Examination of Witnesses (Questions 260
WEDNESDAY 1 NOVEMBER 2000
MR J HOOKHAM
260. There is also the currency differential
(Mr Hookham) Indeed; yes. Such is the difference in
prices that that is not significant.
261. In evidence to us the Transport and General
Workers' Union have said that interestingly the Freight Transport
Association estimates that the current cost of a French haulier
running a French domestic operation and a UK haulier running a
UK domestic operation are broadly similar at 58 pence per kilometre
compared with 55 pence per kilometre. However French hauliers
pay over five pence per kilometre infrastructure costs. Is that
correct? Are the costs for French hauliers running a French domestic
operation broadly similar to those for a UK company?
(Mr Hookham) There is some confusion here. The figures
we developed for the Road Haulage Forum were particularly looking
at the cost base of a UK domestic haulier doing business in the
UK and the cost base of a French haulier and several other Member
States' hauliers coming into this country and bidding for business
on a cabotage basis. That was the principle case we were making.
Therefore of course when a French haulier or any other continental
haulier is in this country they do not pay infrastructure costs
the way we do back home. That particular point does not arise
because of course we do not charge motorway tolls or other charges
in this country beyond VED for the use of infrastructure.
262. Are you saying there is a thruppence comparison?
(Mr Hookham) Yes; that was the difference at the time.
263. Is that the situation today?
(Mr Hookham) Exchange rates, movements in the price
of fuel on the continent as well and there have been some changes
in the cost base of French hauliers, particularly as they have
come to terms with the 35-hour working week. I accept that the
figures which we recalculated at the beginning of the year for
the Road Haulage Forum are subject to these local variations.
The indications are that that basic difference does exist and
in particular is still there for some of the other EU Member States
where they have not had the working time effect.
264. Does the Post Office belong to the FTA?
(Mr Hookham) Yes; it certainly does.
265. They have given us evidence saying that
as a direct result of high fuel costs all the operations they
had on the continent are carried out by European hauliers even
though they would like to be able to carry them out with their
own in-house transport fleet, which you say would be much more
(Mr Hookham) Absolutely because they would be British
vehicles, taxed through VED at British rates, which are much higher
than prevail on the continent. They would have access to the cheaper
continental fuel once they crossed the water but other factors
prevail. You were discussing the effect of the euro a little earlier.
Of course interest rates and therefore depreciation policy on
fleets are much different in euroland than they are in the UK
because of higher interest rates which prevail here. There are
all those sorts of other factors which have to be taken into account
and indeed were taken into account in the analysis we did with
the DETR and the Treasury and the Road Haulage Forum.
(Mr Dossetter) There was a good example of the sort
of advantage which the lower price of fuel has overseas when a
depot in Fareham, Hampshire, about 12 months ago operated by Norbert
Dentressangle closed. The business there, as I understand it,
was normally British employees and British vehicles hauling for
the French haulier. However, it was found eventually that because
of our higher fuel prices here it was cheaper, more efficient,
for the French operator to haul in direct from France rather than
utilise the depot in Hampshire.
(Mr Hookham) Similarly a lot of swop trailer business
which used to come across the Channel, in other words trailers
delivered, say, to Calais, towed onto the ferry and then collected
by a British tractor unit this side of the Channel has now reverted
to through journeys made by the continental haulier because of
that lower cost base. Again more business lost to the UK.
266. The AA recently published a survey that
said that the increases in fuel prices had not had much effect
on fuel consumption or vehicle growth. In terms of your own members,
has their fuel consumption been affected by increases?
(Mr Hookham) No, not by increases in taxes. This is
a very important point which makes the industry's case different
to the private motorist. You have very little option but to collect
the goods from where they are produced and deliver them to where
they are consumed, where they are required. Given the dispersion
of industry and business around the country, there seems to me
a counterproductive attitude that if what you are trying to do
is make journey distances smaller by raising fuel taxes, making
freight journeys more expensive, that seems to defeat the purpose
of expanding in the regions and developing a rural economy if
what you are trying to achieve is a concentration of activity.
It is very important that the Committee understands both the haulier
and indeed the manufacturer who own their own vehicles who comprise
the bulk of FTA's members have little choice but to pay the high
prices and duty rates on fuel because they have to go from where
they produce goods to where their customers are and that is a
given. You cannot really change that in response to fiscal policy.
267. Has there been any increase in your members
looking at other options such as the use of rail? Have you had
any indication of that?
