Motor Vehicles (International Circulation) (Amendment) Order 2013
(Limited Text - Ministerial Extracts only)
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Baroness Kramer
That the Grand Committee do report to the House that it has considered the Motor Vehicles (International Circulation) (Amendment) Order 2013.
Relevant document: 12th Report from the Joint Committee on Statutory Instruments.
The Minister of State, Department for Transport (Baroness Kramer) (LD)
My Lords, the order will allow car transporters to carry out unlimited cabotage operations in Great Britain during the peak registration periods. Road haulage cabotage is domestic goods operations carried out on a temporary basis by haulage operators registered in another EU member state.
EU Regulation 1072/2009 revised the previous EU rules governing road haulage cabotage with the intention of clarifying the minimum extent to which carrying out cabotage in another member state is allowed. Translated into domestic law, this results in non-UK goods vehicles being limited to carrying out no more than three cabotage operations in the seven-day period following the last delivery on the incoming international journey. Once the limit has been reached the vehicle must leave and re-enter with a new international load in order to undertake further cabotage.
Generally, the clarity provided by the 2009 EU rules has been welcomed by industry in place of less certain application of the former rules on “temporary use”. However, the explicitness of the new rules has had an appreciable and restrictive impact on the ability to move sufficient motor vehicles in the new car registration peak periods each March and September in Great Britain.
Car-transporting vehicles are highly specialised and are not suitable for general haulage. Whereas the core demand outside the peak periods is satisfactorily met by UK vehicles operating domestically, at times of peak demand vehicles from other member states have traditionally been used to supplement the UK fleet. Regulation 1072/2009 has the effect of restricting the amount of work that non-UK hauliers can legally undertake on each visit. When there is a shortage of haulage capacity to move cars and vans, they accumulate at factories and ports during these peak periods. This lack of capacity in the supply chain becomes a bottleneck for UK manufacturers distributing vehicles for domestic consumption and export.
My department considered various options to address this problem and concluded that relaxing the cabotage rules at the peak periods via secondary legislation was the most viable option. We consulted on these proposals and the majority of responses, especially those from motor manufactures and retailers, were very supportive. This order, together with the related Goods Vehicles (Licensing of Operators) (Amendment) Regulations 2013, makes regulatory changes to allow vehicles, essentially car transporters, to carry out unlimited cabotage operations moving cars and vans during the peak registration periods.
This order amends Article 5 of the Motor Vehicles (International Circulation) Order 1975, which exempts from excise duty certain vehicles brought temporarily into the UK. Relief from excise duty is already available to vehicles used for cabotage operations in the UK in accordance with the limits of EU Regulation 1072/2009. This order additionally exempts vehicles which are being used only for or in connection with the carriage of motor vehicles in Great Britain from excise duty when carrying out unlimited cabotage operations during the permitted peak periods.
I should also draw attention to a minor slip in Article 2(4) of the order. The Committee should have a correction slip for this which makes clear that the additional definitions are inserted after the definition of the “date of importation” and not in the middle of it. It is simply a typo.
This is quite separate from the new HGV levy charge. From April 2014, these operators will be liable to pay the new HGV levy charge for the period they are in the UK, paying up to £10 per day and £1,000 per year. The related Goods Vehicles (Licensing of Operators) (Amendment) Regulations 2013 created an additional exemption from the need for the user of a goods vehicle to have an operator’s licence under the Goods Vehicles (Licensing of Operators) Act 1995. This came into force on 15 August 2013.
These changes are intended to assist UK car manufacturers and retailers by allowing unlimited cabotage operations by car transporters at the peak periods. I commend the order to the Committee.
Lord Rosser (Lab)
First, I thank the Minister for her explanations of the order we are discussing. I have a number of points and queries.
The impact assessment refers to policy options under consideration, but it does not include the option, or the feasibility, of removing the cause of the trouble, which is the GB system of having new registration numbers every six months, and with it the quite dramatic peaks in car registrations in March and September compared to the rest of the year. The impact assessment dismisses this point, when it says on page 3 that:
“The peak registration periods themselves are nothing to do with any regulations”.
Frankly, I would have thought the peak registration system had everything to do with this order. Will the Minister tell us whether the peak registration system is in the interests of growth, since growth is obviously an important issue for the Department for Transport? This order supports the growth agenda, as the Explanatory Memorandum itself states, without answering the question as to whether the arrangement it is seeking to prop up is also in the interests of growth. Would the car industry, including car transporter firms, be better off with a much more even flow of cars being produced and sold each month than is the case at present?
