House of Commons - Transport

Select Committee on Transport Eighth Report

6 Freight transport and the European Union

European Commission freight initiatives

100. Mainland Europe has long taken a different approach to freight transport than the UK, with governments on the Continent being more willing shape and control their freight industries. In October 2007, the European Commission adopted initiatives aimed at making freight transport in the EU more efficient and sustainable. These include proposals relating to logistics, to a rail network giving priority to freight, to ports, to a barrier-free European maritime transport area and to the Motorways of the Sea scheme. The objective of these initiatives is to "promote innovative, infrastructure technologies and practices, develop means of transport, improve freight management, facilitate the construction of freight transport chains, simplify administrative procedures and enhance quality throughout the logistic chain."[184] The Commission estimates that the volume of goods transported in Europe will increase by 50% between 2000 and 2020 and that freight currently contributes around 8% of all European emissions of carbon dioxide.

101. The Freight Transport Association credits the UK Government with taking "a very positive leading role within the EU—shaping policy relating to freight in a constructive direction."[185] It also considers that the Government has "generally adopted EU regulations into UK law in a flexible and workable fashion, avoiding unnecessary burden on industry." However, Nautilus UK is critical of the UK Government's response to Motorways of the Sea, saying that it is only now, several years after its inception, beginning to invite proposals for operating services related to the scheme in contrast to other Member States, which were "quick to embrace the plans".[186]

102. Several other witnesses agreed that the Government's insistence on a market approach, as well as precluding it from providing strategic direction (for better or worse), results in an unwillingness to pursue European money for UK industry for fear of distorting competition.[187] The British Ports Association described the grants as "not a UK way of doing things."[188] Motorways of the Sea was described as complex to apply for and inflexible in its application, which could also partially explain any lack of successful UK applications.[189]

103. Peel Ports is, however, working with a UK shipping line that is in the process of applying for funding through Motorways of the Sea[190] and the Minister defended the UK's performance in attracting funding through Motorways of the Sea telling the Committee that of sixteen bids that were approved last year five of them were from the UK.[191] He also told us that a "strong team" at the Department is working with the shipping and ports industries to prepare bids for future rounds of funding.[192] In contrast, the British Ports Association claimed that, unlike the governments of other Member States, "getting [UK] Government cooperation in schemes that get money out the Commission is not an easy thing to do."[193]

104. The Government is determined to promote a strict market approach towards freight transport within the European Union but many Member States are still happy to support business interests in their countries. This puts companies operating in the UK at a disadvantage. The Government must engage with European schemes to ensure that UK business is not disadvantaged. It must do all it can to help the UK freight industry take full advantage of such initiatives.

105. Ports operators described the situation where the major ports on the continent, such as Rotterdam, Antwerp and Hamburg, enjoyed substantial public sector financial assistance on the basis of how important their infrastructure was to their regional and national economies. Peel Ports claimed that the UK Government's policy towards its ports has been to "obstruct public sector finance in assisting the development of infrastructure".[194] Although such public funding would appear to be against the spirit of the free market, we were told that much of it is perfectly legal since it can be classed as public infrastructure, the funding of which by Member States is sanctioned.[195]

106. We have previously called for the Government to ensure that our ports have a "fighting chance to securing EU funds in a fair competition", and we expect Government to take up with the European Commission cases where Member States appear to be dragging their feet on implementing EU directives and regulations as diligently as is the case in the UK.[196] The Government has said that it plans to stress the need at European level for transparency in public funding for ports and inland infrastructure.[197]

107. The Government has a decision to make in relation to European funding: does it work with ports to engage with European initiatives even though they represent an approach with which they do not see eye to eye, or does it take a principled stand against intervention in the free market with the risk that UK businesses are disadvantaged. The Government should recognise the problems that are created for UK ports by its failure to engage. Like the other European freight initiatives, the UK Government must do what it can to help UK ports attract European money in order that our industry can compete with the big Continental ports. Efforts should also continue to be made in attempting to reduce the subsidy of ports where it is against free-market regulations.

