Memorandum submitted by The Rail Freight
1. The Rail Freight Group is the representative
body for the rail freight industry, covering rail infrastructure
owners and operators, train and terminal operators, consultants
and contractors, local authorities and customers of the railway.
Its objective is to grow the rail freight market.
2. This paper describes the concerns of
the rail freight industry about recent reports from government
as well as statements by the road freight industry. We believe
that, if implemented, any fuel duty reduction will, without comprehensive
mitigating measures, not only make it more difficult for rail
freight to compete; it will put at risk the 80 per cent growth
over 10 years as well as the Kyoto targets, to both of which the
Government is committed.
3. The problems and some myths are summarised,
followed by a range of solutions and mitigating measures which
we believe must be implemented if rail freight is to provide the
service and reliability that industry has asked for and the growth
to which the Government is committed.
4. In February 2001 the Government will
allow 44 tonne lorries to operate throughout the UK. This measure
will effectively give road freight a 15 per cent increase in productivity
and could result in a similar loss of traffic to rail, according
to the responses by EWS Railway, the Rail Freight Group and others
to the consultation by the Commission for Integrated Transport.
5. If the Government allows the road haulage
industry a 15p reduction in fuel duty, the effect on rail freight
will be as bad again as the effect of the 44 tonne lorry. This
15p reduction is likely to put at risk at least a quarter of the
Government's target for growth in rail freight to 2010. In the
new faster and lighter end of the market, including intermodal,
where competition is most severe at present, perhaps one third
of the 10 year growth would be lost. These figures are of course
on top of the losses caused by 44 tonne lorries.
6. Taken together, these two factors are
likely to cause the 10-year growth in rail freight to reduce from
80 per cent to half this figure.
7. If the Rail Regulator announces in the
next few months an increase in track access charges for rail,
that will add to rail's costs at a time when the Government is
reducing the costs of rail's competitor, road, by 40 per cent.
8. Independent confirmation of this is given
in the aggregates and coal industries' responses to the Rail Regulator's
July consultation on access charges. They make the point that
the road-rail economics are already finely balanced and that,
with 44 tonnes and a reduced fuel duty, a large proportion of
their traffic will return to road.
9. The Government rushed out the 44 tonne
lorry announcement in the 2000 Budget just two weeks after the
CfIT Report was sent to them. Although the CfIT Report recommended
a variety of mitigating measures including better enforcement
of road vehicle regulations, mitigating measures for rail freight
and a two-year delay in the introduction of 44 tonne lorries,
none of these was accepted or mentioned in the announcement, and
the advice on two years' delay was ignored.
10. Since then, the Government has agreed
some enforcement measures allowing the impounding of lorries and
their loads for certain offences; nothing more.
11. We still await the mitigating measures
on rail freight which were to be proposed by the Shadow Strategic
Rail Authority, and we still await more comprehensive lorry enforcement
measures. Rather than expecting improvements, we fear that the
Government will once again cave in to the road freight lobby and
allow a fuel duty reduction. Hauliers will, of course, be compelled
to hand this reduction to their customers, and will see no fundamental
improvement in their financial position.
12. The consequences of this will be disastrous
for chances of growth in rail freight. The Ten Year Plan forecasts
an 80 per cent growth and the industry agreed that it could deliver
this and possibly more, provided that the Government kept the
competitive balance between road and rail moving in the right
13. OXERA reported earlier this year that
road freight only pays about 70 per cent of the true internal
and external costs that it imposes. This work has been developed
in OXERA's Special Report "Policy Options for the Fuel Tax
Debate" published on Friday 20 October 2000. Since the original
report, Government action on 44 tonne lorries and any reduction
in fuel duty will make matters worse.
14. The Government's 1998 Transport White
Paper describes a legally binding target to reduce emissions by
12.5 per cent below 1990 levels by 2008-12, and a domestic aim
to reduce CO2 emissions by 20 per cent by 2010. We have to ask
Government how a policy of less incentives to reduce demand and
therefore emissions fits into its Kyoto commitments, and how it
will defend apparently ignoring its own policy of reducing emissions
at the UN Hague meeting on climate change this autumn.
