Scope of this report: vehicle
5. We received evidence on some vehicle taxation
issues, most of which had been covered in the inquiry by the Transport
Sub-Committee, and on which we do not report further.
We received some
evidence on 'flagging out': the practice of UK hauliers
registering their vehicles in other European countries to avoid
paying UK Vehicle Excise Duty (VED). The Road Haulage Association
(RHA) stated that, as a consequence of the Government's current
taxation polices, many UK hauliers are being forced to consider
registering their businesses abroad in order to benefit from lower
rates of VED and fuel duty.
The Freight Transport Association (FTA) told us in contrast that
"all the evidence is that 'flagging out' appeared superficially
attractive" but they were not aware of any of their 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".
The level of VED was also raised
by a number of witnesses. The RHA noted that VED currently accounts
for approximately 4% of the standing costs of a heavy goods vehicle.
The British Retail Consortium (BRC) pointed out that, at almost
£4,000, VED for Heavy Goods Vehicles (HGVs) in the UK was
nine times higher than in France and thirteen times higher than
The Chancellor announced in the Pre-Budget Report that the Government
would "introduce a reformed system of lorry VED in Budget
The Confederation of Passenger Transport
(CPT) expressed concern about the Fuel Duty Rebate; the
75% reduction on fuel duty that is applicable to bus but not coach
We received some evidence on the feasibility
of introducing a 'vignette' or 'Britdisc'; a levy to be
charged to foreign hauliers for using UK roads. Some European
countries already operate a 'Eurovignette' under which a single
payment gives hauliers access to the motorways in those countries.
The Chancellor announced in the Pre-Budget Report that such a
scheme would be introduced.
Scope of report: environmental
6. In evidence to us, witnesses disagreed about the
success of fuel taxation in improving the environment.
The Energy Savings
Trust stated that "despite anecdotes to the contrary, fuel
prices have a significant environmental effect".
The Environment Agency described the use of tax on road fuel as
"simple and effective" whilst acknowledging it is not
a perfect means of internalising some of the external costs.
The Institute for Public Policy Research (IPPR) said they had
advocated and supported the use of taxation to ensure there is
a continuing increase in the price of fuel over the long term
for environmental reasons.
BP questioned the environmental efficacy
of motor fuel taxes "mainly because they have so little effect
on consumer behaviour".
Mr Steve Polkey of Esso told us that some of the policy aims of
the fuel tax are "questionable" as "the fuel tax
is a relatively blunt instrument".
The RHA commented that "despite many years of sustained increases
in real duty rates, there is no evidence that the policy is having
any impact on traffic levels or CO2 emissions".
The FTA believed there was little evidence that high fuel duties
have significantly reduced problems such as congestion.
The Post Office noted that, whilst they recognised the environmental
benefits to be achieved from a reduction in the consumption of
fossil fuels, "it would appear that increasing the price
of fuel in isolation has failed to deliver any of the environmental
benefits which the Government desires".
The British Retail Consortium stated that "duty increases
on their own, without the provision of alternatives, represent
a limited and blunt instrument with which to combat congestion
and environmental pollution".
1 The Road Haulage Industry,
Environment, Transport and Regional Affairs Committee, Fifteenth
Report, Session 1999-2000, HC 296 Back
296, para 2 Back
Audit Committee, Press Notice No. 29 of Session 1999-2000, dated
2 November 2000 Back
Pre-Budget Report 2000: Fuelling the Debate,
Environmental Audit Committee, Second Report, Session 2000-01,
p40, para 4.3 Back
7 Q269 Back
p40, para 4.2 Back
long-term prosperity for all,
Pre-Budget Report, HM Treasury, November 2000, Cm 4917, para 6.67 Back
the Netherlands, Belgium, Luxembourg, Denmark and Sweden (HC 296,
Ev, p213) Back
p1, para 4 Back
17 Q4 Back