Earl Attlee
My Lords, HGVs play a crucial role in our economy by supplying businesses and servicing customers. Of course, HGVs are only one part of our national and international logistic system. We also have transport by sea, rail and air.
I am sure that the House will agree that we are well served by all those who work in transport and logistics. We should be particularly grateful for their sterling efforts during the recent bad weather, driving their vehicles and operating their equipment in horrendous conditions, often at night or during unsocial hours.
Approximately 1.5 million trips are made by foreign-registered HGVs into the UK each year; they contribute towards the well-being of our economy and are part of our logistic system. However there has been an inequality for some time in that UK hauliers are often charged when they travel abroad through tolls and other charging schemes whereas foreign hauliers are able to use the UK road network for no charge. This is a situation which the Government wish to address through this Bill.
The HGV Road User Levy Bill is a money Bill which comes to this House unamended from its introduction in the Commons on 23 October 2012. It will enable the introduction of a new levy for all heavy goods vehicles that weigh more than 12 tonnes and that are being kept on or are using the UK road network. This new levy is aimed at recognising the cost of the damage that HGVs do to our roads and ensuring that they make a contribution towards this.
The Department for Transport undertook consultation on this subject in early 2012. The results indicated that stakeholders, especially those in the logistics sector, support the planned changes.
Subject to the legislation being passed, we plan to introduce the levy from April 2014, when it will apply to both UK and foreign-registered hauliers. The levy, which is being introduced alongside other measures including reductions in HGV vehicle excise duty, is set at a level that will mean that, overall, more than nine out of 10 vehicles in the UK fleet will pay no more than now, with almost all the rest facing a fairly small increase in charges of up to £79 per year. Introducing the levy for foreign vehicles and offsetting the charge for the vast majority of UK vehicles will help the competitiveness of UK businesses, while ensuring that we continue to enjoy the benefits of free trade with Europe.
I know that the noble Lord, Lord Berkeley, is interested in the subject of time versus distance-based charging. I do not want to pre-empt his speech and will address his concerns when I wind up.
As your Lordships will be aware, any form of road user charge is subject to the strict conditions set out in the Eurovignette directive. It specifies the maximum daily charge as being €11, likely to rise to €12 by 2014 to compensate for inflation, which will mean that it should equate with the £10 per day that we intend to charge the largest and heaviest foreign vehicles that use our roads.
To ensure that no additional administrative burden is placed on UK business by the introduction of the charge, UK hauliers will start to pay the levy in a single transaction with vehicle excise duty when it is renewed from April 2014, and will therefore be able to pay the charge either six-monthly or annually. For the annual rate, we have selected a fee of up to £1,000 for the heaviest vehicles as being a level where, subject to the restrictions already mentioned, the Chancellor will be able to offset the increase to UK hauliers through reductions in vehicle excise duty, which will be set out in the Finance Bill 2013,
For foreign operators, who do not pay VED, the levy will be payable through an online portal or over the telephone. Foreign operators will also have the option to select time periods varying between one day and one year, allowing them to pay the charge at the appropriate level for their trip.
As I said, in the case of the largest vehicles, the annual charge will be £1,000; for the smallest vehicles it will be proportionately less, at £85 for the year. However, most foreign vehicles that come into the UK are those in the heaviest two bands. For the largest, heaviest foreign vehicles, we consider the charge of £10 per day or £1,000 per year to be fair, proportionate and compliant with the relevant EU legislation. For the daily amount we are seeking to charge at the highest level permissible while remaining compliant with EU law.
I accept that for about 40 UK vehicles, the overall charge for hauliers will be much greater; it has proved to be impossible fully to offset the charges in those cases. However, I should make it clear that the increase is largely due to current VED rates being close to or below EU minimum levels, which restricts our ability to rebate fully to offset the charge, rather than the implementation of the charge itself.
Operators facing increased charges have the option to down-plate their vehicle, a simple paper-based exercise costing £27, which will fully offset the increase, although they may be more restricted in the loads that they are able to carry or the distribution of the load on the vehicle.