Figure 4 on page 5 of the impact assessment indicates that, apart from some 10 weeks of the year around March and September, capacity in the haulage fleet comfortably exceeds—in some weeks far exceeds—demand for moving new and export cars. I hope the Minister will give us the facts and figures to show that the GB system of having new registration numbers every six months, and its cost consequences, are justified by the additional cars sold compared to what the position would be with a much more even number of car registrations and sales through the year. Frankly, if this cannot be shown, why are we introducing this order?
The impact assessment also dismisses the registration peaks issue on page 8, on the grounds that any changes to the system would be too complicated to implement. However, should we not be trying to do something about peak periods for the longer term, if that is what is causing problems for UK transporter firms, rather than getting in extra UK haulage capacity at peak times, possibly at greater cost? Can the Minister say whether other vehicle manufacturing countries—such as France, Germany and Italy—have the same problem as us over car transporter capacity because of their own systems of registration numbers?
The impact assessment refers to the effect of this order in allowing Ministers to relax selectively the application of EU cabotage rules in Great Britain. What is the maximum number of weeks in the year that we are allowed to do this? The Explanatory Memorandum states that the Association of European Vehicle Logistics and the Ford Motor Company both suggested that any relaxation period should start two weeks before the peak months; that is, it should be the last two weeks in February and August. The Government do not appear to have agreed to that suggestion, since the relaxation periods will begin on 22 February and 25 August respectively. The department agrees that it is sensible to allow the relaxation periods to commence before the start of the two peak months, but does not indicate in the Explanatory Memorandum why it would be inappropriate to agree to the last two weeks in February and August, which was what was being sought. Can the Minister say why not? I note that even the Government’s proposals will put additional heavy vehicles on our roads at a peak holiday time, around a bank holiday weekend at the end of August. Perhaps the Minister can comment on the wisdom, from a safety point of view, of doing that.
We are told that there were three negative responses. They were not exactly from lightweight sources. The traffic commissioners pointed out that foreign goods vehicles were generally more likely to be non-compliant than domestic vehicles. They said there was a risk to road safety and fair competition from the proposal. The commissioners referred to random fleet compliance surveys conducted by VOSA, which show that domestic hauliers attract a prohibition rate from mechanical defects of 10.4%, whereas the average for all foreign hauliers is more than double that, at 21.8%. The impact assessment goes on to say:
“Nevertheless, the Department is not convinced that this is likely to be a significant issue. Car transporters are highly specialised and costly pieces of equipment and we believe they are less likely to be non-compliant with routine roadworthiness requirements than the average HGV”.
That is really not a satisfactory response when rejecting the concerns of the traffic commissioners. The “we believe” school of policy-making is not on a very firm footing compared to policy-making based on evidence and facts. I ask the Minister to provide the non-compliance rates with routine roadworthiness requirements of, first, domestic car transporters and, secondly, foreign hauliers’ vehicles covered by this order, which would provide a factual basis for the department’s statement that it is not convinced that this is likely to be a significant issue.
Although the impact assessment appears a little imprecise on this point, I am assuming that the effect of the order is that more non-UK transporters will be in this country in the peak periods than are currently. That is because the impact assessment talks about the order removing bottlenecks and about exports no longer being delayed or factories put at risk because end-of-line compounds become choked. One of the negative responses came from a UK-based car transportation company which said that it would have to reduce the size of its fleet if transport operators from other member states were able to operate in Great Britain without restriction for two months of the year. Bearing in mind that outside these two months capacity exceeds demand, it seems likely that the months in question are ones when car transportation companies have more business—and more income coming in—than at any other time of the year. How can the department be so sure that non-UK hauliers being able to operate without restriction during those two peak months for business for UK car transporter firms, as a result of this government order, will not have an adverse impact on the UK firms?
The impact assessment states that the cost of non-UK hauliers would be greater. What is the difference in costs between hiring non-UK transporters and hiring their domestic equivalents, both now and under the revised temporary arrangements provided for in this order? How sure is the department that the statement in the Explanatory Memorandum that non-UK transporters will be,
“used by the sector only when the domestic supply is exhausted”,
is correct? On page 8, the impact assessment states:
“DfT Legal could aim to draft the new Regulations in a way that would make it easier to capture further categories of vehicle at a later date by simple secondary legislation”.
