Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 100 - 113)



Mr Cunningham

  100. What is the worst case scenario as far as the pre-budget report is concerned?
  (Mr Roberts) No such commitment.

  101. I did not hear that.
  (Mr Roberts) No such commitment.

Mr Baldry

  102. Firstly, I would like to register my member's interest, because I think at least one of the companies with which I am involved is a subscriber to the CBI, and I suspect others might be as well. What do you estimate was the cost, overall, to British industry of the disruption last September by the fuel blockade?
  (Mr Roberts) We have not.
  (Ms Barker) I do not think it is possible to make a full estimate of the cost. Obviously a very large number of our members were in touch with us during the week, but I think out of that it is only really possible to draw a couple of messages. One was that quite a lot of people said—and this was confirmed by the figures which came out—that they had lost sales and were not convinced that they would necessarily see some of those sales coming back. The second thing that was very clear was that a lot of people in supply chains and production chains came perilously close to having to close their plants. Very few people actually came back and said, "Yes, we did have to close our plants." Quite a number of people said that they lost some production because they just did not have the parts in place to come out with a lot of output. Quite a lot of those people then said, "But I think we can make that up by the end of the month." I do not think the disruption in September went on long enough to cause a significant degree of disruption, and you probably will not see very much when we look back over this period and see all the figures. It is absolutely important to understand that had it gone on for only a couple of days longer, the companies would have been taking much more serious decisions about shutting plants, they would have lost production and it would have been much more difficult to make back. The very clear message that came to us was that the thing really stopped just in time.

  103. One of the things which comes through from your answers is that one of the causes of concern for everyone must have been why it was that such a broad coalition of people felt it necessary to demonstrate in the way in which they did, and I suppose it is a reasonable inference that they thought they had no other voice otherwise. You, in answering questions this morning, have indicated that there is quite a significant chunk of United Kingdom PLCs which are not actually involved with the CBI or you do not feel that you represent. To what extent, when you are making representations to the Chancellor and to others, do you have sectoral representation? To what extent do the transport sector, or the energy sector, or the other sectors seek to make representations, or do you, to avoid any kind of conflict between the CBI, attempt, when you are making representations, to come to some global United Kingdom PLC overview which thus then means that the particular concerns of particular sectors may well feel that they are not fully appreciated and taken on broad?
  (Mr Roberts) Can I start off by saying that my earlier comments should not be taken as suggesting that we do not represent those interests—we do—but we feel that our value is to speak from the broader point of view of the business community generally. There clearly are a number of sectoral bodies—and this Committee will be meeting some of them in the course of this Inquiry—who can reflect the more specific concerns of some of the sectors that you are implying. Equally, I would argue that simply because we represent a broader church does not necessarily mean that our views are not as firm about certain issues, and on this issue in particular, as those expressed by some of the sectors. We have been expressing a concern about the level of fuel duties and vehicle taxation in the United Kingdom for at least two or three years now, and that is explicit in our pre-budget submissions. We were expressing views strongly to the Government at the time of the September crisis, and we have made our views known to the Government subsequently, for example, in our pre-budget report submission as well. We would like to think that precisely because we are speaking for the business community at large and can develop, if you like, a holistic view about the impact, we do actually have something quite significant to say.
  (Ms Barker) I think that does add a slightly different dimension to some of our submissions and it comes back to the point raised by the Chairman about the specific effect of fuel taxes on businesses. When we make our submission we are not just looking at fuel tax, we are looking at the overall burden on businesses and the difficulties that they suffer. We know that there are many sectors currently who have very strong competitive difficulties at the moment. Our submission reflects not only the problems caused to hauliers in terms of high fuel taxes, but also those other factors, and we have to try and balance all of those factors together in what we put forward and against the background of what the Government can afford to do at any particular point in time. Clearly we have spent a lot of time thinking about this issue, we have put it forward very strongly for a number of years, and that reflects the very serious importance we attach to it.

