Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by The Rail Freight Group


  1.  The Rail Freight Group is the representative body for the rail freight industry, covering rail infrastructure owners and operators, train and terminal operators, consultants and contractors, local authorities and customers of the railway. Its objective is to grow the rail freight market.

  2.  This paper describes the concerns of the rail freight industry about recent reports from government as well as statements by the road freight industry. We believe that, if implemented, any fuel duty reduction will, without comprehensive mitigating measures, not only make it more difficult for rail freight to compete; it will put at risk the 80 per cent growth over 10 years as well as the Kyoto targets, to both of which the Government is committed.

  3.  The problems and some myths are summarised, followed by a range of solutions and mitigating measures which we believe must be implemented if rail freight is to provide the service and reliability that industry has asked for and the growth to which the Government is committed.


  4.  In February 2001 the Government will allow 44 tonne lorries to operate throughout the UK. This measure will effectively give road freight a 15 per cent increase in productivity and could result in a similar loss of traffic to rail, according to the responses by EWS Railway, the Rail Freight Group and others to the consultation by the Commission for Integrated Transport.

  5.  If the Government allows the road haulage industry a 15p reduction in fuel duty, the effect on rail freight will be as bad again as the effect of the 44 tonne lorry. This 15p reduction is likely to put at risk at least a quarter of the Government's target for growth in rail freight to 2010. In the new faster and lighter end of the market, including intermodal, where competition is most severe at present, perhaps one third of the 10 year growth would be lost. These figures are of course on top of the losses caused by 44 tonne lorries.

  6.  Taken together, these two factors are likely to cause the 10-year growth in rail freight to reduce from 80 per cent to half this figure.

  7.  If the Rail Regulator announces in the next few months an increase in track access charges for rail, that will add to rail's costs at a time when the Government is reducing the costs of rail's competitor, road, by 40 per cent.

  8.  Independent confirmation of this is given in the aggregates and coal industries' responses to the Rail Regulator's July consultation on access charges. They make the point that the road-rail economics are already finely balanced and that, with 44 tonnes and a reduced fuel duty, a large proportion of their traffic will return to road.


  9.  The Government rushed out the 44 tonne lorry announcement in the 2000 Budget just two weeks after the CfIT Report was sent to them. Although the CfIT Report recommended a variety of mitigating measures including better enforcement of road vehicle regulations, mitigating measures for rail freight and a two-year delay in the introduction of 44 tonne lorries, none of these was accepted or mentioned in the announcement, and the advice on two years' delay was ignored.

  10.  Since then, the Government has agreed some enforcement measures allowing the impounding of lorries and their loads for certain offences; nothing more.

  11.  We still await the mitigating measures on rail freight which were to be proposed by the Shadow Strategic Rail Authority, and we still await more comprehensive lorry enforcement measures. Rather than expecting improvements, we fear that the Government will once again cave in to the road freight lobby and allow a fuel duty reduction. Hauliers will, of course, be compelled to hand this reduction to their customers, and will see no fundamental improvement in their financial position.

  12.  The consequences of this will be disastrous for chances of growth in rail freight. The Ten Year Plan forecasts an 80 per cent growth and the industry agreed that it could deliver this and possibly more, provided that the Government kept the competitive balance between road and rail moving in the right direction.


  13.  OXERA reported earlier this year that road freight only pays about 70 per cent of the true internal and external costs that it imposes. This work has been developed in OXERA's Special Report "Policy Options for the Fuel Tax Debate" published on Friday 20 October 2000. Since the original report, Government action on 44 tonne lorries and any reduction in fuel duty will make matters worse.

  14.  The Government's 1998 Transport White Paper describes a legally binding target to reduce emissions by 12.5 per cent below 1990 levels by 2008-12, and a domestic aim to reduce CO2 emissions by 20 per cent by 2010. We have to ask Government how a policy of less incentives to reduce demand and therefore emissions fits into its Kyoto commitments, and how it will defend apparently ignoring its own policy of reducing emissions at the UN Hague meeting on climate change this autumn.

