Examination of Witnesses (Question Numbers
264-279)
MR SIMON
BARNES, MR
GREG ARCHER
AND MR
JONATHAN MURRAY
9 JANUARY 2008
Q264 Chairman: Good afternoon, and thank
you for being so patient. We have caught up a little bit in time
but I am told that there may be another division shortly, so we
will just have to take it as far as we can and perhaps, depending
on the timing of that, come back. Can I start off by asking you
why the UK fuel economy label goes over and above what is required
by the EU directive; what was seen to be the value of that?
Mr Archer: Thank you for your
question and thank you for inviting us today. Perhaps I can very
briefly say that the Low Carbon Vehicle Partnership brings together
the motor industry with the oil industry with Government and environmental
groups to promote the shift to low carbon vehicles and fuels;
Jonathan Murray is my deputy director, I am director. Simon Barnes
is from the SMMT but he is also chair of our passenger cars working
group, so we work very closely together on these issues. The simple
answer to your question is that the research that was done back
in 2003 showed that people did not understand the statutory information
which the European directive required, there was a very poor level
of understanding of that. It was presented in quite a complex
form, it was purely numerical, and the work that the Department
for Transport did, undertaken by MORI, simply showed that it was
not well understood, and what we wanted to do was to try to provide
some readily understandable information which could start to change
public attitudes or certainly raise public awareness of the difference
in fuel economy between different vehicles. We did that through
developing a colour-coded scheme, which is very familiar to consumers
through white goods, but applying it to vehicles. At the same
time the European Union was looking at bringing in regulation
on extending its regulations on vehicle labelling and we felt
that there was a case there for the UK to really demonstrate best
practice and try to set a standard in Europe; in fact the European
standard has not been revised since but a number of countries
have adopted a UK-type approach.
Q265 Chairman: Since the introduction
of the label about two years ago, have you witnessed any impact
on consumer behaviour?
Mr Murray: Yes, looking at the
impact of the labelling is complex and it is difficult to ascertain
what is the effect of the label; however, what is quite clear
is that it has been a significant source of information for car
buyers. We conduct an annual survey of car buyers' attitudes,
along with a survey of the rolling out of the label. The annual
survey of car buyers attitudes is conducted by GFK on our behalf
and is of approximately 2000 recent or prospective car buyers.
The latest survey showed that 44 per cent of car buyers were aware
of the label and recognised the label, which is an increase of
four percentage points on the previous year. In addition to that,
when you actually look at the types of car buyers, what is quite
clear is that company car buyers who are more exposed to the impact
of choice on CO2 of their car in terms of the tax that they pay
are more aware of the label as well, their awareness was up to
50 per cent, and this goes along with the fact that the car dealership
and the point of sale is still the primary source for the vast
majority of people in looking for information and choosing the
car, so we are providing accessible information in the right location
to help them and providing a direct link between the CO2, the
cost in fuel consumption and the tax burden they will pay. In
terms of what that has done to purchasing patterns, we have seen
a slow but sustained reduction in average CO2 emissions from cars
purchased in the UK. The latest figure which was just announced
by the SMMT was a 1.4 per cent reduction on the previous year
to 164.9 grammes per kilometre.
Mr Archer: It is important to
recognise that environmental information does not necessarily
or indeed very rarely drives people to make an environmental choice.
Environmental information is an important precursor, it encourages
them to make the right decision but in terms of actually making
that decision there is always a gap between their awareness of
an issue and their willingness to make the environmental purchase;
it is essentially the attitude/action gap where you know what
you ought to do but you do not actually do it. What we are finding
with labelling schemes is that it makes people more receptive
to change their behaviour but it does not necessarily change their
behaviour, and you need other drivers to actually bridge that
gap. Those other incentives are about educating people, making
low carbon vehicles more desirable, increasing the benefits of
buying a low carbon vehicle and so forth and expanding the choice
of vehicles that is available.
Q266 Chairman: I certainly take the
point about the environmental aspect of this and the evidence
from MORI suggests that people use the labels for pure fuel economy
judgments in the main rather than carbon emissions information
which people may not understand. It did amuse me that when these
labels came in in 2005, underneath the Secretary of State for
Transport's office in Marsham Street was a BMW showroom and all
the cars were G-rated. That is a choice that people make when
they can afford to buy such a car, so do we have to go a bit beyond
labelling or do we have to make the labelling somehow stronger
so that there is this aspect which I think is now attached to
four-wheel drives, that if you are seen driving one it is not
quite cool any more.
Mr Barnes: We had a big discussion
when we introduced the label, if I may, about how it should be
introduced, whether it should be relative to the car or what we
call an absolute label, and we felt that the most obvious link
was to create the link to the excise duty bands, which are established
by the government and reviewed on a regular basis. Since then
we have had an additional band put into that label, it was A to
F and it is now A to G, we changed the label to reflect that,
and obviously there has been a revision in the amount of annual
payment for each band, so there is a direct relationship there
between the new story on VED and the band that you see in the
showroom. We believe that as distinct to other labels, which talk
about relative performance, linking it to the fiscal system is
the strongest possible link and the industry very much supports
that link to the fiscal system, so that there is a clear understanding
between the VED and the label in the showroom. There is a stronger
link with company car drivers and that is reflected in their greater
awareness because the amount they pay in their monthly tax bill
is stronger, but we believe even now the consumer is starting
to realise and we hear conversations about G-band cars, A-band
cars, E-band cars. We did not hear that back in 2003.