Helen Southworth

  104. The AA and UKPIA report found that "raising fuel prices has a modest effect on fuel consumption and even less on traffic growth." Were you surprised by those findings?
  (Mr Roberts) Not particularly, because we have been making similar points for some time as well. That is not to say that there is not any influence. I think the importance of pricing measures of that sort sometimes is greater in the longer term in that they send signals over the longer term to the change of behaviour, perhaps, in the purchase of vehicles. What we would argue is that if you want to address congestion on the road, if you want to address pollution, be it local air pollution or global pollution in terms of climate change gases, there are potentially better ways of achieving those ends. For instance, if you look at the United Kingdom's climate change programme and the amount of emissions of green house gases which will be achieved through the then fuel duty escalator by 2010, it will be half that achieved through the improvements in vehicle technology, which the vehicle manufacturers and oil companies have agreed with the European Union.
  (Ms Barker) One of the ways in which you would expect changes of duty on fuel to work is through its impact on manufacturers and the kind of products they get to bring out, because nobody manufactures just for the United Kingdom markets. Manufacturers are certainly working on at least a continental scale, if not a global scale. So it is going to be much more an EU level that you are going to be able to get some return in terms of that kind of operation.

  105. Are your members looking more kindly on freight transport? One of the things that we noticed when we were visiting a number of manufacturing sites is how very few of them have a rail link into the factory?
  (Mr Roberts) Yes, and, indeed, rail freight has grown in the last few years. Mr Stringer may be able to provide the figures. That is clearly as a result of businesses viewing rail freight as an increasingly commercial option. Part of the reason why it is a more commercial option is, I think, due to the fact that the rail freight operators are more attune to the needs of the customer who is not only looking for relatively low cost, but also quality of service.
  (Mr Stringer) I do not know the figures, I am afraid, off hand. I could supply them after. It is true, there has been a marked increase in rail freight and use over the last five years or so. That point is absolutely right. The decisions made by companies in whether to use road freight or rail freight are based on a whole lot of different factors, including cost and including level of service. As you say, a lot of sites do not have the advantage of being near a rail line and, therefore, it is not an option for them.

  106. A lot of sites are very near the rail line, but just do not have the connecting point in. Have you any opinions as to how they can put investment into place to make use of rail?
  (Mr Stringer) We have been involved in the Rail Freight Group, which has been working with Government to find some solutions to this, and I think there are a range of measures. The industry itself is doing quite a lot to reduce costs and improve its flexibility for the customer, which is one of the key things, I think. There has also been an increase in grants for freight facilities, which has been helpful, and more can certainly be done. There are certain issues around capacity on the network as well.

Ms Perham

  107. Obviously, many of your companies' employees have to use petrol and diesel in their cars and vans for business purposes. Is that statistically significant in your costs?
  (Mr Roberts) Certainly their concerns are part of the concerns that we have been trying to reflect to Government. I think it is fair to say that in terms of balance between the interests of those who are looking at freight movement and those who are looking at staff movement, the balance of concern has been expressed from those who are particularly focused on freight movement. There is, at least in some cases, an option for people to get out of their cars and use alternatives, but as we have already heard, particularly at the moment, the alternatives are either not there at all or they are not of sufficient quality to justify making that move.
  (Mr Stringer) We have an estimated figure for the amount of duty paid by companies for fuel used in cars of around £3.3 billion a year and about 80 per cent of that is on petrol.
  (Ms Barker) If you are thinking of what is the most likely to have a direct effect on competitiveness of a business compared with a foreign company, it is going to be freight fuel and haulage costs, when you are talking about exporters for example, rather than the cost of getting people to work. That is not always true, but in general it is going to be that aspect of it which is particularly hard.

  108. In your submission you talk about the serious questions of the failure of the current tax system adequately to distinguish between urban and rural roads and about its effectiveness in delivering environmental goals. How would you see that working? Should there be different vehicle excise duty for people living in rural areas or would people just register their car in the company and go and drive somewhere else?
  (Mr Roberts) I think the focus of our attention has been much more upon the potential introduction in due course of pay as you go charges, be they in the form of motorway tolling or urban congestion charging, and that would be a much more effective way of distinguishing between the characteristics of urban and rural motoring.

