel efficiency, which is done for two reasons. One is that if the Government has set those benchmark levels of fuel efficiency correctly, they would give hauliers an incentive to improve the fuel efficiency of their operations. The second advantage is that it would make the system self-enforcing, it would discourage hauliers from tampering with the tachograph and under-reporting the distance the vehicle has travelled. A similar system could be applied for foreign vehicles to level the playing field. Q41 Miss McIntosh: Will the cost be less with that proposal? Professor McKinnon: It will be a fraction of the cost. There are various estimates of what the LRUC will cost. It is difficult at the moment because we are in the middle of the procurement process and it is only when that is finished and a successful bidder is identified that we will know what the LRUC will cost to operate, but I would estimate maybe £500, £600 million. Our system at the most would cost a few tens of millions of pounds. The other advantage of our system is that those costs would be more than covered by the extra revenue we would derive from foreign vehicles, whereas it is likely the collection costs of the LRUC will substantially exceed the additional revenue which would be generated from foreign operators. It is worth noting that the Chancellor gave an assurance that British hauliers will not have to pay any more, they have been promised tax neutrality, so the only new revenue coming into the system will be that from foreign operators. Q42 Miss McIntosh: Does the industry support Professor McKinnon's version? Mr King: As I said a few moments ago about the LRUC, it is a complicated process and technically there are big question marks over it. We look at the German system and we see they were not successful there. I think anything which offers a simple and straightforward system is worthy of scrutiny. The only point I would make about Professor McKinnon's solution is, first of all, the entry point into the country for continental operators primarily is Dover, that is where most of the vehicles come in and go out of the UK, and long tail-backs whilst accounts are settled could create a problem, and indeed the EU may say that is a cross-border control which is not acceptable. Secondly, the haulage industry hires in vehicles all the time on short-term leases and sells vehicles on, how would you match up the bills for one or the other and work out who is going to pay what over a 12-month period. I am sure the leasing companies would have something to say about ending up with a substantial bill and precious little fuel duty rebate. On paper I think it is an excellent idea and paper is what we have, but there is a need to look at some of the detail, which the LRUC is seeking to address even though in a complex way. Q43 Miss McIntosh: I am slightly concerned. Professor, you are saying at the moment EU hauliers pay nothing? Professor McKinnon: Correct. Q44 Miss McIntosh: So they would pay for the first time, but we are not going to get into a situation where there will be discrimination between what UK hauliers are being charged and what EU hauliers are being charged? Professor McKinnon: That is correct. Chairman: One of the recommendations of this Committee, as you know, Professor, is that this inequality needs to be addressed. Q45 Miss McIntosh: Otherwise it is illegal. Professor McKinnon: That is correct. At the moment, foreign hauliers fill up their tanks before they enter the country, understandably, because fuel is much cheaper outside the UK, and they do not pay any vehicle excise duty so they contribute nothing to the UK exchequer, but the system we are proposing would impose exactly the same level of toll on foreign vehicles as on UK vehicles, and we would treat the foreign vehicles similarly at the points of entry and exit to the UK international hauliers, so there would be parity, and therefore I think this would be compatible with EU requirements. Q46 Miss McIntosh: But the fuel duty rebate? Professor McKinnon: If a foreign haulier chose to buy their fuel in the UK, they would qualify for a rebate on the fuel duty just as UK hauliers would. Mr King: Chairman, you would need special treatment for Northern Ireland because with 130 roads between the North and the South it would be difficult to have border controls to check on mileage and check on fuel duty. Chairman: I think this country is quite used to having different systems for Northern Ireland, Mr King. Q47 Mr Stringer: Professor McKinnon, what is your answer to the point which has just been made by Mr King, that your proposals would not work because the lorries would be in different ownership, or a percentage of the lorries would be in different ownership, over a period of 12 months because they would change from one company to another? When I read your paper, I thought of a similar but different point, that if a haulage company had more than a given number of vehicles, they would just take it in turn to send those vehicles and they would never get the bill at the end of the year. What is your answer to those two points? Professor McKinnon: There are a number of complications we would have to address. If the ownership of the vehicle changed during the year, then a DVLA form must be filled in, you would simply declare what the mileage of the vehicle was at the time of the ownership transfer, and the responsibility for paying the tolls would also transfer at that stage. I do not think that would be too difficult. Every vehicle would have a registered owner who would be responsible for paying the toll, and it would be their job to ensure that was done. Q48 Mr Stringer: Just on that point, that is clearly true, but you catch them after a 12-month period, do you not? Professor McKinnon: That is correct. We would only be checking the tachograph at the time of the annual vehicle inspection. Q49 Mr Stringer: So the owner of a lorry comes in every week for 50 weeks, sells the lorry on and he does not pay a penny, does he? Professor McKinnon: Presumably a central agency, DVLA or whoever, would be keeping a central database on the mileage that the vehicles had travelled, and if the ownership of the vehicle was changed that would be up-dated on the database, so at the end of the year there would be some reconciliation. What might be more of a problem would be where an operator was not able to say how much was spent on fuel consumed by a particular vehicle. The larger operators currently have a system in place which allows them to work out how much fuel each vehicle consumes. Many hauliers are owner-drivers with a single vehicle so they can do it. For smaller hauliers with several vehicles who cannot separately identify how much fuel went into each tank, initially as an interim measure they could perhaps have a fuel rebate system at fleet level rather than individual vehicle level. I concede there are a number of technical problems which will have to be resolved, but I do not think any of them represent a fatal flaw; we can find a way of addressing them. Q50 Mr Stringer: What did the Treasury say when you put this point to them? Professor McKinnon: We have presented our system to Customs & Excise, who claim they have done an internal feasibility study, but they have also said they cannot tell us the results of that study. They say our system will not work but they have not said why. I wrote to them two days ago to take advantage of the new Freedom of Information Act and asked if I could see the internal memo and I am awaiting their response. Q51 Mr Stringer: Will you send us a copy of that response when you get it? Professor McKinnon: I will happily do that, yes. Mr Stringer: Thank you. Q52 Chairman: Can I ask you about the cost of registration and enforcement of your scheme, Professor? Have you done any estimates of that? Have you produced any kind of model which says, "This is what ours would cost", even though obviously you do not know what the Government scheme would cost? Professor McKinnon: The beauty of our system is that it would use mainly existing systems of revenue collection and data collection, so the main revenue stream would still be fuel duty. We would suggest that you abolish vehicle excise duty or at least reduce it to the minimum level required to cover the administration costs of a registration scheme. So the main source of revenue is fuel duty paid during the year. The data collection would be the recording of the distance travelled at the annual MOT test for domestic vehicles. This is slightly more problematic for vehicles crossing international frontiers, so the main additional expense would be setting up a system for collecting information on tachographs at the ports. Roger was correct in saying that a lot of vehicles coming out of the EU go through a small number of ports, in fact we reckon about 95 per cent of all vehicle movements go through about seven points - the Channel Tunnel and six rural ports. That should not present too many difficulties because the system we are proposing is very similar to the system in Switzerland which has 100 border control points and they have 12,000 vehicles crossing those points per day and in Britain we have about 12,000 vehicles coming through seven points, taking advantage of our island status, so that would be a lot easier to implement in the UK than in Switzerland. Q53 Chairman: I wish you joy with your enquiries under the Freedom of Information Act. Gentlemen, can you tell us what you understand by fiscal neutrality? Mr Turner: In the context of fiscal neutrality under LRUC? Q54 Chairman: Yes. Mr Turner: As I understand it from ministers it means that on average what the industry will pay in total in charges after the scheme is the same as before the scheme. In other words, if you add up fuel duty and the charge made after the scheme it will be the same as the total fuel duty before the scheme. What we are reluctantly being driven to assume at the moment is that there is no guarantee that that fiscal neutrality will also include the cost of the equipment and the cost of administering the equipment. If you like, our understanding at the moment certainly extends to neutrality as far as fuel duty and charging is concerned but it does not go any further. We would like it to go further, obviously. Q55 Mr Stringer: Have the Government told you that you will be paying for the setting up of the scheme? You must have asked the Government who will pay for the initial set-up costs, what has been their response? Mr Turner: The answer I have is that we do not know how much it will cost. We hope it will not be a cost we have to pass on to you as the user, but until we know exactly what the cost is then we cannot give you any guarantees. If you take that to its logical conclusion - and that is why as an organisation we are getting a little bit nervous about this scheme at the moment and carrying out a lot of extensive enquiries across a wide range of interests - we are getting a little bit nervous that we are being asked to bear the cost-risk of the scheme because nobody knows how much it will cost and if it costs a lot we might be asked to contribute. Q56 Mr Stringer: Is it helpful that the scheduled timetable for implementation looks as though it has slipped from next year to 2008, or does that cause you problems? Mr Turner: I think the slipping of the schedule is a disappointment in many respects. Whilst we have been hearing about Alan McKinnon's innovative idea, it is very similar in concept to one of the ideas which was polled at the time the Treasury went out to consultation in 2001 as to what they should be. One of them was to introduce a paper-based system similar to the sort of schemes which currently then already existed in Europe. The other option was to introduce a scheme which is the route we have taken. The industry unanimously went for the second route because we felt the first route was the old type of approach and it was an approach which was being left by Germany, Switzerland - I know they are not in Europe but you can almost include them - Austria and others which are moving away from paper-based systems. We felt, for all sorts of reasons but including this, we should be moving towards a system which was based on modern technology and very simple administration. Q57 Chairman: Is that your view, Mr King? Are there any extra points you want to make? Mr King: The point I would make is that in terms of fiscal neutrality, the Chancellor said the overall level of taxation in the industry will not increase. We are not stupid enough to think that it will not increase for some and may benefit others. Certainly, a tipper truck in the peak district, not doing a large mileage but going up very steep hills, will be a beneficiary as they burn more fuel but do not drive that far. Similarly with a parcel carrier on a motorway, the opposite may