Press Release
Haulage fuel duty
7 February 2008
The Financial Times gave prominence to the plight of the road haulage industry in a lengthy opinion piece on February 7 by-lined Jonathan Guthrie. It is an important article – the most detailed about our industry for quite some time in a serious newspaper and very topical.
The colourful analysis starts with an admission that he had little knowledge of the industry and this lack of understanding is reflected throughout the piece. We take issue with almost all the points he makes, as set out below.
“Truckers require the upper body strength of Joe Calzaghe”: Nonsense. Much of the industry no longer requires great strength, to the extent that the government is urging many more women to become vocational truck drivers. Furthermore, the seven-tonne truck he followed around doesn’t compete with foreign trucks, most of which are 40-tonners.
“Continental operators send across fleets of artics stuffed with cheap fuel, like squadrons of Heinkels loaded with bombs, to obliterate British competitors.” Fact: the trucks arrive with 1,500-litre diesel tanks. To fill up such a tank in the UK would involve paying £400 more diesel duty than abroad. (Mind you, tanks that size cannot be fitted to most UK tractor units because they have a third axle to reduce road wear that takes up extra space on the chassis. The tractor two-axled units from abroad were identified in the government’s 1999 Sustainable Transport policy paper as the very trucks it wanted to tax off the road because of the extra road wear!)
“In a rare instance of a British business leader wishing the UK was more like the Continent RHA CEO Roger King added enviously that the French government is paying truckers ’“a 1.8p rebate per litre for fuel used in 2007’”. Let’s analyse this in more detail. It’s nice to be acknowledged as a business leader rather than head of a rabble of Smokey Bears but why do we want to be more like the Continent in this case? Simple: because the Continentals are the ones in this instance that imposing low business taxes – the virtue that is supposed to be quintessentially Anglo-Saxon. We are setting duties at twice the rate for using the same stretch of road. An exact parallel: imagine the gantry in a pub, with London gin and Scotch whisky being sold with twice the UK tax rate as Polish vodka and French brandy alongside.
“It is not the job of the government to smooth the costs of any industry” A debatable point. But nor is it the job of government to impose unfair taxes that mean British firms pay twice as much fuel duty foreigners for using the same UK infrastructure. Unfair? Don’t just take our work for it. Gordon Brown recognized that it was unfair on the floor of the Commons in November 2001 and promised a remedy - the lorry road user charge. That was abandoned as too difficult three years later, after £40 million had been spent on consultancy fees.
Let us be clear. The duty difference is collateral damage from a tax policy aimed at cars. The result is that British-based road haulage businesses pay £10,000 to £15,000 more in fuel duty per articulated truck per year (depending on mileage) than their foreign rivals, equal to around 15% of the truck's earning capacity. The 2p duty increase planned for April will widen the gap by a further £1,200. "Scaling up", recommended by Mr Guthrie, simply means multiplying this government-imposed cost disadvantage.
“The least worst tax is one that is flat and predictable…the scheduled 2p increase is a well-signalled adjustment reflecting inflation” Let’s return to the London gin and Scotch whisky example, already taxed at twice the rate of foreign spirits. It’s OK to widen the gap further…because we’ve given advanced notice! That wouldn’t be acceptable to the drinks trade and the same logic is unacceptable to road haulage businesses.
“Cabotage accounts for less than 2% of total journeys” True – up to a point. This is a figure much-loved by the Treasury and much disputed by the industry. Strip out the own-account sector such as supermarkets, the smaller trucks, the specialist vehicles with which the foreigners do not compete. That 2% figure – four years old, pre-A8 and out-of-date – more accurately reflects 10%-to-15% and growing of the hire or reward haulage market for which the visiting trucks are suitable. This level of foreign presence drives rates down even where the British truck carries the load. Cabotage rules are being progressively liberalised and the flourishing UK domestic haulage market for foreign trucks was highlighted by Continental MEPs in debate only three months ago. Later this year, foreign trucks will be allowed to do three operations a week, next year the A8 countries will be allowed to do cabotage and MEPs have just voted to press for the complete opening of EU haulage markets by 2014.
“one in seven trucks is merely reassuring evidence that the UK trades internationally.” Perhaps Mr Guthrie will also be re-assured to know that the UK’s share of international haulage has slumped. It was well over half and is now less than a quarter according to official figures, which are being reviewed because changes in the way the information is gathered is thought to led to an over-statement of the UK share.
“If trucks are struggling with the level of duty, it is because they are having broader difficulties passing on their costs to consumers via other businesses.” Not sure what the point is here. Yes they struggle to pass on costs for using the same stretch of road that are not faced by foreign rivals. In addition, the Trade and Industry Select Committee last year identified transport costs as one of two main elements driving the motor components industry out of the UK and towards eastern Europe.
“Haulage is a commodity business with low entry costs” Entry costs are low staying in business is increasingly hard. Can a service cannot properly be described as a commodity? Road haulage is a multi-faceted, competitive profession.
Net margins of 1-2% are common among smaller operators Sadly, it is common throughout the industry, small, medium and large businesses.
“willingness of owner-operators to work hard for themselves for little return.” Transport firms work for customers who rely on their essential services. Do we really want to lose them?
Refinery protests: Spot on here. A handful only have talked of a refinery protest. The RHA would hope there will be no repeat of 2000. But that is not because the businessmen in the haulage sector – or their customers – are happy with the government’s diesel duty policy. Far from it.
Scale up or get out? In 1999, the government's Sustainable Transport policy paper proclaimed how well our top logistics companies were doing internationally. Since then, five of the top six have sold up, with Exel, Tibbett & Britten, Hays and Christian Salvesen all in now foreign ownership.
The British haulage industry prides itself on providing an essential service that is efficient, flexible, responsive, innovative and the safest in Europe. All we ask for is FAIR PLAY ON FUEL.
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