Transport industry reacts to summer Budget statement

Transport trade groups and operators have responded to the various measures impacting on the industry within chancellor George Osborne’s first Budget statement of the new parliament, which was published on 8 July.

Fuel duty remained frozen this year, as Mr Osborne had earlier promised in the final coalition Budget in March – despite concerns from some quarters that the chancellor would use the opportunity to raise the tax as part of a package of deficit-tackling measures.

But Mr Osborne did address the quality of the road network in his Budget speech, announcing plans for an overhaul vehicle excise duty (VED) in order to fund improvements.

“Four fifths of all journeys in this country are by road, yet we rank behind Puerto Rico and Namibia in the quality of our network,” he said.

“In the last 25 years, France has built more than two and a half thousand miles of motorway – and we’ve built just 300. In the last parliament I increased road spending, even in difficult times, and set out a plan for £15bn of new roads for the rest of this decade.

“But we need a long term solution if we’re going to fix Britain’s poor roads.”

Mr Osborne pledged to introduce new VED bands for brand new cars, over three quarters of which he said would be exempt from the tax by 2017 under current rules, due to their low carbon emission levels.

He also pledged to return VED revenue: “to the use for which it was originally intended,” announcing the creation of a new Roads Fund.

“From the end of this decade, every single penny raised in vehicle excise duty in England will go into that fund to pay for the sustained investment our roads so badly need,” he said, promising also to “engage” with devolved administrations in Scotland, Wales and Northern Ireland on how the money is allocated within those nations.

“Tax paid on people’s cars will be used to improve the roads they drive on,” he said. “It is a major reform to improve the infrastructure and productivity of our economy – and deliver a fairer tax system for the motorist.”

Prior to the Budget, Freight Transport Association (FTA) chief executive David Wells had written to Mr Osborne asking him not to renege on promises to hold current levels of fuel duty. Following the chancellor’s statement, FTA welcomed confirmation of the fuel duty freeze, saying that “common sense prevailed” – while adding that it would continue to campaign for cuts to the levy.

“The Government has emphasised that its primary objective is to protect the UK economy,” said James Hookham, deputy chief executive at FTA.

“We believe that reducing fuel duty would make a huge contribution to this objective and we will continue to campaign with FairFuelUK for a three pence per litre cut in order to stimulate economic growth.”

FTA added that high taxes had meant operators were failing to reap the full benefits of a 43 per cent drop in world oil prices, resulting in only a 13 per cent pump price cut.

Meanwhile, the Road Haulage Association (RHA) welcomed both the fuel duty freeze and the changes to the VED system to pay for new road-building and maintenance.

“The freeze on fuel duty continues the very positive policy of the last government and will give a massive boost to business confidence not only in the road haulage industry, but the economy as a whole,” said Richard Burnett, the RHA’s chief executive.

“We would have preferred a 3p a litre cut in duty, to boost both jobs and growth, but it was essential that duty was not increased. Our hauliers already pay by far the highest diesel duty in the EU and twice as much as many of our competitors.”

RHA also welcomed measures to set the level of the annual investment allowance at £200,000, rather than falling to £25,000 at the end of 2015 as previously planned. But it later added that the figure, down from an existing £500,000 threshold, was: “well short of what the RHA and others were urging.”

The association lamented the lack of financial measures to assist the haulage industry in tackling its driver crisis, meanwhile, claiming this would: “undermine the economic recovery.”

It added that it was: “distressed to note and very much regrets that no announcement was made about targeted funding to help with the acquisition of HGV licences and in relation to Driving Britain Forward, the [HGV driver training] project the RHA is running with Jobcentre Plus.”

It also warned that an increase in the insurance premium tax (IPT) from 6 to 9.5 per cent “seems bound to drive up costs.”

Elsewhere, the Transport Research Laboratory also expressed approval over the VED changes.

CEO Rob Wallis said: “TRL welcomes the fact that all proceeds from the new VED system will be reinvested into building and maintaining our road infrastructure. For too long, the road network (in particular our local roads) has been maintained under very tight budget constraints and often on a reactive rather than planned basis.

“This is neither the most efficient or cost-effective way of looking after a valuable societal and economic asset and doesn’t provide tax payers with good value for money.

“Although there is currently little detail available about how the fund will be administered, the investment of ring-fenced funds for the development of UK roads in planned maintenance schemes will deliver better value and reduce the occurrence of costly defects, some of which can create safety concerns too.

“It is also hoped this fund will be used to improve the road experience for other travellers, such as cyclists and pedestrians. Only by considering all modes of transport and related mobility can we build a sustainable infrastructure that supports not just current, but future needs for how goods and people will make their journeys.”

Kevin Buchanan, group managing director at the Pall-Ex distribution network, said his firm had hoped for more meaningful support from the chancellor.

“To be fair, we all feared a fuel duty hike after months of cut-price petrol at the pumps. But this freeze isn’t exactly cause for celebration among UK hauliers,” he said.

“The government is still not supporting the sector – fuel costs are still high and only a reduction would have been welcomed.”

On the announced minimum wage increase, he added: “While of course we support an increased minimum wage for workers and their families, today, for some hauliers, this news is bad timing. It will squeeze the smaller firms in a low-margin sector incredibly hard.

“Combined with ever-rising operational costs and increasing legislation, it’s a tough additional blow to an industry which so thoroughly underpins this country’s economy.”

He concluded: “Hauliers and distribution networks like Pall-Ex are the beating heart of industry in this country, and we expected a greater measure of support in today’s emergency budget.

If Mr Osborne really wants to see the positive impact we have on the UK economy, he is more than welcome to pick up a high-vis jacket and join me at any one of our depots.”