First Report Contents

Instruments drawn to the special attention of the House

Draft International Road Transport Permits (EU Exit) Regulations 2018

Date laid: 13 September2018

Parliamentary procedure: affirmative

These draft Regulations are laid under the Haulage Permits and Trailer Registration Act 2018 which was introduced to allow arrangements to be put in place to enable international road haulage to continue after the UK has left the EU. They create a framework for a single permits scheme that will deal with bilateral permit arrangements between the UK and non-EU countries, the multilateral European Conference of Ministers of Transport (ECMT) permit scheme and any future permit scheme that may be agreed with the EU. While ECMT permits are currently undersubscribed, the Regulations make provision for a “no deal” scenario where permits may be very significantly oversubscribed (up to 80,000 for a UK allocation of 1,224) by setting out criteria for the allocation of permits. We draw these Regulations to the attention of the House so that it may press the Minister further on how the Government are planning to deal with oversubscription and how they will ensure that the criteria applied in determining the allocation of permits leads to a “fair and equitable” outcome, as well as ensuring a consistent and clear approach in their application. 

We draw these Regulations to the special attention of the House on the grounds that they give rise to issues of policy interest likely to be of interest to the House and that they may imperfectly achieve their policy objectives.

Background

1.At present, UK hauliers who wish to make international journeys are subject to the following arrangements:

2.ECMT permits and those authorised under the bilateral agreements are issued using administrative powers (by the Driver and Vehicle Standards Agency (DVSA)).

Haulage Permits and Trailer Registration Act 2018

3.In July 2018, the Haulage Permits and Trailer Registration Act 2018 (“the 2018 Act”) received Royal Assent. The 2018 Act was introduced to allow arrangements to be put in place to enable international road haulage to continue after the UK has left the EU. It contains provisions for a permit scheme to authorise international haulage and allows regulations to be made setting out when a permit is required and the administrative processes for managing a permit scheme.5

International Road Transport Permits (EU Exit) Regulations 2018

4.These Regulations are laid by the Department for Transport (DfT) under the 2018 Act. They are accompanied by an Explanatory Memorandum (EM) and an Impact Assessment (IA) which we note, with disappointment, required supplementary material to clarify certain points in the EM. This supplementary material is set out in Appendix 1 to this Report. The Committee also wrote to the Parliamentary Under Secretary of State, Jesse Norman MP, to seek clarification from the Government on how they intend to deal with international haulage after exit day. A copy of the letter and the reply from the Minister is set out in Appendix 2 to this Report.

5.The Regulations create a framework for a single permits scheme that will deal with bilateral permit arrangements between the UK and non-EU countries, the multilateral ECMT permit scheme and any future permit scheme that may be agreed with the EU. They also set out the criteria which will be used to decide which permit applications should be granted in the event that there are more applications than permits available. The EM explains that these Regulations will come into force on the day after they are made. This will enable the introduction of the permit application system in November, which is necessary to issue permits to hauliers by the time they become valid on 1 January 2019.6

Why are criteria necessary?

6.Applications for ECMT permits are currently undersubscribed.7 The IA explains, however, that, given that negotiations with the EU have yet to be concluded, future demand is uncertain and may rise. Three scenarios are described in the IA:

7.These Regulations are intended to provide for contingency measures in the event of no agreement with the EU by providing a mechanism for distributing ECMT permits where demand exceeds supply.8

8.In a letter to the Minister, the Committee sought clarification about the possibility that, in the event of “no deal” with the EU, the number of ECMT permits might be very significantly oversubscribed and what impact this would have for UK hauliers.

9.The Minister acknowledged that:

“…if there are no other forms of agreement with member states, those hauliers who do not receive an ECMT permit or other type of permit will not be able to conduct international haulage … [I]n the absence of bilateral agreements, there may be a significant impact for hauliers who do not receive ECMT permits. It may restrict the capacity for UK hauliers to transport UK goods internationally.”

10.Whilst recognising that the Government’s preferred approach is to reach an agreement with the EU on road haulage, the House may wish nonetheless to press the Minister further about how, in the event of no agreement, the Government will assist those operators who are not granted a permit and who may experience a detrimental impact on their businesses if they are unable to conduct international road haulage.

11.The Committee also sought clarification about the timeframe the Government are working to in negotiating bilateral agreements. The Minister said:

“The Government is working to have bilateral agreements in place by exit day, recognising both where historical agreements will automatically revive and where new agreements are needed. The Government is confident that other bilateral agreements can be put in place by exit day.”

