Examination of Witnesses (Questions 82
TUESDAY 31 OCTOBER 2000
82. Good morning, Mr Roberts. perhaps you could
introduce your colleagues and we will begin.
(Mr Roberts) Thank you, Chairman. My
name is Michael Roberts and I am Director of Business Environment
at the CBI. On my left is Kate Barker who is our Chief Economist
and on my right is Barney Stringer who is Head of Infrastructure
at the CBI as well. If it would be helpful, I am happy to summarise
our broad position and then take questions from your colleagues
if that would be appropriate?
83. I think we have had your submissions so
I think we will use that as the basis for our questions. I do
not think we need to proceed with that.
(Mr Roberts) Yes.
84. We have asked you this morning because we
know you represent the broad swathe of British industry. We think
that part of the events that we have been focusing on in the last
session with the last group of witnesses is, you might say, really
concerned with the problems of a particular group. We are trying
to establish here whether or not across the board British industry
is being disadvantaged and the competitiveness of British industry
is being given a hard time by the incidents of fuel taxation in
the way that it is. Maybe we could start off. Have you been able
to measure the degree of disadvantage that British industry and
commerce has experienced as a consequence of the fuel taxation
of successive governments?
(Mr Roberts) Perhaps the best way of beginning the
answer to that question is to mention that transport costs as
a proportion of overall business operating costs are a relatively
small amount, roughly five to ten per cent of overall costs, but
that differs from sector to sector. However, our concern is that
the impact on margins in various ways is the most significant.
It is significant in the context of overall tightness of operating
margins in the UK but I think it often needs to be seen in the
context of a range of increased costs to business. We have the
highest business rate property taxes in Europe. The influence
of sterling, for example, on manufacturers, the influence of the
proposed climate change levy, about which we have talked to this
Committee before. Total business taxation we estimate has gone
up in the region of five billion pounds a year since 1997 and
in that context the increase in transport costs to business as
a whole, fuelled partly by the level of duty, is a concern. I
should mention that business, we estimate, buys over half of all
the fuel that is sold in the UK. If you look at simply the duty
that is paid on that amount, we estimate that the amount in duties
paid by business in its purchase of fuel has gone up by about
two billion pounds in the last three years.
85. You have thrown a lot of figures at us.
Let us just try and get them in perspective. The five billion
that is spent on fuel, is that correct, represents somewhere between
five to ten per cent of the costs of the turnover of companies?
(Mr Roberts) The five billion to which I was referring
was our estimate of the overall increase in business taxation
86. Right. That is business taxation generally.
What is that as a proportion of costs?
(Ms Barker) The figure that Michael quoted as a proportion
of costs is five to ten per cent of the proportion of transport
costs overall, obviously, which is affected by far more things
than just fuel taxes. The important thing about that is of course
that is an overall figure, it is much higher for peripheral companies
producing relatively heavy goods.
87. If they are producing very heavy goods they
will not produce very many of them, will they?
(Ms Barker) No. Goods which will have to be physically
88. You related a number of taxes which are
higher to the UK than they are in the eurozone, for example, there
are some which are lower as well.
(Mr Roberts) Indeed.
89. There are things like the absence of charges
for motorways and things like that which are tolls we do not have.
Overall, are you able to make a comparison? You have picked some
cherries and you have picked some rotten apples but you have not
really put them together and said how much the package would cost.
(Mr Roberts) Some work has been done within the Road
Haulage Forum which brings together the Government and various
sector bodies, who you will be talking to later in your inquiry.
In the course of those discussions it has been suggested with
regard to freight transport costs, that the UK haulage industry
is operating at a five to ten per cent cost disadvantage to hauliers
in France and Northern Europe and that disadvantage takes into
account the overall operating environment in those different countries,
in other words not simply the negative, if you like, of high levels
of fuel duty but also the positive of lower social welfare costs.
It nets out still at a relative disadvantage of that order.
90. You mentioned the heavy goods, could you
be a bit more specific about the sectors which are worst hit,
most vulnerable at this time to the disadvantage that you have
just indicated? We realise it is an average ballpark figure but
talk about specifics.
(Ms Barker) I think in a sense the sectors that we
all know are worst hit and most disadvantaged by the overall economic
circumstance are particularly manufacturers of commodity products
which are often the kind of fairly bulky products that do require
transport who are competing in markets where the margins are extremely
tight and who are already very disadvantaged by the strength of
sterling against the euro. They are going to be companies who
just cannot pass on the fact that they are also paying disadvantages
in haulage costs. It is going directly to squeeze their margins
and for some of them it will imperil the future of their business.
91. You have not got any specific sectors by
name rather than just an indication of potential product, have
you? Have you, in your survey, identified areas of British industry
where things have really got that much more difficult because
of the change in fuel tax?