be relevant. It is going to be an enormous challenge for the Government to set rates that are going to get the whole industry within this sort of neutrality area. As Mr Turner has pointed out, the big question mark is - we cannot get any answers to this - who is going to provide for the cost of the equipment. If you take the German system, they provide the GPS system at the Government's cost, about £250. The haulier pays for the fitment of it, four hours' work, £50 an hour in the UK, but then there is the time the truck is off the road, the loss of wages of the driver who has brought the truck to the fitting station and that totals up to about £750. Plus, if you add that up over 425,000 vehicles, there is a cost issue here which we have got to resolve with Government. Q58 Chairman: Can I ask you about the private nature of the investment in expressways? How would you like to see more capacity on the network funded. Would you like it all to be private development? Mr Turner: Firstly, I think the use of private funds is more expensive. There is plenty of evidence to suggest that private money costs about a third more than using public money. If we going to use private money, there must be an extra benefit and the extra benefit must be that we get it quicker. Q59 Chairman: Your members would be quite happy to see the charges passported on to them, as long as there is a time advantage? Mr Turner: Yes. Q60 Chairman: You did say earlier on about the fact that they can set their own tolls. Do you think they ought to be capped in some way? Mr Turner: I think you have to get a reasonable balance between the commercial incentive to someone to put up the money and invest in one of these things and the open arrangement whereby once they have got it they can do what they like. I think the M6 toll goes too far in the wrong direction. I do not think there should be rigid controls, but I do think there should be some limit and some sensible control. Q61 Chairman: If the Government is going to set down controls in some way or another, they would have to be very specific, would they not? The Government cannot produce a system which says, we are not going to cap it, on the other hand, you may not go higher than a certain level because they would soon be howled out of court? Mr Turner: Train operating companies do make the investments in trains. Q62 Chairman: That may not be a good precedent, Mr Turner. Would you like to see the money from these, something like the expressway, hypothecated to public transport? Mr King is having difficulty keeping a straight face. Mr King: The answer is no, we do not think that it helps. We would like to stop the amount of money that the motorist is paying to subsidise the railways. If you look at the transport sector, the £12/13 billion which is being spent on the West Coast route to speed up journey times from Manchester to London by ten minutes may be very welcome for those using the railway services. It has not done much for increasing freight traffic on a congested system, but for £12 billion probably you could have built a brand spanking new motorway and catered for 86 per cent of the commercial traffic which is travelling between the Midlands and Manchester and further North. Whatever way you arrive at in terms of funding the necessary increase in road capacity - and the fourth lane on the M6 north of Birmingham to Manchester is long overdue - whatever you do in terms of providing an alternative motorway, let us get the work done. It needs to be done as urgently as possible and if private finance can be used, fine, a shadow tolling system might be the way forward there. As an industry we believe we have paid enough taxes over the years to finance 12 foot of motorway going North and 12 foot coming South. Q63 Chairman: Would you welcome a private parallel national motorway system? Mr King: From the point of view that it could be built essentially for motorists, no. Road hauliers are not going to use it. It would only be a dual carriageway probably anyway. It is inconceivable to think you can put a six lane motorway up through Staffordshire paralleling another six lane motorway. If you built a dual carriageway motorway to motorcar standards, you could build it cheaper and quicker, which may be more effective in getting car traffic and light van traffic off the existing M6 and freeing up that road for the movement of essential goods. Chairman: Gentlemen, you have been most interesting. We are very grateful to you all. Thank you very much for coming. Examination of Witnesses Witnesses: Mr Edmund King, Executive Director and Mr David Holmes CB, Chairman, RAC Foundation for Motoring, examined. Q64 Chairman: Good afternoon to you, gentlemen. Firstly, may I ask you to identify yourselves. Mr Holmes: Madam Chairman, my name is David Holmes. I am the Chairman of the RAC Foundation. On my left is Edmund King, who is the Executive Director of the Foundation. Q65 Chairman: You are both very welcome and very familiar with our ways. May I ask you if you would like to say anything before we begin? Mr Holmes: Our memorandum sets out our position on road pricing. It was the result of the work of an independent group we set up two years ago to look ahead 50 years at the whole range of traffic and transport issues. Our conclusion is that we support road pricing in principle as a national scheme provided it is part of a system giving the country a first class transport system which includes more investment in roads and in public transport, and we see it as part of that package. We have a number of conditions which we attach to road pricing and no doubt these will emerge in the course of the discussion. We do see that it is important that charges should be independently set and there should be a form of regulation to prevent abuse of a monopoly. Q66 Chairman: I think that is helpful. Do you agree that it is impossible to build your way out of congestion? Mr Holmes: Yes. Clearly there are certain areas where more capacity cannot be provided. For example, there are urban areas and areas of Outstanding National Beauty where it would not be sensible or politically possible to build more capacity. We do believe there are many corridors, particularly on the inter urban network, where more capacity is urgently needed and can be provided. Q67 Chairman: Do you have an estimate or have you done any guesswork about the scale which might be required? Mr King: We looked at a number of alternatives in our study. We came to the conclusion that a reasonable balance would be investment in the national road system of the order of two billion pounds a year, which is roughly twice what the Government was spending and rather more than twice what the Government is planning to spend in its latest forecast. Also, there would be a commensurate increase in local authority road investment, although we have not got a precise figure for that. Q68 Chairman: Do you think some kind of road pricing is inevitable? Mr Holmes: I think in the very long run it is inevitable. Q69 Chairman: What is a "very long run"? Mr Holmes: It is some time. Politically it is not going to be very easy to introduce it and, because of the long time scale it is going to need the Government to build up a consensus, some measure of acquiescence and support for it. Afterall, the thing is 12 or 15 years ahead and there will be three general elections between now and then and several secretaries of state. The Government needs to build up an agreement that road pricing is necessary. I think unless the Government does that it will be a very long time before it is introduced. Q70 Chairman: You do not think congestion will rise at such a rate that people will almost automatically require a more urgent response than a 12 or 15 year timescale? Mr Holmes: There is no doubt congestion will rise unless very dramatic action is taken to increase capacity. We forecast that the number of cars is going to grow by 45 per cent over the next 15, 20, 30 years, so congestion will grow. How people will deal with that is difficult to predict. Whether it will result in a demand for road pricing, I do not know. Road pricing will not happen unless the Government prepares the way for it, both in political terms and technically because there are a lot of technical issues to be resolved. Q71 Chairman: You are unusual as a motorist organisation in saying that you support road pricing. Have you done any estimate of what percentage of the general public agrees with you? Mr King: We have polled motorists on a number of occasions and there are very interesting results. If you asked motorists if they felt it was fairer for motorists to pay according to the amount of time they drive in congestion rather than fuel tax or vehicle excise duty, 60 per cent think that would be fairer. On the other hand, if you said to motorists, should there be a toll on all roads and would you be willing to pay it, 84 per cent said no. I think what is more interesting in the kind of package approach which we are putting forward is if you said, "Would you support a nationwide system of tolls if there was an equivalent reduction in fuel duty?", 76 per cent said they would support it. What we have been saying to Government is that it is absolutely essential to get the trust of the motoring public. If you said to the motoring public, "Would you trust Government to deliver a fair scheme?", I am afraid, Madam Chairman, nine out of ten said they would not. If you then said, "If an independent inspectorate was set up to administer the scheme, if it was totally transparent, do you think such a scheme would then work and would it be acceptable?", the acceptance rose to 74 per cent. We are saying to Government that we think motorists can accept a national scheme of road pricing, but they will have to be convinced these guarantees are watertight. Even though the London Scheme has been very successful in central London and we supported it in principle, at the moment we are somewhat concerned about the matter of trust with it because now it looks like the toll is going to be increased from five pounds to eight pounds, which is a 60 per cent increase, even though when the scheme was introduced we were told, categorically, the scheme was introduced to reduce congestion and not to raise revenue. In London it appears that the rules have been changed and our worry is if motorists see that happening in London they will be much more cynical about a national scheme. Q72 Chairman: You said that the charges are always set by an independent regulator rather than the elected representative, but has not the accountability of such regulators not been called into question over the last few years, particularly in the transport sphere? Mr Holmes, you know all about regulators, tell me what you think. Mr Holmes: Madam Chairman, as you said earlier yourself, one should not take the railways as a model for how to organise something. Q73 Chairman: I do not think I mentioned that. Mr Holmes: There are examples of regulators, for example in the water and energy industries who I do not think have come into the same sort of problem. Railways may have come into a problem because one is trying to regulate an industry which is publicly subsidised. It is possible to have regulations. As we would see it, there would be a political decision about the level of congestion which was acceptable in a particular area and that is a matter for elected representatives. Once that decision is set then the question of what the charge should be to produce a desirable level of congestion should be set objectively by a technical person. One would maintain the political accountability but one would not have political intervention in detailed lengths of charging. Q74 Chairman: You would accept that it was precisely the way a regulator interpreted what was the correct percentage of money needed by the industry concerned, in this case the railway industry, that got them into such trouble because the regulator's view was so very different from anybody else at any level. You think that will deal with the problem of public trust? Mr Holmes: I think the regulation issue in roads would be easier than it is in railways because, as I suggest, the level of congestion which would be acceptable would be set by the political authority. Then it would be the job of the technical person to say, as a matter of fact, what is the level of charge which would produce this level. The job of the regulator would be twofold: firstly, to make sure that level of charge had been applied correctly and, secondly, that the proceeds of the charge were applied to the purposes which Parliament had decided. Q75 Mr Donohoe: Has the M6 toll road made a significant difference in terms of reducing the congestion in that area? Mr King: We have found, from the motorist's point of view, that they have found the M6 toll to be very