We estimate that the revenues gained by having foreign hauliers pay a charge are likely to be between £18.7 million and £23.2 million annually. Although I appreciate that that is not an enormous sum in the grand scheme of things, and I am sure that noble Lords would like it to be much higher, the charges have been set at the highest possible allowed by the Eurovignette directive, while allowing other measures—principally reductions in vehicle excise duty—that should ensure that more than 9 out of 10 vehicles in the UK will pay no more than now.
The way the scheme has been structured will ensure a fairer deal for UK-registered HGV operators, who should not have to bear an additional financial burden as a result of the levy’s introduction. While the revenues raised through the charge and the fines levied for non-payment will be paid directly into the Consolidated Fund and will therefore not be spent directly on transport projects, I would like to reassure the House that the Department for Transport will ensure that sufficient funds are directed to allow VOSA—the Vehicle Operator and Services Agency— to deliver effective enforcement of the scheme.
The legislation before the House today is not designed as a precursor to increased charges on businesses, or on wider road users. This charge has a very clear focused objective. I beg to move.
Earl Attlee
My Lords, as I stated in my opening speech, this legislation will help to deliver a fairer deal for UK hauliers and go some way to correcting an inequality which has existed for too long. For this reason, I believe the Bill should be welcomed. Turning to the aims of the Bill, we consider our plan to charge £10 per day, or £1,000 per year, for the largest vehicles, to be fair, proportionate and compliant with the relevant EU legislation. One of the challenges in dealing with this problem is that anything we do must be compliant with EU legislation. We must treat UK and foreign hauliers in the same way.
The noble Lord, Lord Snape, asked about the implementation costs. The total set-up costs are estimated at between £3 million and £6.7 million, which will be spread over the years before the scheme goes live for foreign hauliers. Thereafter, we estimate the annual cost to be £3 million to £4.8 million. These estimates are at a relatively early stage and will be developed further.
The noble Lord, Lord Berkeley, asked whether there will be a vignette and whether there will be booths at Dover. There will be no vignette sticker, or booths at Dover or at any other port. The levy will be paid for by a website or telephone transaction, which will feed into a database that will be available publicly and to VOSA officials. Enforcement of the levy will be carried out primarily by VOSA officers, on a targeted basis, using the payment database to show which vehicles are in the country and which have—or have not—paid, alongside VOSA’s normal stopping process for enforcement.
Foreign heavy vehicles mainly travel on a strategic road network and therefore ordinary traffic wardens do not have a role in this. If they detect a vehicle without a vignette by chance, they can do something about it but, being realistic, a traffic warden will not be dealing with this problem. Using ANPR technology at both fixed and mobile sites, VOSA will be able to identify and stop vehicles that have not paid and hold them until a penalty deposit of £200 is paid. That is a penalty deposit and not an on-the-spot fine.
Lord Higgins
If the website shows that a particular vehicle has not paid the levy, will it be charged before it leaves this country, on the way out?
Earl Attlee
My Lords, if VOSA detects that a vehicle has not paid the levy, I suspect the vehicle will not be going very far—perhaps to the next service station—until it has paid it, which can be done electronically.
Lord Snape
The minimum penalty is £200. Is the driver supposed to pay that on the spot? If he does not have any British cash or that amount of money, under what powers will the vehicle be detained and where?
Earl Attlee
My Lords, that will be done under the powers that were wisely introduced by the previous Administration, who also set the level. I agree that it is at quite a low level and made that very point from the Opposition Benches—I cannot remember whether it was the Front Benches or the Back Benches—at the time we introduced the necessary powers. The key thing is that we will be able to stop the vehicle. That is extremely inconvenient to the operator, and I will have more to say on that point.
The noble Lord, Lord Berkeley, asked me what a stopping officer is. Stopping officers already exist. They are appointed under the powers in the Road Traffic Act 1988, as amended, and are able to stop vehicles in relation to enforcement of vehicle roadworthiness and driver’s hours. Stopping officers are VOSA enforcement officers.