Is that actually what the Government intend to do, and if so, why? What other sectors have reported problems with the present arrangements, and would such a step have a detrimental effect on UK hauliers? I would be grateful if the Minister could confirm what I believe she said—that there is no link-up between the thrust or implications of this order and the issue and consultation on the road user levy.
On its first page, the impact assessment states that the review date for the policy change will be April 2018. Why is four and a half years from now considered the appropriate date for a review? Subject to the Minister’s response, we are not particularly enthusiastic about this order, but we will not seek to oppose it.
Baroness Kramer
I very much thank the noble Lord, Lord Rosser, for a series of entirely pertinent questions. Let me try to take them roughly in the order in which he presented them. His primary question was about whether it is possible to level out or do away with these peaks of registration. As he will be aware, until 2000 there was just one registration date, which was each August, and the peak period was even more pronounced than it is today. Indeed, it was in response to pressure from the motor industry that the DVLA consulted on the registration periods. Subsequent to that consultation, it introduced a system of registrations each March and September. It spread the peaks over two periods. The general assessment of the industry is that the system has worked well and there has been no pressure from the industry to change the system in recent years.
I am sure that the noble Lord will agree that it is to every advantage to have a system that is effective for the UK’s very robust car manufacturing and retail industry. Were there to be any review, it would probably be a BIS-driven review, because it would be to ensure that that is working effectively both for the manufacturing and retail industries and for customers. The department’s job is to minimise transport problems related to the system.
Lord Rosser
I take the noble Baroness’s point that that may have more to do with BIS than the Department for Transport. I asked whether in fact having the peak in car registrations in two months of the year was conducive to encouraging growth. I repeat one part of my question in this context which I think is a matter for the Department for Transport: do other car-producing countries in Europe—Germany, Italy, France—have the same problems as we do because of the registration number system?
Baroness Kramer
As the noble Lord will know, Ireland does that on a once a year basis, so it has something closer to our older form of a single peak. Otherwise, that is not the pattern in continental Europe, but then buying patterns are very different in various countries within the EU. I am sure that the noble Lord would not recommend that we change our system in order to follow continental buying patterns which may not fit buying patterns in the UK. I suspect that he would also agree that this has to be an industry-led consideration, because the goal is to ensure that it works well for the British manufacturing and retail industry and for customers.
The noble Lord talked about an adverse impact on the economy. He will appreciate that if we were to have a generally higher fleet at all times, there might be an associated economic cost. There are both winners and losers for the road haulage industry as well in changing the peak.
The noble Lord asked whether there is a maximum time for which the relaxations can apply. Exactly as he said, the relaxations are over two fixed periods, from 22 February to 31 March and from 25 August to 30 September each year. However, there is flexibility, because the normal EU cabotage rules permit non-UK car transporters to carry out up to three cabotage operations in the seven days prior to the relaxation period coming into force. In effect, it allows for up to six weeks of cabotage operations without having to leave the UK. I think that that responds to the issue raised by the industry when it asked for an extra week, because there is that normal process in the period prior to the actual start of the specific exemption. That provides the coverage that meets the requirements of the car manufacturers.
Lord Rosser
I think that I have understood the noble Baroness’s point, but is she saying that the earlier week before the provision comes into force is covered by the existing arrangement that you can do three trips within seven days, and that you can then switch straight to the relaxation—that that vehicle will not then have to go back to its own country, load up again and come back to the UK?
Baroness Kramer
The noble Lord is exactly correct. That is why providing an additional week, as originally requested by the industry, was unnecessary because it is covered by that element. If we added two weeks on, as he asked, we would have yet another week added on, and I do not think that that would be either necessary to the industry or particularly desirable for the system as a whole.
The noble Lord asked about the impact assessment. There is no review date in the SI itself, but the department will be putting in place arrangements to review the impact of the regulatory changes, and I will ask that he is kept informed as that process goes ahead.
The noble Lord asked about language within the impact assessment that might suggest that the DfT is looking at extending the arrangement beyond car transporters. It is not. I agree that the language was somewhat confusing, so I asked questions about it myself. If the noble Lord looks at the SI, he will see that the way in which it is written means that if there were need to look at an exemption in another area, it would be quite easy to do a mirror SI, simply changing the description of the problem and the vehicle. The issue before us is the only one being addressed. Any further exemption would still be required to go through exactly the same parliamentary procedure as this exemption. There is no change in parliamentary procedure but a reduction in the time that legal counsel would have to sit down and work on the written language. That seems a sensible step when we are constantly trying to cut down costs within government. That is all that is implied.