12.The Committee is seeking further information about how many historical bilateral agreements are in place, with how many EU countries and how these agreements can be revived in time for exit day. Given the time such bilateral agreements may take to negotiate, the House may wish to seek assurances from the Government that there will be no gap between exit day and the conclusion of any bilateral negotiations.

13.In our earlier inquiries, we asked the Department to state how many ECMT permits will be available in 2019. We were told:

“1,224 is the maximum number of annual ECMT permits we can have. This depends on which type of vehicle uses them. We also have the discretion to swap some annual permits for 12 monthly permits instead. We have chosen to swap the maximum number we can to give us the greatest number of permits we can get, and to give us more flexibility in how we use them. This means we will have 984 annual permits, and 2832 monthly permits.”

14.The Minister further explained:

“The quota of ECMT permits includes almost 3,000 monthly permits. Although most of the ECMT permits will be allocated in late 2018, the monthly permits will be retained until close to exit day. This will allow these permits to be used in emergencies or other instances of special need. They also add flexibility to the permit scheme as these could predominantly be used immediately after exit day and the date of bilateral agreements being in place.”

15.The House may wish to press the Minister on how the operation of monthly permits will work in practice, and whether UK hauliers will have to re-apply on a monthly basis; and, how the Government will deal with any business uncertainty that may arise for UK hauliers who need to make longer-term plans for their operations.

What are the criteria?

16.The Government set out the key principles that they are looking to achieve from a permits scheme in the consultation paper on the provisions.9 They are:

17.The Regulations set out the criteria which the Secretary of State must consider before granting a permit. They are expressed in the following broad terms: the exhaust emissions level of the goods vehicle, the goods intended to be carried, the frequency with which the applicant intends to the use the permit applied for, and the proportion of the total number of journeys made by the applicant annually that are international journeys. The Regulations also allow the Secretary of State to use “random selection”,10 and to take into account any other matters that he or she considers appropriate. Where the Secretary of State refuses to grant a permit, he or she must give reasons.

18.The criteria are described more fully in the consultation document, which also states that guidance will be made available to applicants.11

19.We asked the Minister how the Government will ensure that the criteria are applied in a way that accords with the principles set out in the consultation paper, in particular, that the permits scheme will “ensure an approach that is fair and equitable”, with “clear requirements” and is “simple to use”. The Minister explained that:

“The regulations set out criteria that the Secretary of State must consider before determining whether to issue a permit. The regulations do list these criteria in broad terms. Before permit applications may be made and before the regulations are debated in Parliament, the Department will provide guidance that sets out in greater detail how these criteria will be applied in determining whether to grant a permit. The process applied is largely automated as part of the permits IT system being developed by DVSA. This will ensure that the criteria are applied consistently across all applications.”

20.The criteria are expressed in broad terms rather than as prescribed, measurable requirements. If the process is largely automated using an IT system, the House may wish to press the Minister about what specific criteria which will be applied to enable the automation of this process.

21.The Regulations also grant the Secretary of State considerable discretion to determine the allocation of permits where they are oversubscribed. The House may wish to seek clarification on how a fair and consistent approach will be taken in the application of “random selection”.

What will happen in Northern Ireland?

22.We asked the Minister about the applicability of the Regulations to Northern Ireland and questioned in the event of a “no deal” with the EU, what contingency measures will be put in place for hauliers in Northern Ireland crossing the border to Ireland. The Minister told us:

“For Northern Ireland hauliers travelling to Ireland, the regulations do not require a permit to be carried. This is in keeping with the Haulage Permits and Trailer Registration Act whereby regulations may require permits to be carried by NI hauliers in Ireland only following an agreement with the consent of the Government of Ireland. Where there is no agreement with the EU, the Government expects to reach a bilateral agreement with the Government of Ireland. This will be a priority for the Government if there is no overall deal. The monthly ECMT permits mentioned above may also be used for Northern Ireland hauliers travelling to or through Ireland should an agreement not be in place by exit day.”

Costs and fees

23.The Regulations are accompanied by an IA which estimates it will cost £4.7 million to set up the permits scheme. These costs are being funded from the £75.8 million that HM Treasury has allocated to the DfT to prepare for EU exit. The Government expect that the total running costs of the new scheme will be £8.4 million over five years, (£1.72 million per year)12 which they intend to recover from permit fees.

