Select Committee on Environmental Audit Appendices to the Minutes of Evidence


Memorandum from Railway Development Society


  The Railway Development Society (RDS) is an independent national organisation campaigning for a better rail network, to enable more people and freight to travel by rail rather than road. Together with the members of many rail user groups affiliated to RDS we represent 20,000 rail users.

  RDS is pleased to give evidence to the Environmental Audit Committee on the matter of the pre-budget report 2000.

  In 1993 the government introduced a fuel duty escalator. The objective was to ensure that "motorists should bear the full costs of driving—not only wear and tear and congestion on the roads, but the wider environmental costs". (HC Deb, 26/11/96, col 167)

  It is useful to look at what effect this has had on the use of transport up to the present date, or at least as far as data is available.


  From 1993 to 1995 the increase in road freight was 11 per cent (all figures relate to tonne/kms). During the same period rail continued its steady decline from previous years reducing by some 6 per cent, whilst water borne freight rose by nearly 4 per cent. It could be said that in the first two years the impact of the escalator was still to be felt.

  From 1995 to 1998 road freight rose from 150 billion t/km to 160 billion t/km, a rise of 6 per cent. During this period rail freight rose from 13 billion t/km to 17.4 billion t/km, a percentage rise of 34 per cent. Water borne freight rose by 7 per cent in the same period. Whilst it is true that rail freight was privatised in 1995 it would be too simplistic to assign all the growth in rail freight to that one factor.

  During the same period water freight has increased its percentage take without any similar external factor. If the rise in rail freight was all due to privatisation, it would be reasonable to expect that rail would have won traffic from coastal shipping as well as road, but the figures indicate that both rail and water are winning traffic at the expense of road. Early indications for 1999 statistics show that, for the first time in a number of years, negative growth has been experienced in road freight, whilst figures for rail show a continued healthy growth. This is against a background of a steady increase in GDP. It has to be concluded that the fuel duty escalator has reached the stage where it is beginning to affect modal shift.

  It is therefore ironic that the government has chosen this moment to reverse its policy. In the 1999 budget the escalator was not applied and VED rates for HGVs were cut. In the recent pre budget statement real cuts were made in the price of fuel and further massive cuts in HGV VED rates were announced. According to the government the combined effect of these measures is equal to a cut of 8p per litre in the price of diesel. This will equate to a possible 3 per cent increase in the productivity of HGVs vis-á-vis rail.

  However, all this pales into insignificance against another measure announced in the 1999 budget, the unrestricted use of 44 tonnes lorries on our roads. This one measure alone is estimated to give a 12-15 per cent boost to road productivity and result in a loss of 20 per cent of rail traffic totally negating the spurious environmental gains claimed by the government in its statement. The losses to road from coastal shipping seem to have been forgotten in the rush to make comparisons with rail, but as water currently carries three times as much as rail and is equally susceptible to a cheaper road competitor, it can be reasonably assumed that those losses will be even greater than rail. Far from heavier lorries equalling fewer lorries, it is confidently predicted that there will be many more, as well as heavier, lorries after February 2001. Even pipelines have to compete on price with other modes and there is every reason to suppose that some products currently conveyed by this mode will also be susceptible to cheaper road competition.


  HGVs account for 33 per cent of the emissions of particles (PM10) and NOx from road transport. Therefore each 1 per cent fall in road haulage will result in a reduction of .33 per cent of those pollutants. Conversely each 1 per cent rise in road haulage will result in a corresponding rise of .33 per cent.

  If the recent gains in traffic by rail and water had not taken place, and the goods moved by road, the percentage increase in road traffic would have been more than doubled at 12.6 per cent. This would have increased emissions by over 3 per cent. (An allowance has been made for the fact that rail and water are not completely pollution free.) The figures for 1999, referred to earlier, indicate a fall in road freight of some 3 per cent, saving 1 per cent of the accompanying pollution.