  15.  The problems with the road freight industry will not be solved by reducing fuel duty. The differences with continental Europe are much overstated:

    —  only about 0.06 per cent of domestic haulage in the UK is carried by continental hauliers;

    —  90 per cent of UK hauliers crossing the Channel carry backloads compared with 68 per cent of foreign hauliers;

    —  only 10,000 out of 420,000 HGVs registered in the UK have been flagged out.

  16.  The real problem is that the smaller hauliers continue to have their margins squeezed by their customers and many are in financial difficulties. Any reduction in fuel duty will immediately be claimed by the customers and, equally likely, a reduction in fuel duty will probably be followed by a rise in the price of fuel from the oil companies, something that the customers will press the hauliers to absorb and keep their rates stable.

  17.  Until the supply of hauliers willing to work at near zero margins reduces and demand more nearly matches supply, no amount of tinkering with fuel duty will sort the problem out. It will just kill much off rail freight in the process.


  18.  In order to maintain the competitive position of rail freight and allow it to grow and fulfil the Government's targets, the best solution for rail freight would be to continue the fuel duty escalator and take other measures, including those outlined below, to improve the profitability of the industry.

  19.  This policy was, after all, agreed by both the present and previous government as part of the package to implement the Kyoto commitments.

  20.  If the Government does not have the courage to do this and still wants to increase rail freight, then it should subsidise the whole industry to the equivalent amount that it would lose through receiving less fuel duty; a double whammy that the Treasury would, no doubt, resist.

  21.  However, if it stands firm and resists the latest attempt at intimidation, and provides or ensures a number of mitigating measures, there is still hope. These measures, outlined below, are serious proposals which need examining and implementing urgently. Most importantly, the industry will need to see evidence of Government commitment to it if confidence is not to be seriously eroded. Measures include:

For rail freight

  22.  Encourage the Rail Regulator to announce the lowest possible track access charges for freight. On the basis that he may well be seen to be relatively lenient to Railtrack on efficiencies for the passenger network, we have argued that he can be much more robust on the freight side.

  23.  Increase the rail freight grants to reflect not only the increase in congestion on motorways and other roads, but also to compensate for the 44 tonne lorries and any reductions in the rate of fuel duty.

  24.  Exempt rail born traffic from landfill and aggregates tax.

  25.  Exempt rail-born traffic from any climate change levy.

  26.  Exempt lorries taking freight to or from rail terminals from any congestion/road charges.

  27.  Significantly reduce and rationalise business rates on intermodal terminals.

For Road Freight

  28.  Tighten the rules of professional conduct and increase barriers to entry into the road haulage industry from about £6,000 per lorry to about £20,000.

  29.  Introduce the Eurovignette on all lorries operating in the UK, be they UK registered or foreign. UK registered lorries would have an equivalent reduction on their VED.

  30.  Introduce consignor liability, which would require the police to prosecute consignors alongside drivers and owners of lorries for traffic offences. This would stop the current practice of consignors requiring drivers to meet schedules that are only possible by speeding or exceeding drivers' hours regulations.

  31.  Implement the Working Time Directive for all road freight drivers, without exempting owner drivers, who are least able to resist consignor pressure as above.

  32.  Introduce automatic weighbridges at all major terminals, ports and freight premises.

  33.  All the above road freight measures are designed to ensure that the law is obeyed. The equivalent laws have long been in place on the railways.

  34.  Any suggestion that rail drivers should work for 15 hours continuously, that trains should be 20 per cent overloaded or drive at 30 mph over the maximum allowable speed would be greeted with horror by politicians, with no doubt calls for public inquiries. We ask why the same people are so frightened of applying the same rules to road traffic whose safety record compared to rail is very much worse?


  36.  We have concentrated in this paper on the effects of fuel duty on freight. For the reasons stated above, we believe that fuel duty should not be changed without mitigating measures to preserve or enhance the competitivity of rail freight.

  37.  We also believe that the effects of any such changes on the competitivity of UK enterprises will be small; any benefits will be taken by the manufacturers rather than the transport industry and would, we believe, be small compared with fluctuations in exchange rates with the Euro or in the price of crude oil.

31 October 2000

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