Examination of Witnesses (Questions 440
WEDNESDAY 14 FEBRUARY 2001
HAIN, MP AND
440. In the memorandum we had from you jointly,
you said that the government aims to shift the burden of tax from
"goods" such as labour and capital to "bads"
such as pollution. What evidence do you have to show that high
fuel taxation has positive environmental benefits?
(Mr Timms) Our assessment is that by 2010 the volume
of emissions into the atmosphere will have been reduced by between
1 and 2.5 million tons of CO2 emissions. So it is a significant
contribution towards us achieving our Kyoto targets and the domestic
target for CO2 emissions reduction that we have set.
441. Surely by 2010 lean burn vehicles will
have replaced the old dirty ones anyway, so what is the significance
of the taxation on that? People buy the vehicles they can afford
if they are available, so they are going to be available in ever
greater numbers. You will not go and buy a dirty vehicle when
you can buy a clean one, surely?
(Mr Timms) The point about fuel duty is that it increases
incentives for people to purchase vehicles that are fuel efficient,
and we are seeing that happening at the moment.
442. But what happens to the road haulage company
that is toiling at the moment? They have difficulties; and so
they decide that they are going to hold on to a vehicle for six
months longer than they would have done because they do not have
the money to replace it. Is this not one of the deleterious effects
of high taxation, that in fact it acts as a disincentive to investment
because people do not have the money to pay for the new vehicles?
(Mr Timms) The evidence I have seen from hauliers
is that they can and are getting quite rapid pay-backs from up-grading
their vehicles, because the extra fuel efficiency that you can
achieve from a newer vehicle is very substantially greater and
so I think that is actually providing an increased incentive for
them to renew their vehicles. Again, this is one of the issues
we are looking at in the context of the £100 million three-year
fund, but I think one can argue this both ways and make the point
that the current levels of fuel duty provide greater encouragement
for hauliers to obtain more fuel-efficient vehicles because the
payback they get from that is greater.
443. With respect, Mr Timms, I think the answer
you gave to me before the Chairman came in was more an aspiration
than evidence. I am just wondering what measurements you use to
see that high fuel taxation has positive environmental benefits?
Fewer vehicles on the road? Less fuel consumed? Less commercial
miles travelled? Have you any evidence that that policy is working?
(Mr Timms) Yes. Less fuel than would otherwise have
been the case. I am not saying that the amount of fuel being consumed
is reducing but I am confident that the amount of fuel being consumed
is less than it would have been if fuel duty had been lower. If
price goes up then demand goes down, and there have been very
substantial pieces of work that have looked at this. The DTI have
done some work and so have the DETR, and that is the basis for
the range of estimates I gave to youthat by 2010 between
1-2.5 million tons of CO2 emissions are reduced as a result of
the operation of the fuel duty escalator since 1996. I want to
emphasise, however, there has been serious analysis carried out
to lead to that conclusion.
444. And is there anything you can give to this
Committee that you have not already put in this submission to
support what you have just said?
(Mr Timms) I can certainly send information that gives
a bit more detail about the work that has been done. I would be
445. Moving on to cabotage, the Road Haulage
Form commissioned a study to see whether cabotage exists. Have
you seen that and, if you have, what do you think of it?
(Mr Timms) This is the study the government commissioned
in discussion with the Road Haulage Forum, and I have been at
meetings of the forum where that has been discussed. It is very
important, I think, to make the point that the methodology, as
you have indicated, for that study was agreed with the industry
representatives on that Forum. As you know, it concluded that
cabotage only accounts for about 0.06 per cent of the UK domestic
haulage market. It is a very small element.
446. Are you still confident about that figure?
(Mr Timms) Yes. I think we were very careful to measure
it in a way that the industry agreed with, and so I think we can
be confident that it is a robust estimate. There are other foreign
hauliers on UK roadsthe 0.06 per cent figure just refers
to domestic haulage being carried out by overseas lorriesbut
I think as an estimate of that phenomenon 0.06 is a robust figure.
447. Do you think the increase of traffic coming
in from abroad is still a major problem?
(Mr Timms) It is the case that hauliers face significant
pressuresthere is no question about thatand, indeed,
we are seeing greater competitive pressures in large parts of
the economy and we welcome that and want to encourage competition
across the economy. We have been concerned, however, with the
industry on competitiveness and that is really the background
to the very substantial package of measures that the Chancellor
announced in November , which I think will give a significant
boost to UK hauliers. One of the measures that the industry is
particularly keen on is the introduction of a vignette for lorries
operating in the UK and we are going to introduce that. We are
working with road haulage organisations at the moment on the details
of how that will operate, but it will be introduced in a way that
does not add any extra costs to UK firms but will mean that firms,
hauliers, lorries, coming in from other countries and operating
in the UK will have an additional cost to obtain a disc.
448. Are you concerned that the continental
hauliers may be breaking the rules?
(Mr Timms) Which rules are you referring to?
449. EU rules.
(Mr Timms) I am not sure which rules you have in mind.
It is sometimes indicated that there may be drivers from outside
the EU being employed illegally to drive vehicles within the UK.
