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14th September 2005

Fuel Taxes

Are high fuel taxes really the cause of the current haulage headache?

The Competition within the haulage industry is infact a much bigger problem for truckers than high fuel taxes.

Cut-throat competition within the haulage industry is more damaging to truckers than high fuel taxes, the Road Haulage Association has admitted.

The organisation says the real problem is that hauliers cannot pass rising fuel prices to consumers.

The RHA does want the Chancellor to cut fuel duty. But its spokesman regretfully agreed that a duty cut would probably benefit consumers not truckers, because retailers would demand a reduction in haulage bills.

Many small hauliers would cave in because they are prepared to work for little or no profit just to stay in business. Often small hauliers have invested a redundancy cheque from a previous job into a truck and a life on the open road, and are willing just to cover costs to stay in business.

The RHA says the industry as a whole operates on profit margins of 1.5-2%. The public affairs manager of the RHA , Steve Williams, told the BBC Today Programme that "We do almost cut our own throats because while we have got them people there who are prepared to do it for a very low rate we are never going to improve, I am afraid." (Today 6.50 audio)

He said the industry should consider measures to raise the bar for small hauliers, perhaps by demanding a bigger cash reserve for truckers wanting to take to the road.

The problem was too many small firms with between one and five trucks. While big hauliers could negotiate fuel price supplements with their clients, small firms often did not have the time or expertise to strike deals with multiple clients.

Even when small truckers did bid for a compensation payment, the client would usually simply turn to another operator prepared to absorb the fuel price rise himself.

A new survey from one of Europe's top experts on haulage, Professor Alan Mackinnon from Heriot Watt University, shows that 59% of those replying had been forced to absorb 90% or more of the recent fuel price increase. 

The sample in the survey was small but the RHA say they believe its reflections to be accurate. Prof Mackinnon says if the price rises had been passed on, the effect on consumers would have been minuscule.

Since January 2004 the diesel fuel price in the UK has risen by roughly 25%. If this fuel price increase had been it would have added around 0.17% to a £100 shopping bill. Prof Mackinnon agrees that if the Chancellor cut fuel duty any benefits would be likely to be absorbed by retailers, not truckers.

He said trucking costs in Europe had evened out considerably since the fuel crisis in 2000. At that time British hauliers faced 50% higher fuel bills than Continental counterparts. The Chancellor's decision to freeze fuel duty rises had narrowed this to 25-30%. But when total costs to hauliers were taken into account, fuel was a less important factor to British truckers than to most others in Europe (table).

Other factors were labour costs, vehicle Excise Duty (which was radically cut by the Chancellor) and other taxes which are higher in many countries of Europe. The UK's haulage costs, though, are still higher than those in near neighbours.

The government had been planning a truckers road pricing scheme to force visiting hauliers to pay the same prices but the scheme has run into problems after warnings from critics that the costs of running the scheme would outweigh the benefits.

By Roger Harrabin.

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