(Mr Hookham) Indeed, a tremendous amount of interest
in rail and this is for quite separate factors. A lot of the changes
which have been brought into the railways as a result of privatisation
have had an effect and the railways have reported separately quite
dramatic increases in their business as a result of that. That
is partly because they have their costs under control, they have
become more astute at marketing their services to industry and
more recently this year they have shown remarkable advances in
the reliability of their services, which was another very important
factor. The effect of high fuel prices on that has, I would suggest,
been marginal because those factors I have just described, the
reliability particularly, have been the things they have had to
work on first and indeed have started to deliver on. It is quite
separate to the factor of high fuel price.
268. Surely the high fuel price must be a factor.
(Mr Hookham) Maybe at the margin but we have to accept
that the lorry is going to carry the vast majority of freight
which does move around this country. We heard earlier on about
the way in which UK demography and geography is different from
the rest of the EU, so you cannot expect the same reliance on
rail as perhaps occurs out there. I am sure there would be a lot
of freight which does; indeed we encourage and hope that more
freight moves to the railways. In theory they should be more reliable
and less congested given what we expect to happen to the road
network over the coming years. I do not think that trying to achieve
a modal shift, as the Government wishes, is going to be achieved
simply by making fuel more expensive. There are far more complex
subtle factors which indeed are being addressed which will actually
deliver on that particular objective.
269. Is there any significant extent to which
your members have "flagged out" their vehicles or registered
(Mr Hookham) No. All the evidence is that "flagging
out" appeared superficially attractive, particularly after
the 1999 budget when such a dramatic increase in diesel duty,
11.4 per cent, and some very high VED rates were announced, particularly
for the upper weight vehicles, the 40-tonne vehicles, on paper
the costs did look very attractive. However, I am not aware of
any of our members who in any great numbers have actually made
a committed effort to relocate their operations abroad and still
try to run a domestic operation. Some international hauliers have,
because if they are going to the continent anyway they do not
have the problems; they just operate from the other end of the
pipeline, if you like. Such are the legal complexities and such
was the uncertainty about the status of operators' licences under
that regime, a lot of the members we have spoken to have found
it to be risky. They have no wish to attract the wrath of the
traffic commissioners or indeed the law and therefore they have
not committed to that at all. That is a very small number, if
(Mr Dossetter) Nonetheless it is attractive, bearing
in mind the comparative rates of vehicle excise duty. If you do
have an international operation, that does look at the larger
vehicles, and of course international movements are primarily
on 40-tonne vehicles, then there are substantial savings. The
vehicle excise duty in the 1999 budget for a 40-tonner was £5,750.
At that time that compared with a French price of around £450.
If you are running a fleet of 10 or 15, if you are running a fleet
of one vehicle, that is a very attractive option. Of course that
figure came down in the budget this year to £3,950, still
a long way distant from the French comparison, but flagging out
is generally attractive on the basis of vehicle excise duty, not
of course fuel duty because international operations take advantage
of buying fuel overseas. It is a hanging offence for an international
operator to buy a pint of diesel in the UK.
270. Probably most of us would agree with your
view that the vast bulk of goods is going to continue to move
by lorry around the UK. If that is the case is not the exercise
simply that any extra duties or costs which are imposed upon you
are simply in due course going to get passed down to the eventual
customer, they just get passed through the supply chain? That
being the case, can you explain to the Committee why, if the costs
effectively simply get passed down the line, we saw so many road
hauliers protesting and expressing concerns about one particular
cost, admittedly a high one, within your overall costs? Having
heard your evidence this morning, what is difficult for the Committee
to understand is what was the straw which broke the camel's back?
What did cause this protest in the autumn? What was the configuration
about which people were particularly expressing concerns?
(Mr Hookham) May I just break that question down and
come back to the question of why the costs are not being passed
on? That is because at a time when the Government has deliberately
had a policy of escalating fuel prices to industry and others
it has been at a time when British industry otherwise has been
happy to reduce its costs in order to stay competitive in a huge
number of markets, which I am sure this Committee is familiar
with, which have been conducted at a European level, if indeed
not at a global level. This has resulted in a situation of some
quite small businesses, medium-sized businesses needing to go
to their customers and say, "I realise the situation you
are in, where you are trying to reduce your costs to stay competitive
on the global market, but I've had a real increase in the second
most significant cost input that I have, my basic raw material
that my trucks run on, my fuel. I am therefore going to ask for
an increase in rates which is above inflation". It is quite
probable that is the only input to that particular customer where
there has been any talk of an increase above inflation. Given
that the buyer of that transport is not entertaining above inflation
increases on his other inputs of raw materials or in his other
business services, he is saying he does not have the scope to
increase his prices to absorb your extra costs, he is sorry but
he is not paying it. If I may just take the story a stage further,
what does the haulier do? They are small and medium businesses
predominantly. If they do not have clauses in contracts which
allow those prices to be added on automatically, do they just
walk away from that business? Of course they do not. They look
to try to absorb these costs as much as possible. They look to
try to make the efficiencies both in the way they run their business
and the way they run their trucks by which these real increases
in fuel prices can be absorbed. To answer your second question,
I think we got to the point where there was nothing left which
could be done. A persistent policy of increasing fuel duty above
inflation was literally the straw which broke the camel's back
and not seeing any sign of an outcome to the very protracted discussions
which we have had with Government in trying to make them aware
of this situation and how perilous many businesses were becoming.