24.For an annual ECMT permit there will be a £10 application fee and £123 issuing fee and for a monthly ECMT permit there will be a £10 application fee and £10 issuing fee. For a bilateral permit (authorising one journey) there will be a £2 application fee and a £6 issuing fee. When asked if these fees have changed from present levels, the DfT told us that:

“…we have not increased the fee levels compared with the current fees – we have only split the fees between an application fee and an issuing fee. The fees are intended to operate on cost recovery and the split is to ensure that the costs are covered by all hauliers who use the system, rather than just those who receive permits covering the costs for all hauliers.”

Consultation

25.The DfT ran a public consultation from 16 May to 25 June 2018 on the haulage permit proposals. We asked why the consultation only ran for six weeks and were told that:

“For the permits system to be operable from November 2018, we needed to complete the consultation, draft the regulations and progress this through Parliament quickly. Industry have been aware of our plans since the Bill was introduced to Parliament in February 2018. We have also conducted workshops with hauliers and trade bodies and completed user research on the permit system, to make sure the permit scheme is suitable.”

Conclusion

26.We recognise the need for a clear framework setting out the regulation, allocation and enforcement of haulage permits, and acknowledge that the Government’s preferred approach is to reach an agreement with the EU on international road haulage after exit day. We note, however, that these Regulations make provision for a “no deal” scenario where very significant oversubscription may be envisaged, with serious repercussions for those UK hauliers who are not successful in being granted a permit.

27.Given the potentially significant impact on UK hauliers and the uncertainties apparent in the case of no agreement with the EU, we draw these Regulations to the attention of the House on the grounds that they give rise to issues of public policy likely to be of interest to the House and that they may imperfectly achieve their policy objectives.

1 This applies to all vehicles with a gross vehicle weight rating above 3.5 tonnes.

2 These licences are provided to licensed operators by DVSA, providing they meet the qualitative requirements set out in law.

3 UK operators travelling to Belarus, Georgia, Kazakhstan, Morocco, the Russian Federation, Serbia, Tunisia and Ukraine are authorised by bilateral, single journey permits (IA p 8, para 1, 0.1).

4 According to the DfT: “1,224 is the maximum number of annual ECMT permits we can have. This depends on which type of vehicle uses them. We also have the discretion to swap some annual permits for 12 monthly permits instead. We have chosen to swap the maximum number we can to give us the greatest number of permits we can get, and to give us more flexibility in how we use them. This means we will have 984 annual permits, and 2,832 monthly permits.”

5 Page 6 of the IA.

6 The DfT explained that: “ECMT permits are valid for a calendar year. The permits we issue under these regulations will first be able to be used on 1st January 2019.”

7 According to the IA (p 9), about 15 ECMT permits are granted each year. This is largely because haulage in the EU is governed by the Community Licence scheme. The DfT has also advised that there is very little haulage from the UK to non-EU countries. Much of this is covered by bilateral agreements, so there is little need to use ECMT permits currently.

8 The Government have also issued a guidance note on “Commercial road haulage in the EU if there’s no Brexit deal” https://www.gov.uk/government/publications/commercial-road-haulage-in-the-eu-if-theres-no-brexit-deal/commercial-road-haulage-in-the-eu-if-theres-no-brexit-deal [accessed 16 October 2018].

9 Department for Transport, ‘Provisions in the Haulage Permits and Trailer Registration Bill Consultation’ (May 2018): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/707469/haulage-permits-and-trailer-registration-consultation.pdf [accessed 16 October 2018] and Department for Transport, ‘Provisions in the Haulage Permits and Trailer Registration Bill Government Response to Consultation’ (September 2018): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/740304/provisions-in-the-haulage-permits-and-trailer-registration-bill-government-response.pdf [accessed 16 October 2018].

10 The IA (p 16) explains that, without ”random selection”, permits would be issued to hauliers with the highest ‘intensity of use’ score leading to a smaller number of hauliers receiving all the permits that they applied for, and other operators receiving none. Therefore, random selection mitigates potential competition effects caused by the other criteria.

11 Provisions in the Haulage Permits and Trailer Registration Bill - Government Response to Consultation paragraph 1.7 [accessed 16 October 2018].

12 These figures were quoted incorrectly in the IA and the Committee has asked the DfT to revise the IA to correct the figures.



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