Lord Rosser
I thank the Minister for that explanation, but are there other sectors raising queries over the existing arrangements, or is this the only sector?
Baroness Kramer
This is the only sector.
On safety concerns raised by the Freight Transport Association, the noble Lord will be aware that minimum vehicle road-worthiness requirements exist across all EU member states, and the Commission is looking to harmonise standards in the future. The Vehicle and Operator Services Agency, or VOSA, carries out regular spot checks of foreign and UK vehicles to ensure that they are roadworthy and can take enforcement action, including issuing immediate or delaying prohibitions, and in the most serious cases can impound vehicles.
The issue of safety is partly addressed by that, but the noble Lord picked up on the point discussed in the impact statement; namely, that vehicles able to access the UK because of this exemption will be car transporters. As he knows and reaffirmed, those are highly specialised, very costly pieces of kit. I do not think that anyone has done the work for the UK domestic market or for non-UK resident hauliers to compare their accident rates versus other forms of haulage. VOSA will keep a sharp eye out and monitor car transporters more closely, and that applies to both domestic and overseas vehicles; but it is generally expected that these highly sophisticated pieces of kit will be less involved in collisions and raise many fewer safety issues than the haulage industry at large. VOSA is on to that and will keep an eye on it. There is no experience that suggests that we should have any particular alarm related to the exemption being provided for under this statutory instrument.
Perhaps I may ask the noble Lord, Lord Rosser, whether there is anything that I have missed in the questions that he raised, just to make sure that I cover them.
Lord Rosser
There are one or two, but I am not pushing the Minister to give a reply today. One argument advanced by one of the car transporter firms is that it might have to reduce the size of its fleet. I think that the Department for Transport’s answer to that is, “No, you won’t, because the costs of the non-UK hauliers will be greater”. What is the difference in cost for non-UK transporters in hiring domestic equipment under the present arrangements and under the proposed arrangements? Presumably, the argument will be that it may cost less than it does now to hire a non-UK transporter.
Baroness Kramer
The noble Lord, Lord Rosser, is exceedingly helpful; I thank him for triggering my memory on both this and another question. Only one UK road haulier raised this issue. It is expensive, quite frankly, for the UK industry to have to carry the additional equipment—it is expensive equipment, as we said earlier—to meet peak. From an economic perspective, therefore, I think that most road hauliers regard it as an advantage to know that the peak can be met from elsewhere without a requirement that they carry equipment which would have to sit redundant for much of the rest of the year. As the noble Lord will see, the argument works both ways on this issue.
Lord Rosser
The argument is that if you had the flow of registrations more evenly across the year, the industry would not be faced with the problem of having enough vehicles for capacity in the peaks.
I am not from the industry, but as I understand it, the other argument that has been put forward is that those two peak months are probably the time when companies take in most of their income. What guarantee is there that at the busiest and most profitable—or at least, highest income—time, companies will not find non-UK hauliers over here taking away some of that business, on which their finances for the whole year may depend?
Baroness Kramer
Again, I confirm the point that the noble Lord made himself, which is that, because heavy and highly specialised equipment has to come from overseas—you cannot just throw something together to bring over to provide a service to a motor manufacturer—the costs make overseas hauliers more expensive.
Lord Rosser
The comparative cost is one of the questions I asked. I should have thought that it would have been in this information, because it is part of the DfT argument that the cost of bringing in vehicles from abroad will be higher. Presumably, under the new arrangements, the costs may well be less than they are now for the reasons that we have been discussing.
Baroness Kramer
Yes, under the system that we had in place before we had the new European legislation, but we can look at that. I will ask the department to write to the noble Lord with more detail. Again, much of the evidence has come from the industry itself, rather than merely being put together by the DfT, so that may give him some measure of comfort.
The noble Lord raised another question that I want to answer, which is: what would happen if we did not permit those vehicles, so that every three trips within the seven days they would have to go back to the continent and come back over? That is an exceedingly expensive strategy. That is the situation as it would be today without the exemption order. Unfortunately, the cost of that would get passed on to car purchasers within the UK and to UK manufacturing industry. So the noble Lord will see that there is an attraction in avoiding additional cost. He also raised the issue of peaks on the road in August. Sending all those transporters back on the ferry and then bringing them back again, gives a far worse traffic result than keeping them here and having them service that peak domestic need.
I hope that that covers the issues. I understand that the noble Lord has questions; I have said that we will write to him on those which he feels were not satisfactorily answered by my comments; but I am glad that he has given his support to the statutory instrument.