Mr Archer: Labelling is a tool
in the box, it helps the consumer to understand the differences
between different vehicles. Many consumers still think that all
average family-size cars have the same emissions or have the same
fuel economy. They do not understand that there are very wide
differences between them and, by providing this information, you
are helping to get that message across but you do not change attitudes
and behaviours overnight by labelling, it requires much more significant
incentives and other things.
Q267 Chairman: The motor industry,
the last I read, spends about £800 million a year on advertising;
why should the label be confined only to the showroom, why should
the label as it were not be given more prominence in advertising?
At the moment you need a magnifying glass to read information
in six-point type about carbon emissions, for example, there is
no prominence at all; you almost sense that they do not want you
to read it.
Mr Barnes: There are regulations
on advertising. They are European-based, they come out of the
European directive and the VCA gives very clear guidance on how
those rules should be interpreted and the VCA is now actively
monitoring those ads for compliance. We are in discussion with
the Low Carbon Vehicle Partnership and we are waiting also for
a more than likely revised regulation from the Commission this
year on how that information can be made visually stronger in
terms of the products. As an industry ourselves we are discussing
how we can do that by making the label more obvious. We have an
issue in that if you advertise a car like a Renault Clio, for
example, the CO2 on that product can go from something like 106
grammes per kilometre to 250 for what visually might appear to
be the same car, so it is important that whatever labelling we
decide upon the consumer understands and can still make the right
choice. We also support campaigns like Act on CO2 from the DfT
where the consumers can go there and they can go to the VCA website
and find out far more information about the specific product that
they are interested in.
Q268 Chairman: You would not favour
the tobacco advertising type of thing, with half of the cover
space filled with a global health warning written by the Government's
chief scientist?
Mr Barnes: We would not favour
that as an industry, no, because we believe that there are other
issues about the sustainability of our products, there is also
a safety issue and an air quality issue, and at the end of the
day the emissions from the car depend on how you drive it, how
far you drive it, how you service it, not entirely the product
itself although that is of paramount importance obviously.
Mr Archer: There are ways, however,
in which you can extend the use of a label or a labelling type
scheme into billboard advertising and other forms of advertising
and, as Simon says, that is something we have started to look
at and it is something that Europe is starting to look at as well,
so it is coming, but obviously there is a range of views as to
how that should be done and the way that that should be done.
Q269 Joan Walley: Arising out of
that point, I remember going to the Society of Motor Manufacturers
about 20 years ago when I was in another incarnation, talking
about removing lead from petrol, and I seem to remember that it
was only actually in getting the regulation that moved the Society
on into actually removing lead from petrol. I just wonder how
much of the same sort of issue there is now in this in terms of
how much you wait to follow the trend or how much the trend is
determined by the level of the regulations there are which will
take the design and production of your vehicles more down this
route. I would just be interested in your comments; what does
it have to do to actually get the right balance, to actually get
action to be made?
Mr Archer: In fairness to the
SMMT they have been enormously proactive in trying to take forward
debate about strengthening vehicle advertising codes of practice
in general. They have started a debate with the industry associations
in the advertising sector and they are really to be credited for
doing that; they have started a process and are working with other
stakeholders to look at how we can strengthen overall advertising
practices. Simon can say more, but in support of what they are
doing they have been proactive in this area.
Q270 Joan Walley: Going back to a
point which the Chairman made in respect of the vehicles that
were on sale underneath the DfT offices, can you just tell us
in terms of your membership of the Low Carbon Vehicle Partnership
are there any major manufacturers who are not members and, for
example, is TATA a member of your group?
Mr Archer: I do not think TATA
are presently members, but I would hope that TATA will be joining
in the near future. Certainly, that particular company beneath
Great Minster House is a member, and the other thing you would
find if you walked around that showroom is that every one of the
vehicles in that showroom would have been labelled, even though
they were all G-band. That has been a feature actually of the
labelling scheme, in that irrespective of the emissions of the
vehicle it has tended to be that more of the higher emitting vehicles
than in fact the lower emitting vehicles in its showroom are labelled,
so there is no tendency for people with poor performance not to
label their cars, in fact the opposite applies.
Q271 Joan Walley: Just talking about
showrooms leads me on to wanting to ask you about the voluntary
nature of the scheme at the moment; with 86% of new car dealerships
adopting the label why is it not compulsory?
Mr Archer: It is compulsory to
display the statutory European information, it is not mandatory
to display the colour-coded label and the cost information which
is the part of the label that we developed. What we find from
our surveys is that where people are not displaying the label,
they are not displaying any information—in other words they
are not complying with the regulation and they are not complying
with their trading standards requirements.