Lord Berkeley
I have a question before the Minister leaves that subject. There is presumably a database with every vehicle’s number plate on it. Are stopping officers lurking in every motorway service station or do they pick these things up from cameras above motorways? How are they going to find these lorries that have not paid even before they direct them into somewhere safe to deal with them? If I was a foreign lorry driver and did not want to pay, I would keep off trunk roads and go on the side roads, like many people do in France if they do not want to pay the motorway tolls.
Earl Attlee
My Lords, I plan to address most of the points made by the noble Lord later on. To answer his point about leaving the strategic road network and going on to minor roads: an operator would have difficulties with that because the vehicle would be much less productive, while he would be trying to avoid only a £10 per day charge. I suggest that the extra cost of lowering your average speed by using local roads would simply not be worth it. For cases that go to court, the offence is a level 5, which can incur a fine of up to £5,000.
However, the real deterrent for operators is the inconvenience of being stopped, as well as another inconvenience that I will come to in a moment. VOSA already carries out risk-based stops for a number of different offences, including weight, vehicle defects, and driver hours, among others, and the levy enforcement will simply be added to this regime. I also suggest that when VOSA detects a vehicle that has not paid the levy, that is exactly the same as if the driver had put a big sign on the lorry which says “Stop me, because I’m a problem vehicle”.
I am aware that the British Vehicle Rental and Leasing Association has identified an area for a small potential cost burden to operators, which has been introduced due to the way that the levy is rebated, when compared to how VED is currently and will continue to be rebated. It may be helpful for me to say a few words on this. Currently when a vehicle is delicensed—typically, when it is sold—the previous owner can claim back the outstanding whole months of VED, with the rebate calculation done in twelfths. From the introduction of the levy in April 2014, UK operators will still be able to reclaim VED on the same basis, but the levy can be reclaimed only in tenths. To comply with EU law, and to maximise revenue from monthly charges, the annual rate is set at 10 times the monthly rate. This means that in effect it is discounted when compared with the costs of 12 monthly levy charges.
The decision to offer rebates on the basis of tenths is to prevent foreign hauliers paying for a year, using the vehicle for a month or less on the UK’s roads, and then reclaiming 11 months. The value of the loss incurred by the operator is entirely dependent on when the rebate is claimed.
The legislation before the House is not designed as a precursor to increased charges on businesses or on road users in general. This charge has a very clear, focused objective, and its introduction is entirely separate from the reviews on future road policy which the Department for Transport is currently undertaking.
I will now deal with a few other points. The noble Lord, Lord Berkeley, asked why it is a money Bill, and the noble Lord, Lord Davies of Oldham, very kindly helped me. The Bill only concerns money, and is certified as such by the Speaker of the House of Commons; it is not a matter for the Government.
On the wider points made by the noble Lord, Lord Berkeley, on the methods of tolling, following our debate during the passage of the Growth and Infrastructure Bill I offered a meeting at ministerial level with the noble Lord; I hope that that meeting, which is in hand, will be with me. I have mentioned detection. I was asked about VED in other countries. All EU countries have VED for HGVs, or a local equivalent circulation tax. VED or equivalent is required in the Eurovignette directive, and minimum rates are set. Our new VED rates comply with the minimum rate.
The noble Lord, Lord Berkeley, raised a very important point about whether we should implement a levy on a distance or a time basis. I will say a few words about this important point. The HGV levy is a time-based charge which is both simple and inexpensive to operate. It allows more than nine out of 10 UK operators to be fully compensated through VED reductions. A distance-based scheme has been considered and has some benefits, in that hauliers who use the road network the most would pay the most. That seems, at face value, to be inherently fair. However, in reality it would cost hauliers more and it would not be possible to introduce offsetting measures for UK hauliers, which would mean that they would pay more than they do now. In many cases foreign hauliers would pay less than they would under a time-based scheme.