(Mr Roberts) There are certainly individual examples
that we are aware of. There is, for example, a large employer
in the North West, employing about 800 people, £80 million
turnover, whose activities cover a range of sectors. The company
is involved in construction, some element of manufacturing, some
element of aggregate work as well. The effect of the recent increases
in the price of fuel have added about £350,000 to that company's
operating costs. As part of his operation the company chief executive
runs a transport operation. He is running that particular element
of the business at a loss and has had to make redundant a number
of people. That is a very specific example, clearly. In other
areas, for example in retail, we have had reports of upward pressure
on their transport costs. It depends rather on the extent to which
those retail companies operate their own fleets and the extent
to which they contract out their operations but some are able
to absorb those costs, some are not. That is in a sector which,
as you know, is extremely competitive at the moment. That again,
is putting pressure on the margins.
92. Some people are saying actually that the
biggest problem in the road haulage industry is over-capacity
of the market. There are too many road hauliers taking too few
loads and their margins are too low and that is more of a problem
than changes in vehicle excise duty. Is that something you would
(Mr Roberts) I do not know if Mr Stringer would like
to interject here, but I do not think it is an area where we have
(Mr Stringer) It is certainly true that the road haulage
industry is very competitive in the United Kingdom. I do not know
quite how you define the industry. It is a competitive industry
and one with over capacity, and I do not think I would be able
Mr Butterfill: You could not comment?
93. Maybe we can take this up with the Freight
Haulage Association, because we know that in correspondence between
Lord MacDonald and the FHE there was a suggestion that there was
something of the order of 20 per cent over capacity, and that
is where we got the figure.
(Mr Roberts) We have seen the same sort of reports,
but we do not have any particular knowledge as to how accurate
the reports are.
94. Do the single vehicle companies feature
in your ranks?
(Mr Roberts) There will be some members who are from
that sector, but the particular perspective that we try to bring
to this debate is the broader area of concern amongst the business
community at large. I think it is fair to say that whilst much
of the focus, both within our own councils and more generally,
has been on the cost of operating freight transport, clearly there
is an impact in terms the cost of business for staff travel as
well, and we should not overlook that. We do not particularly
feel well placed to speak on behalf of, either the haulage industry
specifically, or the smaller end of the haulage industry about
which your question refers.
Chairman: We are really, in some ways, more
concerned about your observations on the general structure of
the macro picture, but we will take it up with your colleagues
in the haulage industry in general terms.
95. The Post Office has told us that as a direct
result of high fuel costs in the United Kingdom their road transport
between the United Kingdom and other European companies are now
operated by European hauliers. Is that the experience of your
members, or are they still using United Kingdom hauliers?
(Mr Stringer) It is very difficult to quantify, but
certainly at an anecdotal level we have heard similar stories.
The issue of Northern Ireland was mentioned earlier, I think,
and there is a particular problem there. As you say, it is a mixture
of United Kingdom hauliers who carry out trips abroad that will
come back with the full loads of fuel. So there is a certain element
of United Kingdom hauliers buying their fuel abroad. There has
also been some anecdotal evidence of companies, as you say, flagging
out. I do not think we are in a position to say to what degree
96. Using European hauliers for their transport
into Europe. So, as far as you know, there are still United Kingdom
businesses who are doing their road transport costs through Europe,
through your members, and they have not all decided to use European
(Mr Roberts) That is correct. There will be market
limitations on the extent to which that can happen in any event,
partly because some freight transport is quite specialised, for
example, in the construction sector, and you rely upon local firms;
partly because geographically there will be less attraction for
foreign hauliers, perhaps, to offer domestic haulage services
in different parts of the country. The further you get away from
the points of entry into the United Kingdom, the less attractive
it is likely to be. There are always likely to be limitations,
but within that overall context our understanding is that our
members are still predominantly using United Kingdom hauliers
for their freight transport needs.
97. What are you hoping to see in the Chancellor's
pre-budget report? (Mr Roberts) We are hoping that he will
make a commitment by the time of the Budget next spring, to introduce
a vignette, about which we heard some mention earlier; a review
of the levels of vehicle excise duty, not simply for HGVs, but
also for cars and vans; and a review, particularly, of the question
of indexation of duty on fuel, because indexation is part of the
calculations that the Government has in place for its accounting
at the present time.
98. You do not think it should introduce, for
example, one of the measures such as road tolls?
(Mr Roberts) We have been on record as saying that
tolling, be it on motorways or in the form of congestion charging
in urban areas, should be part of the future way in which road
users of all types pay for using the road network. However, we
do have in place at the moment an existing tax structure and before
we can move wholeheartedly to those sorts of instruments there
needs to be a fundamental review of the way in which road users
pay for transport generally, including taxes as well as potentially
new charges of the sort that you mentioned.
99. There also needs to be a huge improvement
in public transport. At the moment if you drove people out of
their cars in London, they cannot get in on the trains at all.
(Mr Roberts) We could not agree with you more.