  Assuming that the estimates for rail losses are correct, it would appear that each percentage point increase in road efficiency could result in a 1.5 per cent drop in rail traffic. Thus the two measures already put in place by the government, 44 tonnes lorries and 8p/litre equivalent price cut, could result in losses of 25 per cent of rail carryings or 4.3 billion t/kms. This represents a gain to road of 3 per cent, or a 1 per cent increase in total road emissions. As discussed earlier, there is no reason to suppose that the other modes, water and pipeline, will be immune to this increased competitive threat and losses in those sectors could be triple those of rail giving a further 3 per cent increase in total road emissions.


  It would be unrealistic to look at the environment in isolation. We have therefore taken a moment to examine the haulage industry's economic case for reducing fuel and VED costs. They have two main planks to their argument.

  Firstly, they say that they are unable to pass on their increased costs to the end user. Any industry that is unable to do this over the longer term, is unsustainable and this is an indicator of the major malaise of road haulage, over-capacity and a lack of law enforcement. Too many operators chasing too little work means that in order to win orders, the unscrupulous cut corners compromising safety. The end user is able to beat down rates by threatening the use of another operator so the honest man is forced to follow suit. Major changes are needed as to how this industry operates but that is outside the remit of this report and has been addressed to other government departments or committees. Suffice to say that any reduction in fuel costs to the operators will immediately be taken by unscrupulous operators and end users as a green light to reduce rates. The end result is that the haulage operator will not benefit from any cut in fuel duty. This also assumes that the oil companies will not take the opportunity of a duty cut to increase their margins.

  Secondly, the industry quotes unfair foreign competition using cheaper diesel and VED etc. Statistics dispute this assertion. Around 60 per cent of UK/EU accompanied road transport is carried out by UK registered operators and the percentage is rising. An equitable distribution of the available work would be 50/50, so on that basis our companies are winning.

  Hauliers also claim that foreign lorries are coming to the UK and carrying out cabotage (internal domestic carrying) using cheap EU diesel. In fact cabotage accounts for 0.06 per cent of UK domestic haulage. In spite of cheaper diesel, EU hauliers find they cannot compete with the cut-throat rates on offer in the UK.

  Much has been said about "flagging out" lorries to "cheaper" EU regimes. Hauliers have found that the totality of costs in Europe is more than the UK and you cannot pick and choose which costs you pick up. If you move abroad you pick up all the costs of your adopted country. The FTA has concluded that "flagging out is not a productive avenue to follow".

  The true competitor that hauliers fear is given away by the earlier statistics of rail increases and stagnation in road figures. Why else would 44 tonnes lorries, and a proposed use of bus lanes by lorries, placate the industry? These would be equally available to the foreign haulier who would still have his tank of cheaper diesel. Why were so many lorries on the original fuel protests those that face no foreign competition whatsoever? We refer to lorries such as aggregates carriers who have no foreign competitors but are under pressure from rail. Thus it can be concluded that rail is the true competition feared by UK hauliers. If road haulage can win back some of the traffic they have lost to rail, they surmise that they can alleviate over-capacity within the industry with no pain to themselves. The added benefit of 44 tonnes lorries will enable them to actually increase business at the expense of rail and water. Unfortunately, the government seems to have missed the finer points of this debate and given in to the threat of civil disobedience.

  Government now has a choice. If it continues with a policy of reducing road haulage costs it will result in transfer of traffic from rail, water and pipeline. Every 1 per cent increase in road haulage will increase total road outputs of the major pollutants by .33 per cent. Road is one of the few growth areas in pollution and this will erode gains made in other areas.

  If government concludes that it is not politically acceptable to maintain fuel and VED rates at levels where they can affect modal choice then they must provide compensation to the other modes for their cleaner environmental record so that they can also reduce rates to compete effectively.

  Any other course of action can only be construed as an abdication by the government of their environmental responsibilities.

November 2000

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