The introduction of a distance-based scheme has also been discounted as it would be very complex and costly to operate, and would potentially involve the use of a mechanism such as a fuel duty rebate, which is illegal under European law. This has already been tested in Germany. We also believe that the revenues gained from foreign hauliers would not cover the costs of operating this scheme. The Department for Transport looked at options for distance-based charging in 2010 and concluded that in order to fund it the scheme would have to be structured to be revenue-raising, and would therefore have a negative impact on UK hauliers, who would pay most of the charges.
Another difficulty is how to capture the distance-based data. That could be done with a tachograph, but the problem is that the tachograph and the records would have to be inspected by enforcement officers. In addition, the tachograph is in essence a safety device to ensure that drivers do not drive for too long. If we insert an economic effect into it, we would increase the chances that the drivers or the operator would interfere with the operation of the tachograph.
Lord Berkeley
I am grateful to the noble Lord. I will not go back over tolling, as we will have a meeting on that, and I am grateful to him. This is a tit-for-tat issue. He very kindly said that other member states also have a VED for domestic-registered trucks; for example, in France. Is there not a risk that those member states might play tit-for-tat and say, “Well, British hauliers going into France will be able to use the roads, with or without the tollings, but they won’t have paid the VED in France, so they’re getting an advantage”? Are we not in danger of getting a tit-for-tat situation across member states?
Earl Attlee
My Lords, the situation is, as I said in my opening remarks, that our operators often have to pay motorway tolls that no one pays in the UK, and because of the Eurovignette directive, whatever a foreign country did in terms of a vignette they would be limited to the prevailing limits of what you can charge. It could not, therefore, cost our operators more than €11 a day. At the moment our operators pay tolls to use the European road infrastructure.
The chosen time-based scheme, coupled with reductions to VED, is a simple, effective and targeted way of ensuring that UK hauliers pay no more than they do now. VED cuts are a time-based method of offsetting the charge, which means that they fit well with a time-based system. In addition, we need to remember that, in terms of administration, this scheme will have a negligible burden on UK operators.
I always enjoy listening to the noble Lord, Lord Snape. He asked many questions, and I will answer as many as I can. I have probably answered quite a few already, and of course, I will write to him on some of them. He asked me what type of penalties there will be. As I believe I have said, drivers will be charged £200 at the roadside. Fines can be enforced electronically, and they can be invited to pay by credit or debit cards. The noble Lord, Lord Davies, made the point that with modern systems of doing business it is easy to collect the charges.
The noble Lord, Lord Snape, also asked if, under the directive we have to offer periods that are appropriate for the trip being made. If we offer only six-month or annual levies to foreign drivers we will contravene the European directive. He asked about the number of foreign vehicles and I can tell him that 3.6% of miles driven by HGVs in the UK are by foreign vehicles. For HGVs of 12 tonnes and over, the percentage is higher. The noble Lord, Lord Wigley, asked about revenue in VED. All levies or fines go into the Consolidated Fund, as we discussed. There are no plans for hypothecation, as the noble Lord suggests, but we will ensure that VOSA, as the primary enforcement agency, will have sufficient resources to enforce the scheme.
I am grateful for the helpful interventions from the noble Lord, Lord Davies, and for his support for the Bill. He asked me about cabotage. The Bill does not change the rules on cabotage but it does do a little to level the economic playing field. It is a difficult problem to deal with. I am delighted that the Bill has been so positively received. It has been long called for by industry and others from across the political spectrum, and I am delighted to be taking it through the House.
Lord Snape
Before the Minister delights or otherwise in taking it through the House, can he just answer the specific question that I put to him? How many vehicles are we talking about? I know that there are 1.5 million journeys and 3% or 4%, or whatever, of total vehicle miles, but how many heavy goods vehicles will be covered by this legislation?
Earl Attlee
My Lords, I cannot immediately answer that at the Dispatch Box. What really matters is how many vehicles are coming in; how many journeys are made. In my opening remarks, I said that there were 1.5 million journeys.