Examination of Witnesses (Questions 100
TUESDAY 31 OCTOBER 2000
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.
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
(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 saidand this was confirmed
by the figures which came outthat 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 interestswe dobut 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 bodiesand
this Committee will be meeting some of them in the course of this
Inquirywho 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.
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
(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
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
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.
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
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 Britainit is
located in Fifewhere 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.
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
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.