Competition for air freight between European airports

108. The UK's most significant airport for freight transport, Heathrow, transports the fourth largest amount of freight of all the European airports behind Frankfurt International, Charles de Gaulle and Amsterdam Schiphol. Brussels and Luxemburg also transport significant volumes of freight.[198] The DfT said in 2003 that there was some evidence of UK-based companies trucking goods to and from continental airports, which might reflect the pressure on capacity at the principal airports of south east England.[199]

109. Considering whether facilitates for international air freight should be expanded so that UK airports can continue to be attractive as European hubs for air freight, the Institution of Highways and Transportation argued that, while it would be beneficial, it should be left to the market to supply such infrastructure if there is a demand.[200] Manchester Airports Group was resigned to the likelihood that aviation in the UK will continue to be self-sufficient, even though it believed that some Continental airports may be receiving national and European subsidies.[201] Its main concern was that the Government's "unilateral" approach to aviation taxation, specifically Air Passenger Duty, is damaging UK industry's competitiveness.[202] It contended that the UK's prosperity requires recognition by Government of the high value of the freight transported by the UK aviation industry[203] and recommended that the Government press for a European-wide framework for the regulation of the aviation industry in terms of taxation, allowing the UK to compete effectively.[204]

110. The Minister pointed to the 2003 Aviation White Paper, which, he said, included a "full acknowledgement" of the importance of air freight to the economy. He appeared to recognise the concerns of the aviation industry and told us that he will undertake discussions with the Treasury in relation to Air Passenger Duty to ensure that the industry is supported.[205]

111. In 2007 total Air Passenger Duty receipts doubled to £2 billion and, from November 2009, it will be replaced by a tax payable on each flight rather than by each passenger. It is unclear how the air freight industry will be affected. We urge the Minister to highlight the importance of UK air freight operators' competitiveness with Continental operators.

The road haulage industry

112. The Road Haulage Association estimates that UK hauliers pay between £10,000 and £15,000 per HGV more in fuel duty than their Continental competition.[206] The Government first announced that it would consider introducing a road user charge for lorries or a "vignette" in November 2000. The initial intention was to ensure that foreign hauliers contributed towards the costs of maintaining the UK road network, although the scheme objectives were widened to cover the congestion, noise and environmental costs of HGVs.[207] The intention was to have a relatively sophisticated method of charging, based on distance travelled by a vehicle, its emissions category, maximum weight, the presence of a trailer, and the number of axles, as well as charges varied by the time of day and according to road type. Charges would have been administered using satellite-based technology. However, the Secretary of State announced in July 2005 that the scheme would be scrapped as a stand alone project and would be incorporated within the Government's broader plans for national road pricing.[208]

113. While most of our witnesses agreed that it would be desirable to reduce the difference in the costs faced by domestic and Continental hauliers operating in the UK, there was no great appetite for a return to the earlier lorry road user charging proposal, which many saw as over-complicated and too expensive to operate.[209] Professor McKinnon reminded the Committee of his long-standing proposal for a simpler, distance-based charging scheme based on annual tachograph readings but told us that the Department has shown no interest in it.[210]

114. The situation for UK hauliers could further deteriorate if the European Union is successful in its attempts fully to remove restrictions on freight transport operations carried out within one Member State by hauliers from another EU country (cabotage) by 2014. The Government succeeded in reaching a compromise at the EU Transport Council in June and some control over the operation of foreign lorries has been retained for the time being.[211] However, so long as costs for UK operators remain higher than those for their Continental competitors, further liberalisation of cabotage restrictions will remain a concern.[212]