  109. You do not see there being any resistance to road tolls? Apart from the Dartford Tunnel, people are only used to paying motorway tolls on the continent. Do you think there will be resistance amongst your members or the public in general against the introduction of road tolls or congestion charging?
  (Mr Roberts) Our support for tolls and congestion charging is conditional. It is conditional, for example, on there being an adequate set of alternatives for people to use, and that there is an alternative for freight as well as for the passenger. Those alternatives need to be in place at that time. The form of charging has to be flexible according to the time of day which people are using that particular piece of the network and, indeed, the location. You would not necessarily introduce tolls upon a very scarcely used rural road, you probably would not introduce it at all, but you might introduce it as a matter of course for urban roads. Finally, I would say that there is in place already a tax system part of the revenue from which is, in effect, used to pay for improvements to the transport network. You would need to review transport tax systems before simply implementing a new and further set of charges on the road user.
  (Mr Stringer) I think it is crucial that road tolls are linked to what is invested in the transport network. I think people will be less resistant if they see that they are getting something in return of the investment.

  110. It would have to be hypothecated.
  (Mr Roberts) Indeed.

  Chairman: I have to say that the Chancellor's own constituency is one of the few parts of Britain—it is located in Fife—where you have to pay to get into Fife and get out of it. There are bridges at both the Forth and the Tee, but that is a different matter. Mr Butterfill.

Mr Butterfill

  111. In your submission you make quite a lot of points about the discrimination against diesel, and you point out that not only do we have the highest fuel duty on diesel in the European Union, certainly, but also company car taxation discriminates against diesel, despite the fact that diesel produces much less CO2 and, therefore, if we are to believe the propaganda that all this is to help meet our international environmental obligation, then you would expect diesel to be more favourably treated. I think in the past governments have said that they are worried about particular emissions and the effect of those. The manufacturers that we have seen recently claim that they have got rid of those in their newest models. How strongly are you continuing to push this, given that we are not just talking about diesel for heavy goods vehicles, but most lighter vehicles? Vans, for example, are said to be diesel, taxis tend to be diesel, high mileage business users tend to use diesel. This is a huge burden on industry. What are you doing to impress that on the Chancellor and what response are you getting?
  (Mr Roberts) We have made some of those points in our specific communications with the Treasury on the company car tax proposals specifically. However, addressing the issues that you have rightly raised is precisely the sort of thing that we would want to see in a review of transport tax systems generally and that we have asked for as part of our submission on the pre-budget report, and it is one of the commitments that we would look for from the Chancellor in his statement in a weeks' time. We would look for him to commit to launch a review which we would hope would lead to the elimination of some of these inconsistencies in tax policy.
  (Mr Stringer) It is also another good example of where technological improvements have had a more effective way of achieving the desired outcomes than the tax. A lot more has been achieved in terms of reducing particulates through improving engine performance and so on, than through taxes.


  112. Could it be said that the spur for the improvement in engine performance, in some areas at least, has been occasioned by the imposition of higher taxes?
  (Mr Roberts) There was evidence, during the mid-90s, of an improvement in fuel efficiency of the freight transport fleet. There must be an element of influence on that due to the high price, or the relative price, of fuel. However, in the last year the soundings that we have had from some of our members in the logistics industry and the retail industry is that increasingly the trade-off is between the incentive to invest to reap the benefits of energy efficiency to reduce the fuel costs, and, on the other hand, the availability of capital, which is being squeezed by reduced margins, part of which is a result of that, and that balance is becoming increasingly difficult and that is having some influence upon decisions now on the need to invest in yet further fuel efficient vehicles.

  113. Thank you. It is an interesting point that I have a letter winging its way to the Chancellor in similar terms from one of my constituents. Thank you very much. I am grateful to you for coming this morning. I should have said at the beginning that we are pleased to welcome you here during your conference. Maybe you are happy to get away from it. I would not for a moment suggest that. Your conference is this week, is it not?
  (Mr Roberts) It is next week.

  Chairman: Thank you very much.

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