successful. It is used by approximately 40,000 motorists every weekday and slightly less at the weekends. The opinion from the motorist is that three pounds - it was two pounds and then three pounds - is a price worth paying. I did an interview on Radio Five Live this morning and someone text in and said they save two hours a week by using the M6 toll and, therefore, it is worth paying that amount. There have been various polls on BBC websites and, generally, the response has been positive. Something like a fifth of the traffic going through the West Midlands conurbation is now using that road. I think before that motorists may have been much more opposed to the concept of tolling, they already pay £42 billion a year and only six billion pound is spent on roads, et cetera, but when they have got a choice and they see the time benefit, I think the majority are willing to pay. Q76 Mr Donohoe: What is the average time saved by using the toll? You said two hours a week, how many times does that motorist use the road? Mr King: That was five journeys a week in both directions. I think more than the time - and this is what some of the freight people were saying - it is the reliability. With many of the journeys in the West Midlands on the old M6, even though the journey might only have taken an hour, you had to give yourself an hour and a half because of the unpredictability. What the M6 toll has brought is a greater sense of predictability and reliability. To some extent that is worth more than the time saving because you do not have to give yourself extra time for the journey. Q77 Mr Donohoe: What has been the effect, if any, on the number of road accidents on that section of the road? Mr King: I am not aware of the accident figures either on the new road or on the old M6. I am not aware of it increasing. Q78 Mr Donohoe: Do your recovery vehicles have to pay the toll? Mr King: The RAC Foundation is separate from the RAC. They are a different body, but I believe they are exempt, no, they are not, sorry, I was taking the advice on that from someone from the RAC. Q79 Mr Donohoe: I was told you have to pay. I think I was given the wrong information when I asked the question. Mr King: They do have to pay. Q80 Mr Donohoe: In terms of the value for money, do you get feedback from your members on that they are getting good value for money on the existing levels of tolls. You may have heard - I am sure you were in here earlier - that there is a possibility that if congestion got to be a problem they would increase it to £20. Do you think that sort of variable increase would be supported by your members? Mr King: Currently, I think they are getting good value for money. We were somewhat perturbed that there was not some kind of a cap put on the amount which could be charged. The reason we say that is if there were some specifically major problems on the old M6, if it was closed - and there have been structural problems with the concrete and the overpasses - and there were major problems, then there would be a captive market, the toll providers could charge what they like and we think that would be unfortunate. Q81 Mr Donohoe: Is that likely to happen? Mr King: Yes, it could happen possibly Q82 Mr Donohoe: How long do you expect the toll road itself to stay as it is congestion free? Mr King: Again, it depends on the level of toll charge. Also, it depends on what happens with road pricing in general because if there is the National Road Pricing Scheme which we advocate, we would see that as a national scheme that would operate, perhaps, on about 10 per cent of the road network at certain times of the day or night depending on congestion. If there is a national scheme, we would like to see the smaller schemes, like M6 toll, become a part of that national scheme. You would remove tolls from the Severn Bridge, you would remove tolls from Dartford Crossing but it would become part of a national scheme and you would only be charged at the times where there is congestion. That is the kind of national scheme which we feel would benefit the country as a whole. Q83 Mr Donohoe: Can I ask a final question, in a different section? It was raised earlier, in terms of the section north of that toll road, as to whether or not you would have any real benefit if that were built as a widening of the existing road or, as an alternative, as a further toll road. Which of the two would be the choice of the RAC Foundation? Mr King: Our choice would be the fastest. Q84 Mr Donohoe: What would that be? Mr King: We do not know. What we have said is that, if it is an expressway, the way to speed it up as an expressway could be to have it as a car-only expressway. It takes less land, less time to build, and it is slightly cheaper. However, if that then meant that the planning process took longer than on-line widening, we would rather see the on-line widening. It is a case of priority, and that stretch is in desperate need. We have said to the Highways Agency that, whilst looking at the expressway, they should keep their on-line options open until they can ascertain which would be the quickest. Q85 Mrs Ellman: We were told by the Freight Transport Association that practicability was the most important issue. Yet they also said that lorries did not use the M6 toll road when the charge for lorries was seen to be too high at £10. Do you think that is a contradiction, and shows the confusion in trying to predict who would use which roads? Mr King: I think that for them it was more a question of economic reality in trying to work out whether the £11 saved them that much time. They have also benefited though from the 40,000-odd cars that have come off the M6 and associated roads, which then does improve the predictability of that route. However, I certainly think that motorists, because the toll was lower, could see the predictability. It was an easier sum to do in their minds. If they are saving 20 minutes on a journey, it was worth paying that amount. For the hauliers, because it was a higher amount, I think that some of them questioned the benefits. Q86 Mrs Ellman: Your suggestion is for charging which would vary according to circumstances and conditions. In that sort of scheme, how could anybody work out what the actual cost of a journey would be? Mr King: To some extent that would be trial and error, but generally we do find that congestion happens on the same roads at more or less the same times of day or night. We could all name those hot spots. One way perhaps of giving advance warning of it is by better use of variable message signs and flashing up the tolls. This is done in the United States of America, where they have high-occupancy toll lanes in California. They actually flash up, and the toll can vary due to the levels of congestion, so you know whether you are going to pay $3, $5 or $8. I think that a similar system could be introduced in the UK. In terms of technology, I think that to some extent people overcomplicate the issue. For example, today Norwich Union Insurance has launched a pay-as-you-drive insurance system for young drivers aged 18 to 21. They will have a black box in their car; they will be monitored by global satellite to see where they are driving. If they drive after 11 o'clock at night and six in the morning, the charge goes up substantially, because that is when young drivers are most at risk of drink-driving, drug-driving, and other accidents. This is being introduced as a pilot, but the point I make is that all the technology involved in this Norwich Union scheme is exactly the kind of technology you would require for a national road-pricing scheme. So I do not think that we are that far off that kind of technology. Q87 Mrs Ellman: When do you think it would be realistic for individual drivers to be able to access sufficient information to let them make informed choices as they were actually on their journey? Mr King: What you would need is information, first before they set off - so some on a website, traffic news, whatever - but also on the journey. If you were driving from London to the west Midlands and you are on the North Circular, on the variable message sign there should be a sign showing that the M1 is congested, the toll will be x-pounds; the M40 is free‑flowing, there is no toll. The motorist can then make the choice. The beauty of that is it balances things out; it balances the traffic out. If one is very congested, people can have another choice. For us, that is the purpose of road pricing. It is to better manage our scarce resource, which is our road network. Q88 Mrs Ellman: Could safety be compromised if people suddenly switched the roads they were using on receiving this information? Mr King: I do not think so, as long as the information is given well enough in advance. There are certain in-car satellite navigation systems that currently do it. I have a system where, if I am driving along and I have given them a route, it can cut in and say, "There is congestion ahead. Expect a 20-minute delay. We have calculated there is a quicker route. Press the button now". I have never found that a distraction in any way, and yet it can help avoid congestion. Q89 Mrs Ellman: How much would it cost to install such a system and who should pay for it? Mr Holmes: The Department's feasibility study made some rough estimates of the cost. The cost of the equipment in the car, a rough estimate was that it might be £100 over the course of time because, as Mr King said, the kind of information which would be needed to operate a road pricing system is the kind of information that people want anyway - these guidance systems, and so on. So, as things become fitted to cars, then it is much cheaper to add the extra equipment to achieve a road pricing system. The cost of operating a system is quite obscure. The Department's estimates were very high. They were of the order of three billion a year. In our view, that would be unacceptable; but there are lots of ways in which that cost can be reduced. If, for example, the Department thought about all the databases which Swansea and the insurance companies are keeping and amalgamated those together, it should be possible to bring the cost of operation down quite considerably. Q90 Mrs Ellman: Do you think that it is realistic that could be done effectively, when you look at the problems government seems to have in accessing data systems and installing new technologies on a big scale? Is this a realistic proposition? Mr Holmes: There is certainly a poor history of government large-scale computer systems, but I think that there are also some very successful schemes. If you look at the advance of mobile phone technology, for example, and indeed credit cards, it is perfectly possible to make systems work with very large numbers of people. Perhaps somehow the Government has not yet found the trick of getting these right, but we would not want to abandon the idea simply because of failures in the past. Q91 Mrs Ellman: Could you put an approximate date on when you think it would be feasible to install such a system? Mr Holmes: The Government's estimate in the feasibility study which I took part in was 12 to 15 years, before a full national scheme could be operating. My own view, and the Foundation's view, is that it could be quicker than that. Partly because, as Mr King explained, there are these private sector uses - the Norwich Union experiment. Also, if the lorry user charging scheme which is intended to be introduced in 2008 works, that has a lot of components in it which would be necessary for a national road pricing scheme. So we think that 12 to 15 years is probably at the upper end of what would be feasible, if the Government has the will to do it. Q92 Mr Stringer: Mr King, is not one of the problems with the system you are talking about which says, "You are heading for congestion", that if everybody uses the same system you end up congesting the next road? Mr King: That is something that has always been argued with the satellite navigation systems, the Trafficmaster type of system; but I think the importance is that the charging we are talking about is not on individual roads. It is an area charging scheme. What you do not want is to push all the traffic off the purpose-built, charged road on to unsuitable regional roads. That is why it needs to be done on an area basis. Otherwise, people will choose the rat runs and go through the towns and villages. However, what you actually find and what you found with the M6 toll is that even if you have to pay a relatively small amount of money, it does change habits. In London, £5 in terms of £25 for parking your car is a relatively small amount, but it has reduced traffic by 30 per cent. So it does not have to be large amounts. I think you will find that motorists would develop habits. Some will pay because that is the route they know; others will try