115. The Minister insisted that a considerable amount of work had been undertaken and that the Department's analysis of options for a return to the vignette proposal was almost complete.[213] However, the 2008 Budget included an announcement that the Government would not be pursuing a vignette scheme. It was said that such a scheme would "produce limited safety, congestion and environmental benefits.[214] The DfT's Freight Data Feasibility Study (published in April 2008) also concluded that there would in any case be a significant risk associated with the interpretation of the EC's Eurovignette Directive and the principles of state aid.[215] The Government considers that an additional £24 million for VOSA (the Vehicle and Operator Services Agency) for enforcement "is a better option to protect road users in the UK."[216]

116. It is patently unfair that UK hauliers continue to subsidise their Continental competitors through high levels of taxation on fuel, eight years after the Government announced proposals to address this problem. The rising cost of oil and the threat of the liberalisation of European cabotage legislation mean that the problem is set to get significantly worse. We are astonished that work on a vignette scheme has been abandoned with no recognition of the need for an alternative. We note that potential problems connected with European directives or state aid rules seem to have been overcome by other Member States including Germany, Austria, the Czech Republic, Hungary and Slovakia, all of which have implemented or are implementing lorry road user charging schemes. The Government should discuss a way forward with the industry.

117. Although the announcement of £24 million to assist VOSA with enforcement is welcome, it does not address this distortion of fair competition between European freight operators.

118. Enforcement against foreign-registered vehicles is another long-running saga for the UK road haulage industry. The Institution of Highways and Transportation described a situation where many enter the UK overladen and/or driven by drivers who may not be following working time directives.[217] The Road Haulage Association told us that, although a range of penalties are available for UK drivers and operators, foreign drivers and operators are rarely prosecuted.[218]

119. Witnesses believe that the problem should be addressed through a combination of enhanced enforcement and co-operation with the relevant governments, and that proper enforcement against foreign registered vehicles would result in significant safety improvements for all road users.[219] The British Ports Association suggests that enforcement should also take place before lorries reach this country because of "serious problems with some of the standards of the lorries [from other EU Member States, including the Republic of Ireland]."[220]

120. The Freight Transport Association has welcomed the potential introduction of the Graduated Fixed Penalty and Deposit Scheme, which should increase the opportunity for the application of sanctions for unsafe vehicles.[221] Crucially, the graduated fixed penalty legislation will allow VOSA officers to issue penalties at the roadside for offences such as overloading, exceeding allowable driving hours and vehicle unroadworthiness. However, there is concern that the timetable for the introduction of the legislation, which first went to public consultation in 2004, is still slipping.[222]

121. The Minister explained that there were considerable legal and practical obstacles to overcome before the graduated fixed penalty legislation can be introduced. He estimated that the scheme might be up and running by early 2009, which would represent a significant delay in comparison with the original timetable. He also outlined the other measures that the Government is taking: extra funding and equipment for VOSA and exchanges of information with other European governments.[223] He also assured the Committee that the Government was involved in "joined-up activity behind the scenes" to ensure that the police forces were in a position to assist VOSA in their efforts to improve safety standards. He believes that a "stronger culture" is emerging within the Police in relation to tackling road traffic offences and explained the Home Office is to introduce road traffic offences into Forces' reporting and assessment structures.[224]

122. We are pleased that the Government recognises the lack of successful enforcement against sometimes unsafe foreign registered vehicles as a problem. The Graduated Fixed Penalty and Deposit Scheme and enhanced enforcement by officers from VOSA and the Police should eventually improve the situation. The delay to the introduction of the Scheme is, however, lamentable and we see no evidence that there will not be further set backs. The Government must be seen to be making progress and the Committee urges the Government to publish a detailed timetable of the necessary steps to implementation in 2009.

184 Freight transport in Europe, European Commission press release, 18 October 2007 Back

185 Ev 175 Back

186 Ev 193 Back

187 Qq 117, 130, 164, 205 & 207 Back

188 Q 205 Back

189 Qq 196 & 197 Back

190 Qq 208-211 Back

191 Q 518 Back

192 Q 520 Back

193 Qq 203 & 204 Back

194 Ev 127; PD Ports took a similar view, see Ev 116-117, as did the BPA (Q 243). Back

195 Q181 Back