Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 180 - 194)



  180. We have some big operators in the UK as well.
  (Mr King) Yes, but not so big as some of the major continental operators. They need to get that truck back out of the country and they need a load to put on it. Some of the rates charged are exceptionally low. Nobody is suggesting that there are not going to be some tears in an international industry like this. We do have to compete and nobody is going to come along and give you enormous concessions to help you. The industry has to help itself and has to operate efficiently and effectively. What it wants, in order to compete that way, is a more level playing field on its operating costs. It is very difficult to compete with continental operators when you are paying so much more for fuel, so much more for vehicle excise duty and these operators are allowed to roam UK roads without contributing a brass farthing to the running of those roads. What we have to do is make sure they do pay some of those costs, begin to level that playing field so that we can hold our own. For the moment the competition is unfair.

Helen Southworth

  181. What I am having difficulty comprehending from some of the things you have been saying is if 2.9 per cent of the cabotage operations are carried out in the UK and UK hauliers are responsible for three per cent, a slightly positive figure there, why are we not benefiting from return journeys in the same sort of way you were describing that other European hauliers were in Britain? That looks like us not taking opportunity. Two point nine per cent and three per cent are indistinguishable figures so they should equalise out.
  (Professor McWilliams) The issue is essentially an issue of the number of return journeys. For the latest year the figures we have on this show that 562,000 UK vehicles went abroad and 884,000 continental vehicles came into the UK. Obviously the UK vehicles will have done their best to get return journeys and in fact the figures show that they got about eight billion tonnes/kilometres of business from a mixture of the business they were doing on the continent, the return journeys, and the cabotage they benefited from. The problem is that you have one and a half times as many vehicles coming into the UK as going out of the UK and the one and a half times is the thing which actually creates the extra business for the continental lorries. No-one is denying that UK hauliers do business on the continent.

  182. It should not matter how many vehicles there are, it is actually the percentage of business they do that matters and the percentages are equal.
  (Professor McWilliams) With respect, it depends what you are trying to measure which statistic is the relevant one for it. What we have been trying to measure is the amount of economic activity driven by certain factors and in trying to measure the amount of economic activity driven by these factors what we have done is looked at the total number of tonnes/kilometres and percentages are interesting but in the end it is the total number of tonnes/kilometres which drives the number of jobs, drives the tax collection, drives the amount of fuel which is used, drives the tax revenue for that matter and drives that mixture of things. That is really what we have been focusing on and that is the element we think is sensitive to differential taxation.


  183. You did make reference to the fact that there were more bigger players on the continent. Give us an idea of the size of the fleets which are coming into the UK. Is it small companies from abroad coming in, competing at the edge, or is it major players in the European market coming into Britain using their weight, using their economies of scale? Equally, what is the position regarding the UK vehicles leaving the UK and driving around Europe and picking up work there? Do you have any indication what the profile of the players is?
  (Mr King) There is one very big operator by the name of Willi Betz which is an Austrian company which straddles Europe with a very extensive operation who now has a distribution centre in the UK, in the South East. Some have suggested that anything up to 800 of his trucks are in the UK at any one time. They are recognisable because they are blue tractor units and yellow trailers with Willi Betz written down the side. He is very efficient and very effective and knows how to get his costs down to a very low level. He looks upon his business as a European business. In other words in some areas of Europe he will probably not charge such an economic rate as he would in other areas because he is obviously interested in developing and expanding. It does seem that he uses East European drivers to cut costs down and operates in an effective way, armed with cheaper fuel than you can get in the UK.

  184. This is one company. If we are going to talk sensibly we have to have a reasonable spread of examples, we have to have reasonable numbers. To concentrate on one rather sexy operation is a bit misleading. Do you have broader information than this?
  (Mr King) Up to a point but as you will know there are market leaders which do tend to set the rates for everybody else and even bearing in mind their size do have an undue influence upon the development of a market. You get it in airlines on certain routes, you get it with ferry companies, you get it even in the High Street and the supermarkets. Willy Betz is probably the prime example of that. As far as the UK goes, obviously the one which springs to mind is Eddie Stobart who has several thousand trucks some of which are operating now in Holland, having been what might be described as "flagged out". He is a major player within Europe but he has taken the view presumably that operating costs and his efficiency are going to be best served by looking at his operation within Europe rather than within the UK and has taken steps to adjust accordingly. There is no doubt that apart from the handful of really big operators—I guess you could put them on one hand—the industry throughout Europe is based on owner-drivers and very much smaller operators with maybe no more than 20 or so trucks. To ask what the trend is in the marketplace, we believe that the Working Time Directive looming up on mobile workers, where the self-employed will not be expected to comply with the Working Time Directive for mobile workers, have been exempted, that trend will—

  185. Are you happy about that? Surely there is a safety issue.
  (Mr King) No, we are not happy about that because it opens up the opportunity for the self-employed drivers to be able to take business from company drivers who are obliged to work with the Working Time Directive. That is a few years away yet but the impact upon the industry is going to be equally traumatic as high fuel prices are at the moment. It does actually apply throughout Europe but it is interesting to note that 70 per cent of haulage operators in Spain are owner-drivers and one can expect the influence of Spanish drivers and freight companies to be rather substantial in years to come.