to find other routes. Over time, however, I think that will even out. Q93 Mr Stringer: Secondly, perhaps I may clarify a point between your evidence and the previous evidence we heard. In the last evidence we heard that there are sometimes signs saying that the M6 is free. My memory of using the M6 is that those signs never say that. What they say is that the M6 toll road is free, and they never tell you anything about the M6. Is that right? Mr King: Do you mean the variable message signs which say whether there is congestion ahead? Q94 Mr Stringer: Yes. Mr King: I have certainly seen signs indicating, "Beyond Junction 21 expect congestion". I have seen that kind of use, but I think that we could use those much more effectively across the whole network. Q95 Mr Stringer: The point I am making is that they do not tell you if the non-priced road is free. I would like that to be confirmed or not. It is my experience. Mr King: I think that it is that kind of technology we would need to improve, to offer a better service to the motorist. Information, particularly if people are paying for roads, will be more important. They will be seen more as a customer and therefore should get a better level of service, and more accurate signs would be part of that. Q96 Mr Stringer: Mr Holmes, if an extra lane is added to existing motorways, would you support those lanes being reserved for high-occupancy cars? Mr Holmes: We think that there is room for experiment on those lines. The Government has talked about adding an extra lane to the south end of the M1 and reserving it for high‑occupancy vehicles. We certainly think that is worth experimenting with. If the high‑occupancy vehicles did not materialise and did not use it, then we would see no purpose in continuing it and it should become part of the ordinary road system. Yes, we favour this kind of innovation. Congestion is so bad that the Government should be trying out various means of easing it. Q97 Mr Stringer: Taking you back to your very first points in response to Mrs Dunwoody, you effectively said that you did not think we could build our way out of inter-urban congestion. I am slightly surprised at that response from a motoring organisation, because we have the lowest motorway density in what was the European Union before it was extended, and most of the motorway system that is congested is not running through areas of natural beauty. It would be expensive, but do you not think that technically we could build our way out of it? Mr Holmes: I am sorry: I have not made myself clear. I said that I think it would not be possible to build our way out of urban congestion, because clearly one does not want to see towns and cities destroyed. I think that inter-urban congestion can be dealt with by increasing capacity, except in very special areas and areas of outstanding natural beauty, where you would not want to. But, even in those cases, more imaginative techniques could be used, such as tunnelling and so on - which we do not use enough in this country - to create the capacity that is needed. So I think that inter-urban congestion can very largely be resolved by building extra capacity. Q98 Chairman: Finally, Mr Holmes, would you support the idea of an entirely alternative tolled motorway? Mr Holmes: As we have said, Madam Chairman, the country suffers acutely from under‑investment in its roads, and indeed in its railways. We would support measures that increase capacity. Whether a separate system of tolled motorways would be practical, I very much doubt. I think that it may be much more practical to go on widening and improving what is already there, rather than starting afresh. Chairman: I am very grateful to you both. Thank you very much indeed. Examination of Witnesses Witnesses: Mr Mike Lambden, Head of Corporate Affairs, and Mr Marc Sangster, Director of Strategy, National Express Limited, examined. Q99 Chairman: Thank you very much for coming. Would you like to identify yourselves, for the record? Mr Sangster: Good afternoon, Madam Chairman. My name is Marc Sangster. I am Director of Strategy for National Express Limited, which is the coach division of National Express Group. Mr Lambden: I am Mike Lambden, Head of Corporate Affairs for National Express Coaches. Q100 Chairman: Do you, Mr Sangster, have something you want to say before we begin? Mr Sangster: No, we do not have any opening words, but I would like to add that Mike is our expert on this subject and I am very much here to support him. So he will be leading our submission. Q101 Chairman: We always like to see faith in those that are responsible for public relations. Mr Lambden, did you want to say anything to start, or may we go to questions? Mr Lambden: Go to questions, please. Q102 Chairman: Do you agree that it is impossible to build our way out of congestion without limiting traffic growth? Mr Lambden: We do. We think that is a true statement: that it is very hard to build our way out. There are, as has been said earlier, certain pinch points around the strategic road network which will need adjustment but, overall, I do not think that we can build a huge amount of more roads. It takes too long and it is not practical in some cases. In other cases, although previously the RAC colleagues were saying that you could build motorways, it is also getting in and out of the cities that is the other issue. If you have more traffic going along the motorways inter-urban, they still have to get in and out of the cities - where some of the worst congestion is. Q103 Chairman: Has the coach industry done any estimate of the building it would require to deal with points of congestion? Mr Lambden: I am sorry? Q104 Chairman: The amount of extra building it would require. Mr Lambden: No, we have not gone into that. Q105 Chairman: Do you think that road pricing is inevitable? Mr Lambden: We do not out and out welcome it. We have a cautious response to it. We think that there could be advantages in using it as a method of controlling demand. As other people have said earlier, there is not an unlimited supply of roads to run upon and it should be used, if it is used, as a way of making sure that you can deliver, from our point of view, a good, reliable service for our customers. Q106 Chairman: So you would not be against its introduction. Do you have any theory of when that ought to be? Mr Lambden: I think that it is unlikely it will be within the next ten years. As was said earlier, there is the technology of getting it into place and how you fit everyone's vehicles with equipment. To fit equipment to our vehicles could be quite quickly done, linked in with things we already have on board the coaches. Q107 Chairman: Such as GPS? Mr Lambden: Yes, things we are fitting at the current time. GPS and our new in-house tracking system we are introducing in the near future. Q108 Chairman: Is that a management tool so that you know where your coaches are at a particular time? Mr Lambden: Yes, and providing real-time information at all times to drivers. Q109 Chairman: Encouraging them not to stop in the wrong places? Mr Lambden: In part, yes. Q110 Chairman: Have your views as a company changed over the last five years in relation to road pricing because of something like congestion charges or the M6 toll road? Mr Sangster: Are you asking me, Madam Chairman? Q111 Chairman: Yes, I was. Mr Sangster: I would not say changed as such, but I think that we recognise increasingly the problem of congestion, and we have probably formalised our views more than we would have if you had asked us that question a few years ago. Q112 Chairman: You have said that you thought the Government ought to make you exempt from road user charges. Did you get an indication from the Government what their response was to that? Mr Lambden: No, we have not heard anything in that respect, but we do not pay congestion charging in London. We think that is a precedent. Q113 Chairman: So really you were extending what happens now in relation to one particular scheme, and using that as an example of how you should be allowed to be exempt. Is that it? Mr Lambden: Yes, we are. Q114 Ian Lucas: Do you pay a toll on the M6 toll road? Mr Lambden: We do, yes. Q115 Ian Lucas: Could that not be a precedent too? Mr Lambden: It is not under the Government's control, is it? Q116 Ian Lucas: But as a general policy? Why do you think you should have an exemption? Mr Lambden: We believe that if the Government is committed towards public transport and encouraging the growth of public transport, we should be given every incentive to help people to travel. We deal with a lot of people who are less fortunate in terms of their income. We participate in the DfT scheme for the over-60s and the disabled concessionary fares scheme, and people value the service which we give as an alternative to other modes of transport. Q117 Ian Lucas: Do you, as an organisation, have a view on any alternatives to road pricing to control congestion? Mr Lambden: As I said before, linked to that, one of the issues is getting in and out of cities. If you keep building more and more car parks and make it easier for people to get in and out of cities, I think that people will continue to drive. It has been demonstrated in a number of places that just putting up car park charges - although the congestion charge in London seems to have a very positive effect in controlling traffic, car parking charges do not. People just seem to pay it. There are also other things which cause congestion, such as the building of out‑of‑town leisure facilities and retail parks. Business parks alongside motorway junctions are putting severe pressure on some of the junctions. If planning consideration is taken to the full and that sort of thing is avoided, it helps public transport to serve it in the local community better but, secondly, it stops all the issues of everyone coming to one junction and causing pinch-point problems. Q118 Ian Lucas: Have you made any assessment of what effect the introduction of a road pricing scheme for cars would have upon your business? About the number of additional passengers you might secure? It would be good for you commercially, would it not? Mr Lambden: There are a number of items attached to that. Probably the first is that if you can make the journeys more attractive, improve reliability and improve the journey times, you will encourage people to use the coach more. Secondly to that, yes, there is the added incentive that you may get people out of cars. Clearly that is the target market for us. The question was asked earlier whether we should have it for free. Pragmatically, we rather doubt that we will get it for free, but what we have to balance up as a commercial organisation is how many extra people we can gain for what we might pay out. Q119 Ian Lucas: Do you think that you would get more passengers? Mr Lambden: We believe that we would, yes. Q120 Ian Lucas: Have you made any assessment of how many more? Mr Lambden: It is hard for us to research that, because most of the people who travel with us are occasional travellers and their opinions are not the same as someone who travels every day. It takes a while to form opinions. Q121 Ian Lucas: Are there any examples from overseas that assist you? Mr Lambden: We talked about this ourselves earlier on - about the fact that we run services into Europe and we pay tolls on roads there; but ever since we have run the services the tolls have been there, so it is difficult to do a comparison. When we established the services the tolls were already there, and there are not really any alternative roads that can be used. Mr Sangster: I should add at that point that our average journey price is somewhere in the region of £8.50 to £9. Q122 Chairman: £8.50 to £9 for...? Mr Sangster: For an average journey that a customer would make with us in the UK. We are an affordable, low-cost transport operator. Q123 Chairman: How far would I get from London for £8.50? Mr Lambden: You could get from London to Glasgow for £1 on certain types of tickets. Q124 Chairman: I am hoping to be there in one bit! Mr Lambden: No, that is a proper National Express coach, with the same facilities as anyone who has paid the higher prices - by advance booking. Q125 Chairman: This is presumably one of your loss leaders, Mr Lambden. You are not suggesting that you normally charge £1 for a distance from London to Glasgow? Mr Lambden: No - to Coventry, Birmingham, et cetera, from London. Q126 Chairman: Would be about £8? Mr Lambden: Yes. That is the one-way fare. Q127 Ian Lucas: If road pricing were introduced, would you like the whole network to be road priced or do you think it is better just to have distinct parts of it? Mr Lambden: I think it has to be looked at as distinct parts. I do not think that the whole road network needs pricing. I know it therefore leads to other issues which have