15. The problems with the road freight industry
will not be solved by reducing fuel duty. The differences with
continental Europe are much overstated:
only about 0.06 per cent of domestic
haulage in the UK is carried by continental hauliers;
90 per cent of UK hauliers crossing
the Channel carry backloads compared with 68 per cent of foreign
only 10,000 out of 420,000 HGVs registered
in the UK have been flagged out.
16. The real problem is that the smaller
hauliers continue to have their margins squeezed by their customers
and many are in financial difficulties. Any reduction in fuel
duty will immediately be claimed by the customers and, equally
likely, a reduction in fuel duty will probably be followed by
a rise in the price of fuel from the oil companies, something
that the customers will press the hauliers to absorb and keep
their rates stable.
17. Until the supply of hauliers willing
to work at near zero margins reduces and demand more nearly matches
supply, no amount of tinkering with fuel duty will sort the problem
out. It will just kill much off rail freight in the process.
18. In order to maintain the competitive
position of rail freight and allow it to grow and fulfil the Government's
targets, the best solution for rail freight would be to continue
the fuel duty escalator and take other measures, including those
outlined below, to improve the profitability of the industry.
19. This policy was, after all, agreed by
both the present and previous government as part of the package
to implement the Kyoto commitments.
20. If the Government does not have the
courage to do this and still wants to increase rail freight, then
it should subsidise the whole industry to the equivalent amount
that it would lose through receiving less fuel duty; a double
whammy that the Treasury would, no doubt, resist.
21. However, if it stands firm and resists
the latest attempt at intimidation, and provides or ensures a
number of mitigating measures, there is still hope. These measures,
outlined below, are serious proposals which need examining and
implementing urgently. Most importantly, the industry will need
to see evidence of Government commitment to it if confidence is
not to be seriously eroded. Measures include:
For rail freight
22. Encourage the Rail Regulator to announce
the lowest possible track access charges for freight. On the basis
that he may well be seen to be relatively lenient to Railtrack
on efficiencies for the passenger network, we have argued that
he can be much more robust on the freight side.
23. Increase the rail freight grants to
reflect not only the increase in congestion on motorways and other
roads, but also to compensate for the 44 tonne lorries and any
reductions in the rate of fuel duty.
24. Exempt rail born traffic from landfill
and aggregates tax.
25. Exempt rail-born traffic from any climate
26. Exempt lorries taking freight to or
from rail terminals from any congestion/road charges.
27. Significantly reduce and rationalise
business rates on intermodal terminals.
For Road Freight
28. Tighten the rules of professional conduct
and increase barriers to entry into the road haulage industry
from about £6,000 per lorry to about £20,000.
29. Introduce the Eurovignette on all lorries
operating in the UK, be they UK registered or foreign. UK registered
lorries would have an equivalent reduction on their VED.
30. Introduce consignor liability, which
would require the police to prosecute consignors alongside drivers
and owners of lorries for traffic offences. This would stop the
current practice of consignors requiring drivers to meet schedules
that are only possible by speeding or exceeding drivers' hours
31. Implement the Working Time Directive
for all road freight drivers, without exempting owner drivers,
who are least able to resist consignor pressure as above.
32. Introduce automatic weighbridges at
all major terminals, ports and freight premises.
33. All the above road freight measures
are designed to ensure that the law is obeyed. The equivalent
laws have long been in place on the railways.
34. Any suggestion that rail drivers should
work for 15 hours continuously, that trains should be 20 per cent
overloaded or drive at 30 mph over the maximum allowable speed
would be greeted with horror by politicians, with no doubt calls
for public inquiries. We ask why the same people are so frightened
of applying the same rules to road traffic whose safety record
compared to rail is very much worse?
36. We have concentrated in this paper on
the effects of fuel duty on freight. For the reasons stated above,
we believe that fuel duty should not be changed without mitigating
measures to preserve or enhance the competitivity of rail freight.
37. We also believe that the effects of
any such changes on the competitivity of UK enterprises will be
small; any benefits will be taken by the manufacturers rather
than the transport industry and would, we believe, be small compared
with fluctuations in exchange rates with the Euro or in the price
of crude oil.
31 October 2000