That is an issue that we have been concerned about along with
other EU member states, and the vehicle inspectorate does carry
out checks on drivers and vehicles as part of routine enforcement,
so we are checking that. I am not saying there are never any violationsI
am sure there are. It is a legitimate concern and we are taking
steps to do what we can to check what is happening in the UK.
450. Do you monitor it in your department? Do
you use the Road Hauliers' Association for that type of information?
(Mr Timms) Specifically the question about non-EU
(Mr Timms) That is the responsibility of the vehicle
inspectorate that reports to the DETR, and they do carry out checks.
452. Have there been any violations that you
are aware of?
(Mr Timms) My understanding is that we are aware that
some companies are employing drivers from outside the EU, thereby
avoiding paying the appropriate taxes and being able to undercut
legitimate companies, so I think there is some evidence that that
is happening. As I say, the vehicle inspectorate is carrying out
checks as part of its routine enforcement work and in addition,
in response to approaches from us and other member states, the
European Commission has published proposals aimed at combatting
EU haulage companies illegally employing drivers in this matter,
and avoiding taxes as a result.
453. Have any companies been prosecuted successfully
in the UK?
(Mr Timms) That I do not know. DETR would compile
that information, but I am sure we could obtain it and send it
454. It has been suggested perhaps that the
haulier Willie Betts is a particular problem in this area and
one would imagine that, if people like us have got this information,
it will be common place elsewhere. I think that there is a sense
here that there is a bit of hand-ringing and not much else going
on. It is quite serious, not just in terms of the interests of
the British haulage industry but also British citizens, in terms
of road safety if unqualified, unauthorised drivers are driving
these massive trucks about the country.
(Mr Timms) Yes.
455. Can I turn to the issue of what is alleged
over-capacity in the haulage business? Lord Macdonald wrote in
October of last year to John Bridge of the Road Haulage Association
suggesting a figure of 20 per cent over-capacity in the business,
and the Road Haulage Association said that there would need to
be some further work to look at this. Do you agree with the figure,
firstly, of 20 per cent, and has any further work been undertaken
in this particular area to see how the issue of over-capacity
can be addressed?
(Mr Timms) I do not think we have made an estimate
of the extent of over-capacity. Indeed, the view we take is that,
if you have an open and competitive industry, then the problem
of over-capacity will, in any case, be one that corrects itself.
What we are wanting to do, and what the Forum has enabled us to
make some progress in doing, is to work with the industry in addressing
the problems that it faces. We do not think there is a single
remedy or a quick fix but, through the measures that the Chancellor
announced in November and the discussions we are having about
the use of the £100 million three-year fund, we think we
can work with the industry to help it through what is undoubtedly
a difficult time and contribute to developing a commercially viable
and environmentally sustainable UK haulage industry for the long
term. On the specific question of the extent of over-capacity
in the industry, we do not have a figure that we regard as an
456. I assume this figure of 20 per cent was
not plucked out of the air by Mr Macdonald. We have received some
oral evidence where people have said, for example, that lots of
haulage companies were going out of business and being driven
out by the high cost of fuel yet, on the other hand, we did not
see from our perspective any empirical evidence in terms of vehicles
being taken off the road. Maybe the companies going out of business
are selling them on. You do not really accept, therefore, that
there is a endemic problem of overcapacity; and could that be
the reason why there is pressure upon the haulage industry?
(Mr Timms) There may well be over-capacity. There
is conflicting evidence here because another point that people
often make is that there is a shortage of drivers in the UK, and
a shortage of trained people, so I think the position that the
haulage industry finds itself in is quite a complicated one. There
are many different factors and influences that are affecting current
conditions in the industry, and I would be very loathe to say
that the problem is overcapacity or any one of the issues. I think
we have to recognise the breadth of the issues the industry faces
and work with the industry in developing a more sustainable future.
457. You say that maybe there is over-capacity,
maybe there is not, but a 20 per cent estimate by one minister
seems to suggest that there is a bit of overcapacity. If you said
it was 5 per cent, it might be regarded as negligible, but when
somebody is talking about 20 per cent and he is talking about
one part of this joined-up government, one would imagine that
your department, which prides itself being at the heart and knowing
everybody else's business, would know whether that is right or
not, for God's sake?
(Mr Timms) I am certainly not saying that there is
no problem of overcapacity. I am simply making the point that
I think it is important to recognise the full range of the factors
that are affecting the industry at the moment. I think different
people would have different views on the extent of the over-capacity.
458. But would the Treasury regard the road
haulage industry as being particularly efficient?
(Mr Timms) I think you are now inviting me to trespass
on other people's property.
459. It is not a reticence you have shown in
(Mr Timms) I think there are very efficient operators
in the UK haulage industry. I think we have some of the most efficient
logistics companies in the world operating based in the UK. There
are also no doubt other companies that do not operate efficiently.
It is a very variegated industry and I think it is quite hard
to make valid generalisations about the conditions that you will
find ranging from one person who owns their own lorry in one part
of the industryand there are lots of thoseto very
large and very sophisticated big operators on the other.