been talked about earlier, about people diverting on to other roads, but that has to be thought through as a cohesive policy for an area. Q128 Ian Lucas: Who would determine that policy? Do you think it should be done locally or nationally? Mr Lambden: I think that it has to be done nationally because, leaving things to individual areas, everyone seems to be afraid that "I am not going to be the first to do it". So I believe that there has to be a cohesive national policy. Probably the Highways Agency are the best people to look after things. We are primarily talking about the strategic road network, which the Highways Agency already look after. Q129 Ian Lucas: When the congestion charge was introduced, did that have a positive effect upon your business, negative, or no effect at all? Mr Lambden: I think it almost took us by surprise how good it was. Even from areas where the coaches did not go into the congestion charge areas, particularly coming from the south coast into London, suddenly in the peak we were reducing service times by about 30 minutes at certain times of the day. Q130 Ian Lucas: Has the M6 toll road had any effect? Mr Lambden: As people have said earlier, it has indirectly. We have not been using it to any great effect ourselves, but the knock-on effects on the original M6 have been tremendous. For example, Friday afternoons used to be hell on the road network round there. It now runs pretty freely most of the time. So it has had a very positive benefit in that respect. Q131 Ian Lucas: I am surprised that you are not more enthusiastically in favour of road pricing, given the commercial impact that those two schemes have had upon you. Mr Lambden: As we have said in our submission, what we have to make sure is that it stacks up for us commercially, because we do run all our services on a strictly commercial basis. If we consider that it is the right thing to do for the commercial bottom line of the company, we will do so. Q132 Mrs Ellman: What element of time saving would you say is commercially beneficial to you? Mr Lambden: It has to be offset against what the price might be. It is very difficult to give a straight answer on that, because if the price is very small and we save ten minutes, then it might be commercially beneficial; but if it is a high price and it is saving us 10 minutes, it definitely is not beneficial. Using the example of the M6 toll road, we have undertaken comparative timing trials along both routes and have decided that at the present time we are not using the M6 toll because the saving we made - I know someone quoted earlier that there was a 30 to 40-minute saving - we found was only ten minutes, and that was taken over a period of a fortnight of doing comparative trials on both roads. It is very difficult to give a clear‑cut answer on it until we have experience and we know what the costs will be. Q133 Mrs Ellman: If there was a differential system of charging introduced, with different charges for different times of day and different charges related to the level of congestion at any particular time, would that be a system which you could work with? Would it enable you to take the commercial decisions that you need to take? Mr Lambden: It has some difficulties attached to it but I think that it is essential, because if people are going to accept that the way of managing demand on the roads is by charging, it is no good charging people if you do not get a congested road. So you have to charge according to demand, to be able to offer people the reliable service on the tolled road. Q134 Mrs Ellman: In a system of that nature, who would then take the decision on which route to follow, if you did not know what the charges were going to be until the journey was actually being undertaken? Mr Lambden: I think that there would have to be charges set by the time of day, time of the year. We deal with those sorts of things sometimes in coach station access charges. We get charged according to whether it is known to be a busy time of year, time of the day, time of the week. There is enough knowledge base to be able to say that on a Friday afternoon it will cost you more than it will cost you to travel at two o'clock on a Monday morning. Q135 Mrs Ellman: Are you saying that you would need to know in advance of journeys exactly what the price was, and you could not deal with something that changed during the course of the journey? Mr Lambden: No, I think that we would plan either to use it or not use it. We would not make instant decisions, unless there was a particular incident to get round. Under normal circumstances we would follow a prescribed route. We run services to a schedule, and we want to deliver our customers on time. If we thought that it was the right thing to do for the business, we would do it. We would have to determine whether we were going to generate enough extra trade by using it. If it provides a Friday afternoon service which is far more reliable and more attractive than it currently is on some parts of the motorway network, then it may be the right thing to do. Mr Sangster: Perhaps I may comment on that. We are discussing charging quite a lot and I fully understand why we would be having that conversation, but our view quite clearly is that there is a very strong argument as to why coach should be exempt from charges on these forms of roads. We have a key role to play in helping the Government support its transport strategy, taking people out of cars and thereby reducing congestion conditionally in that way. I would like to make the point that we think we should be exempt from charges. Q136 Mrs Ellman: You have suggested that coaches should have a higher speed limit on toll roads. What is the justification for that? Mr Lambden: If it is a controlled environment on the toll road, then that refers to our submission on the M6 expressway and at what speeds traffic could run on that. We do not believe there is any logic that says coaches should be slower than cars, if the national limit is 70 mph. Coaches used to run at 70 mph. For a number of reasons that was reduced to 100 km per hour. Coach technology has moved forward considerably since then. Coaches are incredibly strong in their build now; they offer a lot of safety options. Quite separately, in correspondence or discussion with DfT about the accessible coach which is now required in order to comply with the law, and as suggested in response to funding this ourselves, we would like to see the introduction of the higher speed limit for the coach. The two things are linked together as well - but only for coaches which meet certain standards. We would not suggest that it be retrospectively applied to older coaches which do not meet the same standards. Q137 Mrs Ellman: You have also suggested that access to toll roads should be restricted, to stop congestion. Do you know any country where such a system operates? Mr Lambden: That relates to the comments about the M6 expressway, where they suggested in the consultation document that there may be a reduced number of access points on such a motorway. That is what we were commenting on there. There has been a lot of discussion, for example in multi-modal studies, about whether certain junctions be closed at certain times of the day to help traffic flows. However, nothing has ever come of that as far as I know, and I do not know personally of any circumstances elsewhere, although sometimes transport experts quote things from various countries around the world; but I do not have any firm facts on that. Q138 Mrs Ellman: Are you saying that a system like this should be decided and notified in advance, or would it have to be done dependent on the level of congestion at a given time of any day? Mr Lambden: With the M6 expressway, I think that was based very much on it being described as built with perhaps three or four junctions between the west Midlands and the Manchester turn, as distinct from ten or 11 now. I think that all the evidence suggests that what causes congestion very often is merging traffic at junctions. Certainly if you minimise the number of junctions, you can reduce the levels of congestion around that area. I am not expert enough to comment on the flows on other motorways. Q139 Chairman: Speed limits are set at European levels, are they not? Mr Lambden: They are, yes. Q140 Chairman: So would it be possible for the United Kingdom to set its own unilateral levels? Mr Lambden: In other aspects of coach use there are national rather than unilateral rules, on weight limits, construction and build, which are not totally in line with the European standards. So I suggest that perhaps there is a precedent. Q141 Chairman: Finally, what sort of response have you had from the Government to your recommendations? I know that you mentioned it earlier, but you have presumably approached ministers, have you? Mr Lambden: Over what is within our paper overall? No, we have not approached ministers directly on this. This is something we need to do. If, Madam Chairman, you could point us in the right direction as to the person to contact, we would welcome that! Chairman: We have an excellent secretary of state, who is very easy to listen to. Gentlemen, you have been very helpful. We have enjoyed it very much. Thank you very much for coming. Examination of Witness Witness: Mr Mike Shipp, Director, Lorry Road User Charge Programme, HM Customs and Excise, examined. Q142 Chairman: Mr Shipp, since you are used to the vagaries of political life, I should begin by explaining that we may all, within about two seconds, rise rapidly to our feet and depart from the chamber. First, I should point out that this is nothing to do with you personally, but because I think that they are going to call a vote any second. Can I begin by welcoming you and saying that we are very grateful to you for coming this afternoon? If you do not mind, we will perhaps get over the preliminaries and some identification, and see how we go. Mr Shipp: I am Mike Shipp. I am from Customs and Excise, where I am the Director for the Lorry Road User Charge Programme. Q143 Chairman: What do you think are the objectives of the Lorry Road User Charge? Mr Shipp: I think that the first and foremost objective is one of fairness, levelling the playing field for the haulage industry, where all hauliers will contribute fairly to the costs they impose when using UK roads. That is the first and most obvious objective. The next one is about modernising the taxation of the haulage industry. The current arrangements for fuel duty are a relatively blunt instrument, and LRUC will give ministers an opportunity to tailor the taxation for the haulage industry in a way that they cannot do today. That will enable them to take account of such issues as the costs on the environment and so on, and then to effect an instrument on the haulage industry which is distinct from other road users. Q144 Chairman: Who would you say is the final arbiter on this scheme? Would you say it was the Treasury or would you say it was the Department for Transport? Mr Shipp: My experience to date has been that all the policy matters pertaining to LRUC have been developed jointly between the Department for Transport and the Treasury. From the earliest days of this programme, those two departments have been working together on the policy objectives and then, in the spring of 2002, approached Customs and Excise to develop the specific systems that would introduce the tax. However, all my experience from the early days of the programme - and I have been with it since the then Financial Secretary asked Customs and Excise to take it forward - has been that those two departments have worked jointly on setting out the objectives. Q145 Chairman: In this harmonious and jolly atmosphere, Mr Shipp, which department would be able to instigate changes? Is there any indication whether the objectives need to be changed, and who would be responsible for getting that agreed? Mr Shipp: I would look to the two departments concerned. Clearly, when it is a matter of setting the tax rates - and LRUC is a tax - then I suspect that Treasury ministers would have first call on that. As to the other elements of the charge that affect the haulage industry and the way they use the roads, my expectation is that Transport and Transport ministers would have a full part to play in that. Q146 Chairman: How are we going to evaluate the effect? Are you going to have targets? Mr Shipp: Targets for the charge itself? The specific targets for the charge have yet to be made. There is still quite a way to go yet before we are in a position of developing sophisticated performance indicators. As, perhaps I could say, a tax professional, my expectation is that one of the key targets that my department will be assessed by are the compliance levels that we achieve for the charge, as measured by revenue linkage, and