Mr Morgan

  186. Mrs Leeming said earlier that a vehicle can come in from the continent legally with 1,500 litres.
  (Mrs Leeming) Yes.

  187. Were you implying that there were any significant numbers of vehicles coming in illegally with a greater amount of fuel on, with extra tanks for example?
  (Mrs Leeming) There is certain anecdotal evidence about that and the customs authorities do prosecute that sort of thing. You quite regularly see belly tanks coming in but that is the legal amount. I do not have a figure for what level of illegal operation there is.

  188. What radius would a truck coming in with one of these other tanks on it have once it has landed at Dover?
  (Mrs Leeming) It depends on the size of the belly tank but if you have a tank double the size of your normal running tank, the 1,500 litres, then you have double the range.

  189. So it could land at Dover and go up and down to Edinburgh, two return journeys at least, 2,000 miles.
  (Mrs Leeming) Yes. It would be illegal of course, but yes.

Mr Chope

  190. You described how there are one point five million trucks coming into the country each year and some of them are UK trucks coming back, some of them continental trucks coming in. I presume each one of those one point five million comes in with a full tank of diesel on which no UK tax has been paid. Do the figures you have include those trucks which are UK based which go either to Southern Ireland to fill their tanks? We have heard that is a standard practice for the post office in Northern Ireland; they send all their trucks to Southern Ireland to fill up even if it means going extra miles to do so. A lot of UK operators are doing the same, going over to the continent to fill up. Do the figures of one and a half million trucks coming in include those ones as well or not?
  (Professor McWilliams) Yes. Table 1 which has been quoted before shows an estimate of the losses in UK tax revenue at the tax rates which existed a year ago and shows that from Northern Ireland the losses were £85 million a year, which is consistent with other estimates which have been produced, and from purchases on the continent the loss is £82 million a year. Yes, the figures do take that into account explicitly and make estimates which I do not think anyone would seriously challenge.

  191. So you are saying that we are now reaching the stage when the law of diminishing return is applying because of these penal rates of tax on diesel.
  (Mr King) It is exactly like tobacco and alcohol, is it not? Who would want to get into a situation we presently face at the moment where the exchequer is losing huge amounts of revenue but cannot do much about it because of the enormous levy of tax on alcohol and tobacco. It has to accept the high rate of smuggling; it is a major, major problem. Here we have the same this year with fuel. Fuel has got so expensive now in the UK that the Government is losing a huge sum of money; it certainly is in Northern Ireland where 50 per cent of fuel purchases are now purchased south of the border, a level which is likely to rise as operators develop new systems. I would not want to hazard a guess at how much is actually being smuggled into Northern Ireland and then into the UK through Liverpool or elsewhere but our views are that trucks come in with 1,400 litres of fuel legally. They should not tranship that fuel into other vehicles but you can fill an awful lot of Transit vans with one tractor unit with 1,400 litres in for deliveries round the Merseyside area or Birmingham or anywhere else.

  192. Can you help us about this? Apparently there is a Comos card scheme operating whereby UK hauliers can buy cheaper French and Belgian fuel and at the same time get up to 30 days free credit. Is that right?
  (Mr King) Within the UK?

  193. I imagine they have to go across to the continent to get this fuel.
  (Mr King) Yes; I do not think it is available in the UK. Many many ingenious schemes are being proposed so UK hauliers can access cheap fuel; I have even heard someone wondering what happened to Pluto, the pipe laid under for the Second World War and whether it could not be reversed.

  194. They are getting a subsidy. They are getting 30 days free credit as well. Have you heard concerns, as I have, that the fuel card schemes which were being operated in this country for many of the small hauliers have become totally uneconomic over the last month because whereas they used to provide a discount against the pump price of diesel, they are now charging a premium against the pump price of diesel and that is as a result of structural price changes made by the petrol companies. Is that right?
  (Mr King) Quite incredibly, after the fuel protest, two weeks later, diesel on the forecourt was seven pence per litre cheaper than you could buy in bulk for your own haulage operation. No-one has yet appreciated or understood why there was that substantial disparity between prices where you could charge so much less on the forecourt; indeed haulage companies were getting their vehicles filled at filling stations rather than using their own stocks because it was so much cheaper. As we understand it, that is not a legitimate act under EU law. You should be offered a discount off the main price if you are buying in bulk. Oil companies have not given us a satisfactory answer to that. In the Road Haulage Forum we have reported it to the Transport Ministers and I understand the Department are looking into it and will report back at the next Road Haulage Forum in November. It is a very interesting situation. As to the credit card, yes, what is the point of having a credit card from a fuel company which entitles you to fuel at a certain price when it is being offered at a cheaper price at a supermarket. It does not make any sense. I have to say the market is adjusting now and the fuel cards are generally coming into line so they are actually probably not worth using now as the market has adjusted. It has been quite extraordinary over the last four weeks. May I leave this Internet Trading Manual with you? It demonstrates how the industry is going to develop its structure through the website, back loads, solving some of the problems of identifying where opportunities lie.

  Chairman: Thank you. If we have not had all the answers we are looking for, we shall be in touch with you again. Thank you very much for the fullness of your replies this morning. We are very grateful.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 15 March 2001