Q272 Joan Walley: Sorry, which regulation?
Mr Archer: The European regulation
which has been translated into UK law, so the issue is with people
complying with the regulation, it is not with people not labelling
their vehicles according to the voluntary scheme. What we need
to see is every vehicle in every showroom being labelled; if that
happened the overwhelming majority of showrooms would choose to
adopt the voluntary colour-coded approach.
Q273 Joan Walley: That is a matter
for trading standards officers.
Mr Archer: Yes.
Q274 Joan Walley: Are they not doing
it or do they not have the resources to do it, or have you had
talks with them about how to do it?
Mr Barnes: It is a combination
of resources and time and there is a regional performance aspect
to some of this as well. We can only assume that that is to some
extent a reflection on the resources of trading standards. When
we designed the label we co-operated fully with the LowCVP and
with trading standards to raise awareness because we were conscious
that their officers would need to know what the label would look
like, so we briefed them fully and they are aware of that. We
have, I think, seen increasing activity from trading standards
in this area; as the labels awareness increases, as we see it
in other areas such as on websites, then inevitably the policing
from them is increasing.
Q275 Joan Walley: Moving away from
the regulation and coming to the label as a voluntary scheme,
in respect of the 14 per cent of dealers who are not adopting
the labels, do you know why they are choosing not to do so and
how are you going to encourage them to join in?
Mr Archer: Each year we feed back
the results of our survey to SMMT in detail, in other words the
showrooms we visited and how many cars were labelled, and how
the dealer responded to questions about the label. The SMMT then
discussed those with each of the individual manufacturers who
were then able to take them back and discuss them with each of
their own showrooms, so we have to very proactively make sure
that the information from the survey in detail goes back to the
SMMT so that their individual members can talk to their dealerships,
and it is through that process that we are driving up the level
of cars being labelled year on year.
Mr Barnes: I would reiterate that.
We feed that information back to manufacturers on a dealership
by dealership basis so that they can see some gaps. Those gaps
are not always obvious; sometimes nine out of ten dealers will
perform and for some reason one will not, so we feed that information
back and we hope to make it more of a competitive element. The
partnership certainly rewards those and puts that up as evidence
of those who are doing well and we write to the ones that are
not doing well and ask them how they are going to improve their
performance.
Q276 Joan Walley: Moving on, the
label only applies to new cars; it does not apply to second hand
vehicles. Could it, should it, when will it, how will it?
Mr Barnes: We are in discussions
with both the LowCVP and the Retail Motor Industry Federation
on this particular issue. There are a number of practicalities
associated with that and one of them is defining what a nearly
new vehicle is, is it five years old, two years old, ten years
old and we have to make a decision around that. The other practical
issue is establishing a database of information because at the
moment we are only talking about new cars and so that is relatively
straightforward; if we extend that to old cars then we will be
reliant on the VCA in particular to have a database that is available
to dealerships for that information. Potentially there is an issue
that once a car has been bought and someone changes the tyres
or the wheels, technically they may change its CO2 rating. I personally
do not see that as an issue, but if someone wanted to argue a
point of law on that as an individual then they may be able to
do so. So there are a lot of issues to resolve here that need
further discussion.
Q277 Joan Walley: What sort of machinery
have you got for resolving those outstanding issues?
Mr Barnes: Through discussions
with the LowCVP and the Retail Motor Industry Federation.
Q278 Joan Walley: Who is driving
this agenda, are you driving it?
Mr Archer: We are, along with
the SMMT, and we have involved officials from the Department for
Transport also. The Retail Motor Industry Federation recognises
that this is something that they need to look at as a matter of
urgency and are keen to work with us on it, but as Simon says
there are a number of practical issues. However, some dealers
are already doing this in an entirely voluntary sense, even with
used cars, and there is now a commercial scheme that will print
out a colour coded label in the same way that it is done for new
cars.
Q279 Joan Walley: Finally, if I may,
earlier on you talked about what it was that was important when
people came to make choices about new cars and the surveys that
you do, and you mentioned the private purchaser and the company
purchasing schemes. I am just wondering about the role of public
procurement and in respect of that—for example, local authorities
or where employees are required to use their cars for work purposes—what
there is under way to encourage greater awareness from that client
group in terms of getting the awareness across about the labelling
and the way in which that fills that gap that you referred to,
Mr Archer, between awareness and actually translating that into
action.
Mr Archer: I am not sure that
there is a huge amount happening with respect to labelling. With
public procurement more widely there is a new £20 million
public procurement fund that the Department for Transport announced
a few weeks ago, which is due to start in April, and there are
other initiatives in terms of trying to improve the performance
of local authority vehicle fleets, which is operated by the Energy
Savings Trust, the fleet review process. There are also, obviously,
ongoing discussions in the Treasury about amending the AMAP scheme
by which people are reimbursed for their fuel costs when they
use their private vehicles and linking that to CO2 performance,
although the Treasury has delayed making a decision on that. So
there is a range of things happening more generally, but I do
not think specifically on labelling.
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