so on. Q147 Chairman: Have you done any estimate of what foreign hauliers cost the United Kingdom in terms of wear and tear annually? Mr Shipp: That is difficult to predict, in the sense that our data about foreign hauliers is relatively poor compared to that of UK hauliers, largely because they do not participate in our systems. Q148 Chairman: Is there no automatic way of Customs knowing who is going out of the ports? You are telling me that is not recorded? Mr Shipp: No, not by my department. Q149 Chairman: I might have a nasty suspicion that somewhere in Customs and Excise there is a lot of intelligence being built up about the movement of lorries, but perhaps that would be unkind. Mr Shipp: We certainly have some data about lorry movements, which is collected for a variety of different purposes - so the Chairman would be quite right. Since the completion of the Single Market, however, on the immediate borders to other Member States - as the Chairman of the Committee will be aware - we have stepped back from regular intervention at those points, and now rely much more heavily on commercial data and on intelligence sources. Q150 Chairman: Can I ask you what you understand by the phrase "fiscal neutrality"? It is important to know exactly what it means in the context of the Lorry Road User Charge. Mr Shipp: Fiscal neutrality - essentially, my understanding is that the ministers have said to the UK haulage sector that their overall tax burden will not change across the industry as a whole as a result of introducing LRUC. Q151 Chairman: The difficulty about that is the industry will want to know exactly what that means in terms of real payment. Will it include the costs of installing new systems? Forgive me: at the moment, I do not think that the industry is quite clear what fiscal neutrality means. Mr Shipp: We work quite closely with the ---- Chairman: I am sorry - you are now going to have a long time to think about that definition. The Committee is adjourned for ten minutes. The Committee suspended from 4.32 pm to 4.41 pm for a division in the House. Q152 Chairman: I want to bring you back to fiscal neutrality, if I may, because the implication is - in fact, the statement is - that the cost to the UK industry is not going to go up; but, if you are including foreign lorries, are we to assume that this is a cunning way of including resources to the Treasury? Mr Shipp: The presumption within the programme is as you have indicated, Chairman: that for the UK haulage industry the position on tax will remain revenue neutral. Given that foreign hauliers currently do not contribute anything to the UK when they use the roads, our presumption is that, once LRUC is introduced, there will be a new revenue stream arising from that source. Similarly, our expectation is that hauliers, both UK and foreign, who today purchase their fuel in other Member States when they have the opportunity to do so, in the future will be more inclined to purchase fuel in the UK, and that will give us further revenue. Over and above that, I understand that the UK haulage industry's concerns are around the administrative costs of LRUC. Particularly, I know their concerns about the cost of any on‑board equipment that they need to install in lorries in the early days; because, in the longer term, one would assume that manufacturers of vehicles will include this. Q153 Chairman: It will be automatic. Mr Shipp: Yes. I know from a number of discussions I have had on this subject with Treasury officials and with Treasury ministers that they are very sympathetic about this issue and would like to be in a position to give some reassurances to the UK haulage industry; but the fact of the matter is that, until I am in the position of being able to set out with confidence for Treasury ministers exactly what this scheme will cost, they are clearly not in a position to write blank cheques. I do not expect to be in that position until the end of 2005 at the very earliest, until we have completed some further negotiations with potential suppliers. Q154 Chairman: Do you have any idea what level of tax we get from the road freight industry altogether? Mr Shipp: My focus has been principally round the contribution they make through road fuel duty. There, road fuel duty in broad terms generates nearly £23 billion a year. Of that, about £9 billion is from diesel fuel, and the population of hauliers that would be within LRUC accounts for slightly less than half of that: so about £4 billion, perhaps £41/2 billion. Q155 Chairman: Is it true that hauliers in this country pay higher taxes and charges than their foreign competitors? Mr Shipp: It is certainly true that the road fuel duty they pay is significantly higher than their competitors in other Member States. Whether their overall tax burden is ---- Q156 Chairman: And the information does not exist in the Department, so that you could say, "Although in this one instance they pay more, there are other taxes which they do not pay"? Mr Shipp: You are right, Chairman. It does not exist within my programme. Our focus has been principally on their excise duty. Q157 Mr Donohoe: How much is it going to cost if you do introduce this charge? Mr Shipp: As I indicated to the Chairman earlier, those costs are still uncertain because we are still at a midpoint of quite a substantial procurement. So I would not expect to be in the position of presenting ministers with a full business case until about the end of this year. Q158 Chairman: We have taken evidence this afternoon. Without giving anything away, you are aware that there are different schemes, are you? You have a number of people that you are looking at - a number of different types of collection and disbursement. Mr Shipp: I am aware that other countries have schemes that look similar to our plans. Germany is the most obvious. That went live earlier this month and, I am pleased to say, it seems successfully. Switzerland has been running a scheme for some years now, and Austria has a similar scheme. We therefore have comparators that exist elsewhere in Europe that we do draw on quite heavily. There are experts who designed the Swiss system who have been advisers to us since the early days of the programme. So we are able to draw on that quite extensively. Q159 Mr Donohoe: But you are not anywhere near to a position where you could estimate what the cost of introduction will be? You must be. Mr Shipp: We naturally do have some estimates, which I have made available to Treasury ministers at the points at which the programme comes up for review; but they are not firm and you will understand that, in the middle of a procurement, they are extremely commercially sensitive, and it would not be appropriate for me at this stage of the procurement to indicate what we may pay for this contract or that contract. Q160 Ian Lucas: How much did the German scheme cost? Mr Shipp: The scheme is quite different to ours in a number of respects, so I am not sure that the comparator really works. Q161 Ian Lucas: How much did it cost? Just to give me an idea of how much a system costs - not necessarily the system we are going to use, but the German system. Mr Shipp: I believe that the German Government pays the consortia that operates that scheme something of the order of 600 million euros a year - something like that. Q162 Mr Donohoe: And the Swiss scheme? Mr Shipp: That I am afraid I do not know. Q163 Mr Donohoe: Can we turn now to the revenues themselves that you are going to get from this charge, and in particular that you will get from lorry road users. Is that to be hypothecated or not? Mr Shipp: The revenue...? Q164 Mr Donohoe: The revenue from the Lorry Road User Charge - will that be hypothecated? Mr Shipp: LRUC has been established as a tax and the revenue that we draw from it - our working assumption is that those net proceeds go straight into the Consolidated Fund. Q165 Chairman: The Transport Minister, in representations to the EC earlier this year, made application on the basis of some other charges that this should in fact be hypothecated - in other words, European charges. It would seem sensible, would it not, to have both on the same basis and that the hypothecation would take place, so that the benefit would be to the industry itself and not to the Treasury? Mr Shipp: As I say, my understanding is that this is a tax, as other taxes are that are administered by my department and it was therefore straight into the Consolidated Fund. Q166 Chairman: You are surely not telling us, Mr Shipp, that you would not like to express an opinion on the policy? Mr Shipp: It would be inappropriate for me to do so. Chairman: That comes as a great surprise to us! Q167 Mr Donohoe: It certainly is a surprise. I would have thought you would have told us that you were all in favour of hypothecation! What is now the date for the full implementation of the Lorry Road User Charge? Do you have a date? Mr Shipp: We have working assumptions. Our expectation is that we will sign contracts around the end of this year. We will then enter into a system-build phase, during which we will be testing and trialing elements of the scheme. We are expecting to set up registration facilities and to begin installing equipment in lorries during 2007, and then introducing the charge towards the back end of the year 2007-08. Those are the dates that sit in my programme plan. Of course, there is a dependency on exactly how those negotiations proceed and what we learn from the proof-of-solution testing and trialing that goes on during that period. However, our working assumption is that the scheme will go live in 2007-08. Again, our working assumption then is that we would look for a phased introduction, probably starting ---- Q168 Chairman: Phased in relation to the strategic network or one particular motorway? What are we talking about when we say "phased"? Mr Shipp: Groups of lorries. Q169 Chairman: So you are thinking of doing it by the type of lorry? Mr Shipp: One of the problems that our colleagues in Germany encountered was introducing LRUC in one go, and the severe strain that placed on the logistics of equipping all those lorries - many hundreds of thousands of them - within a fairly short time line, building the equipment; arranging for its installation, and then persuading hauliers to be available. That is a lesson that we are determined to learn from and we are hoping to do it in more manageable phases. Q170 Mr Donohoe: You are already subject to delays. There have been delays to its introduction as it stands, have there not? Mr Shipp: The original date for implementation was forecast as 2006, but I think it is fair to note that those announcements were qualified on the basis of, "This is our plan, and there is still a lot more work to do before we can be certain about that". It is when we have begun to undertake that work that we have found that we are in a better position to make a more realistic assessment of what is possible to deliver in a prudent timescale. I should add that this is not a revision that we have made within the bowels of Whitehall: this is a project plan that we have shared with our colleagues in the road haulage industry, and they too are very keen for us to get a date that works, for them and for us. Hence, I think that it was around the Budget of last year that we announced that 2008 was more realistic. Q171 Mr Donohoe: When do you think that you will be in a position to award the contracts? Mr Shipp: At the end of 2005. Q172 Mr Donohoe: How much do you estimate these contracts to be worth? Mr Shipp: I am afraid I regard that as commercially sensitive information at the current time. Q173 Mr Donohoe: If we go back to Mr Lucas's point, what was the equivalent cost in Germany? Mr Shipp: I am not familiar with the detail of the contracts in Germany. You will understand that, although I have fairly regular contacts with my counterparts in Germany, and given that there is quite a large civil action going on at the moment where the German Government is taking court action against the German suppliers, they are rather reticent to share some of that information even with civil servants in another administration. So I am not very close to that, I am afraid. Mr Donohoe: I do not think it is worthwhile asking any more questions on that matter! Q174 Mrs Ellman: Going back to the contracts, have any of the figures applied to more than one contract? Mr Shipp: We went into the procurement with three separate contract services bundles, as we describe them, and a number of the bidders had bid for all three. We have been going through a process firstly of qualifying them, where not all the bidders qualified for all three of the contracts and, more recently, short-listing them. Again, not all of the bidders have qualified for all of the contracts. At the beginning of the procurement, therefore, yes, quite