I would suggest it was that sheer frustration which resulted in
the sorts of action we saw by the hauliers and farmers.
(Mr Dossetter) In the 1999 budget we did, in a public
reaction to the Chancellors almost 12 per cent increase in diesel
duty, point out that at that time the world oil price was relatively
low, around $10 or $12 per barrel. We did warn that if the price
went up on the world market there would be some trouble ahead.
That of course is what happened in the period, in the 18 months
between budget 1999 and summer 2000. The price of oil on the world
market went up from $10 per barrel to $25, $30, over $30 per barrel.
We had the toxic combination there of a Government's very high
fuel duty policy combined with an increased oil price. Although,
as we heard earlier, the price of the product itself is only 20
to 25 per cent of the total product price, the fact that went
up as well as the Chancellor's policy, the two things coming together
caused a number of explosions to happen.
271. You used the expression "the straw
breaking the camel's back". It has been suggested to us that
there was considerable overcapacity in the road haulage business;
a figure of 20 per cent has been suggested by the DETR. Do you
have any evidence of this overcapacity? Do you think that the
straw breaking the camel's back might well result in a shakeout
in the industry, a reorganisation of it, fewer people being involved?
The smaller player is perhaps unrealistically still involved in
an industry where there is not enough work for him to do.
(Mr Hookham) If that were to happen in any other market,
then we would let the market take its due course and the more
efficient players would contain their costs and be able to compete
still and those who could not would eventually disappear. What
I find extraordinary is that given we may have a market here with
alleged overcapacityI cannot see it being any more oversupplied
than any other market for that matterhow do you reconcile
that with a Government policy deliberately to escalate the second
most important cost in that business sector's input costs? That
is what has been particularly frustrating for our members, that
whilst they do attempt to make the efficiencies in their businesses
that they need to do, their haulage businesses and in manufacturing
industry as well, to reduce their transport costs, and of course
to deliver on environmental objectives and improve the quality
of transport and reduce emissions and so on, this is all coming
at a time when Government fiscal policy is all pointing in the
other direction to make it as difficult as possible.
272. I am sorry, but have the numbers of your
members fallen? Has the rate of recruitment gone down? Are there
any examples of the businesses going bust as a consequence of
the fuel increases?
(Mr Hookham) We certainly have examples we can send
to the Committee.
273. I want figures, not just individual anecdotes.
Do you have a significant percentage drop in your membership,
do you have evidence on a sizeable basis either showing that nothing
is happening or that there is a figure X percentage of a decrease?
Until we can get that kind of figure, frankly it just does not
wash. We understand the burdens are difficult. We understand it
is harder to work at but what we do not understand is why people
keep on doing it.
(Mr Hookham) With respect, this is British entrepreneurship
at its best.
274. The Dunkirk spirit.
(Mr Hookham) Quite possibly. It certainly seems to
be putting those kinds of pressures on certain parts of the sector.
It would be regrettable if we had to wait for many of these companies
to fall off the cliff edge before we were to be convinced of the
scale of the problem.
275. Why should we as consumers pay more for
the goods being delivered if there are too many players in the
business? Why should we keep other businesses? It did not happen
for the mineworkers or the textile workers in my constituency.
Why should I put my hand in my pocket to support other people
who frankly are perhaps no more economically useful than textile
workers, the demand for whose goods no longer exists?
(Mr Hookham) With great respect, I think that the
difference there is that the Government is not deliberately increasing
the price of those commodities which you describe and therefore
forcing additional costs and additional frustrations into those
sectors. Quite the reverse. It was putting money in to try to
help them at the time. This is what frustrated a lot of our members
because whereas the Government is actually trying to encourage
them towards more environmentally responsible actions, that requires
investment in their lorry fleets, investment in their driver skills,
investment in the way in which they manage their business with
the sort of opportunities information technology now offers. Whilst
it is hoping and encouraging them to do that, with the other hand
it is taking out vast quantities of cash through higher duty rates
which is making it difficult for them to deliver on those objectives
and actually making it difficult for them to stay in business
at the same time. I am afraid at the moment there is largely anecdotal
evidence of individual companies who have ceased trading, quite
sizeable companies, quite sizeable names which we shall be happy
to supply, but in terms of delivering robust statistics I sincerely
hope we do not get to that stage. I hope that we are able to impress
upon the Government just how dire the situation is and that action
is taken before we do have robust statistics on the number of
liquidations and bankruptcies. For us in our industry, that would
obviously be too late.
