HGV road user levy is a spectacular failure not a great success!
Owner and Chairman | Baxter Freight
After years of campaigning by the British haulage industry for a ‘level playing field’ with Europe, the Government finally caved in on 1st April by introducing the HGV road user levy. The levy is paid by all trucks running on British roads but is only an increase for foreign registered vehicles, as UK trucks have their vehicle excise duty rebated by the same amount.
The Government is hailing the new tax as a great success as it has raised £23.4 million in six months, more than expected for the entire first year. What does that tell us? First, ministers got their sums horribly wrong and secondly that once you take into account the costs of administration, this tax raises very little money indeed.
In reality, the levy is nothing more than a sop to UK hauliers who have long felt at a disadvantage to their European counterparts. The introduction of new EU members from Eastern Europe has only exacerbated this view. But the reasons behind this sentiment are complex and this tax hasn’t done much, if anything, to address them.
The truth is the vast majority of UK registered trucks carry out UK domestic work and are not involved in international transport. Freight between the UK and Europe is almost entirely carried by European trucks because there are twice as many loads coming to the UK as export loads leaving the country due to our physical trade deficit with Europe.
Consequently, import freight rates are roughly twice UK export rates. So, it’s perfectly natural that vehicle round trips start in Europe where the higher paying in-bound loads are found rather than from here where many trucks leave without a load at all.
The levy hasn’t impacted this position one iota. In other words, I believe UK registered trucks haven’t done a single additional trip to the continent because of this tax. I challenge any haulier out there, as well as the Freight Transport Association and Road Haulage Association who supported the levy, to prove me wrong.
It is fair to note that some other countries like Germany, Austria and Switzerland charge similar levies but their rationale is different. Their aim is to charge trucks that are merely transiting their countries and thus provide no economic benefit while using their roads for free. Apart from a relatively small amount of Irish cargo this issue does not affect the UK.
So, what about cheap foreign trucks pinching all the domestic work? The involvement of foreign trucks in UK domestic work is negligible currently not least because EU ‘cabotage’ rules restrict their ability to do it. I’m against these rules as they restrict free trade and are bad for my customers. They cause empty running which is both economically inefficient and harmful to the environment.
But even when they are eventually scrapped (the EU is currently consulting on this) I don’t believe foreign trucks will take a big slice of our domestic market. It’s difficult for foreign hauliers to build relationships with UK customers unless they have a set up here. If they’re not local they cannot offer the quick responses and flexible capacity UK customers require.
In reality, foreign hauliers just want to get home to pick up another well-paid inbound load. If they do want to pitch for UK work at a cost of less than £50 per week the new levy makes next to no impact on their ability to do so. So I’m confident the levy has done nothing to reduce the amount of UK domestic work being done by foreign hauliers. Again, I’d challenge anyone to present evidence I’m wrong.
It’s true that certain European countries have cheaper labour costs (although many do not). Fuel is much cheaper in some countries than in the UK because of our high rates of duty. In the UK, hauliers have to pay VED (and now the levy) which other countries don’t have. These may be reasons for our hauliers to feel fed up. But they aren’t addressed by the levy.
The truth is that while foreign hauliers are physically paying the levy in reality they are just passing it on to the UK importers and British manufacturers who use them. If they’re able, they are sticking this cost increase onto the prices their customers – that’s you and me – pay.
So, I believe the new levy has done absolutely nothing to help British hauliers, it’s not helped them win more European work or offered them any protection from foreign participation in our domestic market, such as it is. It’s not won them a single pound of extra profit or created even one extra British haulage job. The only good news is that the money collected is so small that the amount of damage it’s done has been limited too.
I’m looking forward to the day when my industry realises we need to get rid of this mis-conceived tax and that truly open markets, far from being a threat, are an opportunity for the British freight industry and for our customers.
About the Author: Ian Baxter is the founder and Chairman of Baxter Freight, a new logistics company established in 2014 focusing on all types of domestic, European and international freight. The company currently has 70 staff and expects to handle 40,000 freight shipments next year.
Posted on: November 10th 2014