a number of the organisations that responded to us put in a bid to do all three of our service contracts; but, as that has moved forward, some of them have fallen by the wayside. Q175 Mrs Ellman: So how many companies are now involved? Mr Shipp: We have short-listed six companies. In August we selected ten, through a pre‑qualification process. One of those subsequently dropped out, so we were left with nine. We are now moving forward with six to the short-list stage. We are in the process at the moment of going through a series of debriefing meetings with those bidders, to explain our perceived strengths and weaknesses of their bids. Q176 Mrs Ellman: The Government does not seem all that successful in big IT projects. Do you think that you will be able to make a success of this? Mr Shipp: I very much hope so. That is my job. We are asked a lot of questions by a number of interested parties, with just that thinking in mind. We are also subject to regular reviews by the Office of Government Commerce - Gateway Reviews, which I imagine the Committee is familiar with. To date, we have passed those successfully and have recently been through another Gateway Review. The advice from that review team is that they think we are well placed to deliver these successfully. Q177 Mrs Ellman: Are you going to have any testing systems? Mr Shipp: We are. Some of that testing has already begun. Before we short-listed bidders, we asked them to commit to entering into proof-of-solution testing. Q178 Chairman: Prudent solution testing? Mr Shipp: Proof-of-solution testing. Q179 Chairman: I am sorry - I thought that I was missing something there that had been ignored for years. Mr Shipp: We have contracted with the Transport Research Laboratory, and the successful bidders will now be going through a process of demonstrating to us that the solutions they have advocated will work. The results of that process will form part of our evaluation, before we move into the later stages of the negotiations. Once we have awarded contracts, further testing will take place before we go live. Q180 Mrs Ellman: What provision will you have to deal with the contractor who is not successful once the scheme starts to operate? Will you be able to get rid of them? Mr Shipp: Yes, we will be able to. We are pursuing model contracts which, I am advised, draw on the lessons from some difficulties that we have encountered previously in government. So our model contracts are consistent with the latest good practice that comes out of the Office of Government Commerce. Our contract management capabilities that we are developing now, well ahead of contract award and well ahead of when the system goes live, are being developed very much with an intelligent customer who can interact effectively with contractors - and doing that now, rather than waiting until the contract is sealed. Q181 Mrs Ellman: So you are confident that the scheme will be successful? Mr Shipp: From a programme management point of view, there are many things that could yet impact on the programme; but in terms of delivering this contract, yes, my confidence is high. I would not suggest that this is not challenging. It is a hugely complex and challenging task, but we have assembled a very high-capability programme. As I mentioned earlier, we are tested quite regularly. I have had positive feedback from those independent testers, and my confidence is high. We have a good team working on this. Chairman: There are a number of wry smiles round the Committee table, Mr Shipp, but I would not want you to misinterpret them. Q182 Ian Lucas: Are there plans to use the Lorry Road User Charge to tackle congestion problems in the future? Mr Shipp: We do not have an objective that is about congestion management. What we are trying to provide for in our solution though is some element of anticipating wider road pricing, should ministers decide that is a sensible thing which they wish to introduce. On the feasibility report which was published in July we had quite a bit of discussion with DfT colleagues - the same colleagues who work with us on this programme anyway, which made that process much easier - about the extent to which it was possible for us to anticipate what that scheme might look like in the last few years of the LRUC contracts. We agreed between Treasury and Transport ministers how our objectives would be framed with that in mind, and adopted contractual flexibilities with that in mind. I made a particular point when we launched our preliminary invitation to negotiate document to our prospective bidders. We had a presentation to them and we explained that government were thinking jointly on this issue, and this was the way that we were approaching the problem. Q183 Ian Lucas: Is it part of the specification? Mr Shipp: No, it is not. The specification for LRUC is just to deliver the objectives that have been set for LRUC. There are some very distinct differences between the two schemes. However, ministers were concerned that, should road pricing be introduced around the dates that have been postulated in the feasibility study, it would be a bizarre situation if that applied only to cars, coaches and other vehicles, and if the lorries that are within LRUC were in a completely different system and were not in any way affected by those measures. So we sat down and thought hard about the extent to which we could give ourselves some flexibility towards the end of the LRUC contracts, to accommodate some changes that we were not able to anticipate at the current time. Q184 Ian Lucas: Are you satisfied that the solution that you have come up with will resolve the difficulty of not having it included in your specification? Mr Shipp: I am satisfied that the specification will deliver the objectives we have been set today. One of the difficulties on the road pricing debate - and Transport colleagues know much more about this than I do - is being able to look that far into the future and to specify with any degree of precision, which the market would respond to in an intelligent way, exactly how that might work. As the study makes clear, the technology does not really exist today to do that. Consequently, it is extremely difficult to include, in a specification that you are going to procure, elements which we know cannot be delivered today and, moreover, we cannot specify them terribly clearly even if they could be delivered today. Q185 Ian Lucas: Going back to the Lorry Road User Charge specifically, what factors will you use to determine the level of the charge? Mr Shipp: I think there will be a whole host of issues that will come to bear on that. These are issues we have yet to come to in terms of setting the rate, and I imagine that this will be a decision the Chancellor will take on the Budget that precedes go-live - so consequently a little way over the horizon yet. Our presumption is that, in order to deliver a level playing field, we will need to have a fuel duty refund that is broadly analogous to average EU levels of taxation. The charge would then be set to put that into equilibrium. That itself provides a boundary for the charge. Within that, however, there are a whole host of factors that will need to be weighed before we are in a position to take decisions on that. Q186 Ian Lucas: Can you give us an example of a couple of those types of factors? Mr Shipp: As I indicated earlier to the Chairman, the haulage sector pays about £41/2 billion or £4 billion per year in road fuel duty, and our road fuel duty rate is about 47p per litre. If we wished to produce a rate that the hauliers saw was at average EU levels, there is a lot of debate to be had. Do you go for the rate? Do you go for the pump price? Do you take a weighted average? Do you deal with just the Member States that are in close proximity to the UK? There are a whole host of issues that need to be weighed there. For the sake of argument, if one said, "Let us present them with a rate that is broadly at EU average levels", that would mean we would have a road fuel refund of approximately 23p per litre. That, in turn, would produce an overall refund of about £2.3 billion. To recoup that, in terms of a charge - and this is where the data gets a little softer - the statistics we have from the Department for Transport suggest that about 28 billion kilometres per year are travelled by lorries that would be within the scope of the charge in the UK. So if you wish to recoup that in that way, it would produce roughly an average rate of about 8.5p per kilometre. That takes no account of lots of other issues that will have a bearing on that; nor does that average take any account of how you may set the charge to take account of lorries of different weight, different emissions, classes, number of axles, and so on. However, I hope that gives the Committee a feel for the sorts of numbers that we are working to. Q187 Ian Lucas: The haulage industry has called on you explicitly to rule out of the scheme premium rate charges at peak times of the day. Have you ruled this out? Mr Shipp: That is essentially a policy issue rather than one for me, in terms of the scheme. Ministers have been very clear that they want the capability within the scheme to be able to vary the charge by different times of day. We have therefore specified for our bidders that we are looking for potentially two time slots. Exactly how that will be configured - whether it be peak, off-peak, night, day, whatever - has yet to be determined. Ultimately, it would be for ministers to determine whether they wish to take advantage of that ability. The analysis that would need to be done to inform them on that is still a little way from being prepared at the moment. However, they have been clear that they want that facility. I understand that the haulage industry has these concerns. They have also represented them to me. Part of the equation that needs to be understood here, however, is that if ministers were in the position of being able to have a time differential that they applied to wider road traffic, they would not wish to be inhibited from being able to do that for lorries as well. Q188 Ian Lucas: Are ministers wanting to differentiate between a charge on motorways and not on motorways? Mr Shipp: They want the facility to be able to do it. Leaving aside the arguments in the feasibility report on road pricing and about congestion management, there are other arguments for encouraging lorries to use motorways as opposed to other roads. So, again, ministers have been keen to have the flexibility within our solution that would enable them to do that. Q189 Chairman: Mr Shipp, I do not want to be the cold water at your party, but the experience of this Committee is that when systems of this complexity have something that is called "flexibility" built in, they do have enormous capacity to fail. I am not quite clear - and I hope that I have listened carefully to what you have said - whether, if what you are specifying now is a system that will do exactly what you want in relation to lorry road charges, you can also give a specification which is sufficiently flexible to take account not only of the possibility of exemptions but also of the general shape of a completely different system that we have been talking about - which might be there at the end of the Lorry Road User Charge scheme. Possibly that is because I am of very little brain, but this Committee has seen, time and time again, government schemes where the difference between the original specification and the final result has, in brutal terms, been something like millions of pounds worth of taxpayers' money. Can you assure us that you are sufficiently focused? What I am really saying to you is this. Are ministers saying, "Just do us a lorry road user charge" or are they saying, "Produce a system that, if needs be, can be adapted at a certain point to do something else"? Mr Shipp: I think that ministers are saying both to us. I think that you can justify the distinction on the motorways on the basis of influencing lorries to use motorways. You can make a case for that, leaving aside the wider road pricing. On your point about very sophisticated systems, Chairman, we have been acutely conscious of mission creep being the fatal flaw in large contracts in government. This is why we have been very focused from the very early stages in articulating and then validating our policy requirements and the technical specification with our colleagues in Treasury and Transport, and with their ministers, at successive stages through the programme. We have made some very deliberate decisions at certain milestones to revalidate that, including paring back to some degree some of the functionality. As I was explaining a little earlier regarding the discussions we had in the summer, in some of our earlier material that we published in LRUC, at one stage we were