276. By the same token, if people get the goods
they want delivered, why should we forego tax revenues if there
is an overcapacity? At the moment it is suggested that there are
too many lorries in Britain, there are too many people hanging
in the transport industry, more than we require. I am being the
devil's advocate here. We shrink the industry, we get it down
to a level, then we get the environmental benefits of fewer lorries
on the roads and we get other things as well. It may be that our
industry is too big.
(Mr Hookham) With respect, this is a peculiar way
in which to conduct Government policy here. If indeed there is
an issue to address of too many vehicles on the road, we want
them to become more efficient, I should be only too happy to talk
with relevant Government departments as to how we do that. As
I indicated before, if we want to do that, if we want to bring
in more efficient, less polluting vehicles, we need to put more
money into the sector rather than keep taking it out. The best
thing a haulier could do these days in terms of environmental
efficiency is to buy a new vehicle. New vehicles today are so
much cleaner than the ones they are currently operating which
they may have bought seven, eight, nine years ago. The more newer,
cleaner vehicles are introduced the quicker those environmental
and efficiency objectives will be achieved. A lot of the case
which the FTA has brought to the Government over recent years
has been to ask them to confront the situation that at a time
when they are asking for more money to be invested in the sector
they have a deliberate policy of taking more money out. That cannot
277. Do you accept that if the whole picture
of taxation is taken into account British competitiveness increases?
(Mr Hookham) No, I do not. We endeavoured to make
sure we covered all the relevant costs and taxes that goods vehicle
operators on both sides of the Channel have to pay in the analysis
of costs which we did in the Road Haulage Forum. It was not just
taxes, it was features such as infrastructure tolls, different
rates of depreciation because of different interest rates, different
corporation tax levels and so on. We did try to do a whole costing
review of the different businesses. I do not accept that even
when you take into account these other costs, that goods vehicle
operators in the UK are actually better off. The figures we submitted
to the Department, which they seem to accept, suggest that there
is still a higher cost base in this country.
278. What assumptions did you make in relation
to France about motorway usage? Certainly it is my impression
that there are relatively few commercial vehicles on French motorways,
at least on the tolled French motorways, because they just go
to the routes nationales which are free?
(Mr Hookham) The figures we used came from several
sources. The two which appeared to be most reliable, in that they
were independently sought and seemed to agree most, were from
our counterpart organisations in France, who had obviously a close
feel for the cost of their domestic members, and operators. Although
that is certainly the case in some parts of France, it is self-evident
from driving along the autoroutes that a lot of commercial
vehicles do use and pay the tolls on the motorways. We did not
start from that position. We simply asked the question of those
bodies we thought would know.
279. Is your point that as a result of Government
policy the number of foreign owned vehicles on our roads is increasing
at the expense of British owned vehicles and British jobs? You
described the environmental impact from this and the effect it
has on existing British hauliers not being able to replace their
capital equipment as soon as they would otherwise do so. Could
you also comment on the impact on road safety? It is said that
the advent of a lot of foreign lorries driving effectively on
a different side of the road to the one they are traditionally
accustomed to, with not so well maintained vehicles and all the
rest of it, is having a detrimental effect upon road safety in
(Mr Hookham) There are two parts to that question.
The first is that we should make it clear that the reason why
there is such an increase in foreign vehicles coming into the
country is simply because of the balance of trade at the current
time and that is a function of exchange rates. I accept that there
is no deliberate Government policy which has resulted in that.
The consequences of large numbers of foreign vehicles being in
this country is of significance because then the potential undercutting
of prices is there. To deal with the second part of the question
on safety, as I hope the Committee are aware, we have had for
a very long time now, since the beginning of the 1970s, the operator
licensing system which comes complete with very rigorous checks
on the ways in which goods vehicles are maintained and inspected
for roadworthiness. The points which have been made about the
safety of foreign vehicles are simply because not as much is known
about the condition of vehicles on the continent as we obviously
know through that system in this country. Certainly the FTA is
not alleging that standards are any lower, it is simply that we
do not have the controls and checks which are in place on domestic
vehicles by virtue of the O licence system and the work of the
traffic commissioners that we have on foreign vehicles visiting,
for example, the requirement to inspect the roadworthiness of
a goods vehicle every six weeks. I do not know whether that is
a requirement in any other Member State of the EU. It is certainly
a requirement under most O licences which are issued in this country.
We need to be clear as to what the uncertainties are in this and
also the robustness of the system we have for goods vehicle licensing
in this country, of which we are justly proud.