Autumn statement: possible fuel duty hike and no driver training funding

Transport operators could face a rise in fuel duty from April 2016, following the chancellor George Osborne’s notable failure to mention the levy – the rate of which has now been frozen for several years – in his autumn statement. Meanwhile, no commitment has been made to special funding for driver training, as pressed for by trade groups.

Included within the small print of the ‘blue book’ published by the Treasury were figures which projected a £2.3 billion rise for fuel duty revenue between 2015-16 and 2020-21; and various media outlets have reported that this figure will likely reflect an annual rise in the levy in line with inflation from next year.

A Treasury spokesperson neither confirmed nor denied a future rise following our request for comment, telling Transport Operator: “Like all taxes, fuel duty is kept under review with any changes announced at fiscal events,” and adding that, “it is standard for Treasury documents to assume inflationary increases going forward.”

Reports that duty would be raised appeared to stem from an economic and fiscal outlook published by the independent Office for Budget Responsibility (OBR) on the same day as the autumn statement, which said that: “The government has told us that its policy is to uprate duty rates in line with retail price index (RPI) inflation each year from April 2016 onwards. This more than explains the £2.3 billion rise in [forecast revenue] between 2015-16 and 2020-21 and helps offset the effect of further improvements in fuel efficiency.”

However, it added that: “This uprating assumption could be considered a source of policy risk to the forecast, given repeated decisions to cancel planned duty rises in recent years.”

When Transport Operator contacted the OBR for further clarification, a spokesperson told us: “The OBR forecast, in the absence of specific policy decisions, assumes that tax thresholds for income tax and national insurance contributions, and duty rates for indirect taxes, are uprated by inflation each year (unless otherwise specified).

“This is the long-standing forecasting convention – so we assume fuel duty rates will be uprated by inflation each year from April 2016 onwards. We would adjust our forecast if the government made an announcement on fuel duty.”

Meanwhile, the Freight Transport Association (FTA) expressed disappointment that no announcement was made of any reduction to the levy, having earlier called for a 3p per litre cut in a submission to the Treasury. The government had thus missed an opportunity, FTA said, to ease cost pressures on road freight, create jobs and stimulate economic growth.

Karen Dee, policy director at FTA, said: “The 3p per litre reduction would have provided much needed economic relief – not only to the logistics sector, which faces continuing difficult trading conditions, but also to the wider motoring public who rely on their cars to get to and from work.”

According to a study part-funded by FTA and published by the Centre for Economic & Business Research, recent reductions in forecourt prices have raised the UK’s gross domestic product (GDP) by 0.6 per cent, boosted tax revenues, stimulated an additional £11.6 billion of economic activity and created more than 120,000 jobs.

The association also criticised the Treasury for having ignored its calls for dedicated funding for the training of professional drivers – a stance which FTA said was “simply not good enough.”

Sally Gilson, FTA skills development manager said: “FTA is deeply concerned that without the proper funding for training the driver shortage problem is going to get worse.  The average age of a professional lorry driver is 52 and the freight industry is desperate to engage with young people. There must be a route available for people wanting a career as a driver; without access to apprenticeships this issue will only be exacerbated.”

The Road Haulage Association (RHA) expressed similar sentiments, saying it considered the failure to provide funding: “a threat to economic recovery”.

RHA chief executive Richard Burnett said: “We are doubly disappointed as we have figures that clearly show [a £150 million investment by government to fund driver training] would be more than recouped through taxes paid by the new drivers.

“The new driving jobs created by this funding would generate additional income tax, national insurance, and up to an extra £275 million in fuel duty revenue due to the extra truck miles driven.

“In addition, the extra investment in UK skills would reduce the industry’s reliance on drivers from abroad, which the RHA estimates leads to approximately £180 million per annum being sent back to drivers’ home countries. This is money that would otherwise be spent in the UK, supporting employment, generating VAT and boosting UK growth.”

FTA additionally highlighted the chancellor’s announcement within the spending review that three million apprentices would be in place by 2020, and noted his decision to introduce a new apprenticeship levy in 2017 so that large businesses will share the cost of training.

But Ms Gilson said that: “With an apprenticeship for HGV drivers post-2017 still in the balance, it seems as though the chancellor expects large companies to fund apprenticeships that they may not be able to provide unless the skills minister reverses his earlier decision to reject HGV apprenticeships.

“Setting a target of three million apprenticeships will not plug the significant skills shortages that the freight industry is currently experiencing. There has already been an 11 per cent spending cut to the adult skills budget, so for those who do not fit into an apprenticeship, mainly the over-24s, funding is near impossible to find.

“Although the chancellor announced that the Advanced 24+ loan would be extended to 19-23 year olds, the crucial change needed for the logistics sector is to expand the loan to cover Level 2 qualifications, therefore opening this up to HGV tests.”

The RHA’s Richard Burnett added: “At present, this industry has no apprenticeship for lorry drivers, the main employment category for transport firms. A third Trailblazer bid is under consideration by the [Department for Business, Innovation & Skills].

“It is essential that we get a driver apprenticeship, otherwise the levy is simply a tax on payroll. An apprenticeship without funding for the core element of training ahead of the HGV driving test would be largely meaningless. That is what would happen under current business department policy – a policy that makes no sense.”

He concluded: “Training for the test lies at the core of any haulage driver apprenticeship, and sets the quality platform for the apprenticeship as a whole; and the RHA is calling on skills minister Nick Boles to accept that truth and to scrap the opposition to funding driver training.”

In a parliamentary question tabled earlier in November which touched on driver training and apprenticeships, David Simpson, business spokesperson for Northern Ireland’s Democratic Unionist Party, asked what government could do to help hauliers with the: “exorbitant fees of £3,500 that are charged to train for HGV licences?”

Nick Boles responded that: “There is a convention, which we have stuck to for very good reasons, that we do not ask the taxpayer to pay for licences to practise a particular profession. We believe that doing so should be directly in the interests of both the employer and the employee who will benefit from having the licence.

“However, we are encouraging those companies to develop, and they are working on developing, an apprenticeship standard to include the whole of the rest of the training, which will of course receive substantial support from the taxpayer and from the apprenticeship levy.”

One issue affecting the road transport industry that did receive mention in the autumn statement was that of motor insurance, which the Treasury said should fall due to a policy of: “ending the right to cash compensation for minor whiplash claims.”

“We’re going to bring forward reforms to the compensation culture around minor motor accident injuries,” said Mr Osborne, in news which is likely to be welcomed by hauliers that have found themselves on the receiving end of dubious claims and organised ‘cash-for-crash’ schemes.

“This will remove over £1bn from the cost of providing motor insurance. We expect the industry to pass on this saving, so motorists see an average saving of £40-50 per year off their insurance bills.”

Mr Osborne found £250 million for: “a major new permanent lorry park to increase resilience in Kent, by taking pressure off the roads in the event of Operation Stack.”

FTA’s Karen Dee said: “We are delighted that the chancellor has recognised the devastating impact of Operation Stack on the logistics industry and its customers and we look forward to developing a permanent solution with purpose-built facilities for drivers.”

The Treasury also announced: “£250 million over the next five years to tackle the potholes that blight our local roads, on top of nearly £5 billion of funding for roads maintenance – a £300 million increase compared to the previous parliament.”

But FTA raised concerns more generally about a 37 per cent resource budget cut at the Department for Transport, which it said could put some important areas of spending at risk.