looking ahead at the prospect of being able to differentiate by more than two types of road. We were doing this partly on the basis that the equipment would probably need to be refreshed during the lifetime of the contract. Given the analogy with mobile phones and so on, technology becomes more capable and cheaper over time, and ministers are very keen for government to be able to avail itself of these opportunities. So we have postulated the possibility that we may have rates for A and B roads at some point in the future. During the summer, however, we thought long and hard about that. How would we articulate that requirement? Could it be delivered today? What would we use it for? We concluded that we would draw back from that somewhat, and we specified only two rates - motorways and other roads - for the purposes of the procurement launch. I would therefore like to reassure the Committee that the requirements that were specified for LRUC are regularly tested and assured as being fit for purpose for LRUC and for wider policy developments, should they occur in the lifetime of that contract. Q190 Chairman: I want to ask you about enforcement. Are you expecting to be able to produce a system that can be enforced? How are you going to enforce it, and how much will that cost? Mr Shipp: The short answer is yes, we do expect to have what we regard as a compliance model. We have a compliance model within the programme at the moment that we are developing. Q191 Chairman: That may be the difference between "pretty please" and my saying, "You have got to do it". Can you actually enforce it? Mr Shipp: Yes, we believe that we can, but it is a mixture of a number of things. In order to produce a level of enforcement that will command the confidence of the haulage industry - and that is very important in order to give them confidence that the playing field is being levelled, but it is also very important to Treasury ministers in terms of revenue linkage - there are a number of component parts that have a bearing on it. One, and perhaps the most obvious, is how much effort and manpower you put into policing it - assurance and investigation-type activity, which my department undertakes for other taxes. Another element is what physical infrastructure might be appropriate which would detect apparently non‑compliant hauliers, perhaps akin to what you see in Transport for London with its congestion charge, with cameras and so on. Another component will be how secure in itself is the system that detects and calculates the charge. How robust is that? That is a very important ingredient. Last but by no means least is the regulatory framework in which that operates. What sorts of penalties exist for non-compliance? What sort of value will that have in deterring the non-compliant? What sorts of education and information programmes do we have to help people to comply? There are a number of component parts there which interact on one another, and we have an embryonic compliance model that anticipates some of that. We will not be able to conclude it until we have completed our discussions and we know what the technical system looks like, but I would then expect to be in the position of going to ministers with this analysis and, effectively, offering them some choices. Where do they wish to be firmer? Where do they perhaps wish to relax a little? I have given a commitment to the haulage associations that I will also be expecting to talk them through those proposals, because they will undoubtedly want to make representations to ministers on the subject too. Q192 Chairman: We have had raised with us the whole question of dealing with foreign hauliers, which might require expansion of existing facilities, physical facilities, quite apart from the enforcement you have been talking about. I assume that is part of your planning. Mr Shipp: I am not quite sure I understand what that proposition is, Chairman. Q193 Chairman: In the sense that we do have a limited number of ports through which foreign hauliers are likely to appear and, with an existing system that may be somewhat complex to administer, will this constitute a physical barrier at the ports, in the sense that you will have the physical presence of large numbers of foreign hauliers wanting to sort out their situation - and presumably you would want to sort out their situation as well? Mr Shipp: The solution that we are looking for, the steer we have given to bidders, is that we do not want high dependency placed upon a physical intervention at the points of entry to the UK. It is not only logistically extremely difficult; it is arguably open to challenge by the EU Commission in relation to free movement, the abolition of physical frontiers, and so on. Although there will undoubtedly be some possibility of intervention at the frontier - because that is the natural choke-point for some lorries that enter and leave the UK and, as Customs, we already have a presence in some of those locations - our presumption is that the scheme will not depend on that and that the bulk of the enforcement activity will take place inland, away from the frontier. We are very seized of the difficulties that we would face if we had lorries queuing to avail themselves of registration facilities, or whatever, trying to get into Dover and so on. We know that just will not work. Q194 Chairman: Did the EU authorities object to a simple system like the one that is being proposed to us by Professor McKinnon? Mr Shipp: We have had informal discussions with the EU Commission about our plans, and I have written to them on a number of occasions. We have not had a great deal of feedback from the Commission on this issue, and I am not aware that we have had any discussions with them about Professor McKinnon's proposals. Q195 Chairman: But you have looked at that? Mr Shipp: At Professor McKinnon's proposals? Q196 Chairman: Yes. Mr Shipp: Yes, we have been aware of those for some time. Q197 Chairman: I am not asking you to comment on them. I am just saying you have looked at them. Mr Shipp: His proposals? Yes. We had invited him in and he had visited some of my colleagues, and indeed we have invited him to join an advisory group that we have recently set up. So, yes, we are very familiar with Professor McKinnon's proposals. Q198 Chairman: Do you have any estimate of whether there would be a common EU standard right the way across the board for electronic tolling? Mr Shipp: The Commission have already succeeded in having adopted an intra-operability directive. Q199 Chairman: That is not quite the same thing, Mr Shipp. Mr Shipp: No, it is not, but it lays down standards. If a Member State tolls electronically, it lays down some standards by which those tolls should be applied. At the moment that is at a fairly high level and there is a Committee that is continuing to work, to come forward with more detailed proposals in due course. Q200 Mr Donohoe: Is this going to be introduced first across the whole of the United Kingdom and will it include Scotland? Mr Shipp: LRUC? Q201 Mr Donohoe: Yes. Mr Shipp: It applies to all parts of the United Kingdom, yes. Q202 Chairman: Do you think that it is very realistic to expect lorry drivers who are only occasionally users of the UK's roads to book their journeys in advance? Mr Shipp: We are not asking them to do so, Chairman. We have not yet finalised the sort of system that we will have. You are perhaps referring to ---- Q203 Chairman: The occasional user scheme. Mr Shipp: Yes. The German system has a facility for occasional users to book their journeys in advance, either on the Internet or at kiosks. We are looking for an occasional user system that does not rely on that approach. We are looking for a simpler occasional user system. Indeed, we have developed our requirement knowing what the German solution to this issue has been, and in conjunction with the Road Haulage Forum Sub-Group. Our requirements are rather different in that respect. Q204 Chairman: However, it is interesting because, if you were able to get a booking system of that kind up and running, it would give to the United Kingdom Government a great new avenue of traffic management, would it not? Mr Shipp: The difficulty that we foresaw with the pre-booking arrangement - and these were representations made to us by the haulage sector - was that there are many occasions where the haulier ends up either taking a different route or, indeed, does not know what the full route is that they will undertake during the course of their journey. If we were to have a system where that needed to be pre-booked, they would find themselves with considerable compliance burdens, in ringing through again or finding an access to a terminal to notify some changes. Consequently, we concluded that that would not work for the UK. Q205 Chairman: Have you talked to the ports industry, which is increasingly developing a system exactly like this for container movements, in order to deal with congestion? Mr Shipp: I have not spoken to them ---- Q206 Chairman: It would be bizarre if it were turned down by Her Majesty's Customs in relation to road management but was increasingly insisted upon commercially. They are only operating with one end of it. They are saying that, increasingly, lorries coming into congested ports will only be allowed to do so in agreed time slots. By implication, however, that carries with it a management of the road system. They must plan to arrive at a particular port at a particular time. It would be a little sad if we shut down any possible means of expansion. However, I am very happy to accept that you have thought about all of these things. Mr Shipp: One of our considerations in this was what impact it would have on the lorry driver him or herself, in that we were keen to have a system that relied on them as little as possible, if I could put it that way - with as much automation as possible, not relying on them to know that they have drifted off from a prescribed time or route, and then they needed to do something about that. One of the considerations presented to us was that the operator who was responsible for the charge would then be potentially confronted with the consequences of their drivers' non-compliant behaviour, and that was not an exposure that they welcomed. Q207 Chairman: Forgive me, but they are now confronted by you somewhat brutally with the effects of their drivers' behaviour, if it comes to seizures of goods and lorries, are they not? Mr Shipp: Yes. Q208 Chairman: So although you may be very tactful and charming in relation to the collection of taxes, at the moment you are quite capable of enforcing certain measures against the owners because of the behaviour of the drivers, are you not? Mr Shipp: We are, yes. Q209 Chairman: So this is a nicety of approach that you do not necessarily reserve for other aspects of your work. Mr Shipp: I would describe it as a coincidence of interest. Q210 Chairman: I see. I am always open to have my vocabulary extended. A "coincidence of..." - what was it? Mr Shipp: "Interest." We were very keen to have a simple system that was highly automated, because that gives us a warmer feeling about the likelihood that it is going to work. The operators and their associations were keen to remove that discretion, as it were, from their lorry drivers. Q211 Chairman: Finally, Mr Shipp, it is very interesting for us to know whether you have any model that says how long the phasing-in of this kind of scheme would need before it became universal. If you are talking about categories of lorries, I can foresee certain difficulties with the industry, who will then automatically want to run the lorries that were not involved in this. What kind of timescale are we talking about? I know that you have given us an indication of when you expect the scheme to be up and running, but have you a model beyond that which says, "We will expect, over the period of five, ten, 15 years, to do the whole lot", or what? Mr Shipp: We were thinking of something considerably shorter, Chairman. We were envisaging a phasing-in period of perhaps two years. Q212 Chairman: Two years? Mr Shipp: With perhaps six-month intervals. Our planning assumption is that we would start with the largest lorries, equip those, and then have a window of opportunity to assess what we had learned from that phase before deciding to proceed with the next phase; then gradually ramping up the numbers of vehicles that have been equipped and introduced. Q213 Chairman: You are really telling us that you would expect to have the whole of the industry involved within - what? - five years of the initiation of the scheme? Mr Shipp: By 2010-11 is our planning assumption. Chairman: Mr Shipp, I can only wish you the very best of luck and say that I suspect we may be meeting you more often than you think. Thank you for coming. Mr Shipp: Thank you, Chairman. |