Road Haulage Association submission to HM Treasury ahead of Autumn Statement 2014

Transcription

1 Road Haulage Association submission to HM Treasury ahead of Autumn Statement The Road Haulage Association represents 6,000 firms in road haulage and distribution that operate approximately 100,000 HGVs and provide vital services across the UK economy. We appreciate the opportunity to contribute to the Chancellor s thinking ahead of the Autumn Statement. General outlook 2. UK growth has had a significant impact in demand for road haulage. We are currently conducting a review of members experiences over the past year and it is clear that for many firms, increased demand has yet to translate into significant margin growth, which is needed to promote investment. Conditions remain challenging for many of the industry s customers. 3. One issue has come to the fore and now dominates discussions in the industry the emergence and impacts of a lorry driver shortage, long discussed and now upon us. This is reflected in the balance of our submission. The structural weakness of an ageing driver workforce has long been discussed for and the RHA has, in submissions to the Treasury over several years, urged action in response. In reality, however, the sudden worsening of the situation has caught the industry as a whole unawares. Driver shortage 4. In an ed survey of members that the RHA conducted in early September, 360 firms responded. Of these, 70% said they were suffering a driver shortage and a further 20% said they expected to do so soon. Only 11% felt their business was not and would not suffer a shortage of drivers. The survey drew strong response from larger members. The UK faces the prospect of a damaging shortage of haulage, due to a shortage of drivers who have a valid LGV driving licence. This is caused by: a) Many years of under-investment in recruiting and training UK residents not least by very large companies - in order to replace existing drivers as they retire b) The relative reduction in availability of suitably qualified drivers from elsewhere in the EU c) Drivers leaving the industry in the down-turn in demand post-2008, gaining jobs in other sectors in which they are settled d) The absence of a straightforward and accessible funding stream, as we have demonstrated to officials. Funding that is available is very limited geographically, burdensome to access, involving significant time delays and various other aspects of training that are not seen as relevant. The current system is woefully inadequate and is especially inaccessible to SMEs e) The introduction of additional training and test requirements through the Driver CPC legislation, which has resulted in a marginal loss of drivers 1

2 f) The reluctance and constraints on firms training new recruits in sufficient quantities without support. Very large and SME employers are available to spell that out directly to the Chancellor 5. The sector is facing significant labour cost inflation fuelled by a shortage of supply of drivers, which will have an inflationary impact on the cost of transport. Straightforward, targeted, time-limited funding to operators for the acquisition of LGV licences 6. The RHA calls upon the Treasury to create a new scheme of grants for getting UKresident individuals through their LGV driving licence. The grants would be straightforward, nationally-available, targeted specifically on licence acquisition and time-limited for a period of two years, with a review after 12 months. 7. The RHA proposes a scheme available to employers which cuts through the current varied, complex structures available through local initiatives, as we have evidenced. The shortage of drivers is too widespread and too serious in its impact on the economy as a whole never mind the haulage industry - to rely on existing funding structures. 8. As the RHA has long argued, the current apprenticeship model is not directly applicable to LGV driver training, due to the particular circumstances of the job and the regulatory framework. The key elements of what in other trades would be covered in an apprenticeship are covered in the LGV driving test. That has been the case for half a century but is especially the case with the additional demand made of candidates in recent years. 9. The requirements of employers (and of their insurers) have also increased. The normal practice in the industry is to invest resources into ensuring new entrants into the industry are capable of doing the job, as well as having the necessary legal licences and qualifications in place. 10. The cost of putting a car driver through C-category licence test is 1,500 or a little higher. In addition, companies identify costs of at least a further 1,500 for training. This latter figure rises to up to 5,000 depending on the employer and nature of the role. 11. We therefore propose that government funding of 2,500 be available to an employer for each individual it puts through the test for C-category licence (rigid vehicles) and Driver CPC initial qualification; and a further 500 to take that individual on to C+E. The RHA recommends direct grant upon completion of the training and test for the first 1,500; a further 1,000 after three months employment; and a further 500 upon taking the C+E test. 12. We are concerned that the pass rate for tests is only in the order of 50%. We believe that the direct involvement of employers, rather than training organisations, in the 2

3 selection of candidates and management of their training will increase this percentage pass rate significantly. Hauliers investing time with a view to recruiting individuals have a strong stake in the candidate succeeding at test this is reflected, we believe, in the pass rate of drivers sent by employers when compared with the average and of those sent to test through Jobcentreplus schemes. (We do not think it would be appropriate, therefore, to reduce the proposed grant in event of failure.) 13. The RHA will issue detailed guidance for members on how to identify suitable candidates, drawing on the experience of members and reputable trainers. 14. It should be noted that the costs above are for getting an individual to test. Given that not all pass, the true cost for an employer can be significantly higher and is another barrier to recruitment and training in the UK, rather than recruiting from abroad or from other operators the latter of which drives up inflation. 15. The RHA has been pressing the case on this issue for several years. Last year, we urged a student loan-type arrangement for funding, as a fall-back in the absence of targeted funding for companies. We do not oppose such an arrangement but we see it as a poor second-best to direct funding of LGV operators. Why should the Treasury spend taxpayers money in this way? 16. UK employers are not going to train sufficient drivers without government funding support and we have near-unanimity on that from members ranging from the very large to the SME and micro sector. Large companies are very ready to explain this directly to ministers. 17. With insufficient drivers, SMEs will lose drivers to larger employers, especially to those in the own-account sector (which is often less cost-conscious as it is a small part of the overall business) and to agencies. We are already seeing that and the disruption caused in the industry. 18. A very common comment from company bosses in the hire or reward sector can be paraphrased in this way: We are not going to invest a whole of lot of money in training drivers for them to leave us to take up a job working for Tesco [as an example of a large employer of drivers that can afford to buy its way out of a shortage of drivers]. 19. It is often suggested that hauliers get recruits to sign investment pay-back clauses indeed, the RHA s Employment Contract service to members, which is highly regarded, includes such a standard pay-back clause. However, members experience is that they are often of little value in the real world because of the practical difficulty of enforcement. 20. With an increase in drivers from ever-further East in Europe, we fear a decline in driving standards. Member feedback suggests that this is already happening. 3

4 21. The consequence of these pressures is that the whole economy will suffer from the shortage of essential transport services. We are already seeing, as examples, an increase in the waste of food and delays to construction projects. This trend will increase. 22. Lastly, we believe that the Treasury will gain revenue, paradoxically, from funding the training of people resident in the UK. HM Treasury is losing large sums of money from foreign drivers working in UK domestic haulage. 23. The reason for this loss of revenue was candidly set out by Laszlo Andor, EU Commissioner for Employment, Social Affairs and Inclusion: The European single market was developed to create opportunities for all. Everybody benefits from the mobility: The companies who would otherwise not find the workforce. The origin countries [benefit] because many of the workers are sending home a significant part of their income 24. The RHA has no accurate figures of the number of foreign drivers, mostly from Eastern Europe, working in the UK on domestic haulage but it is put at a conservative estimate at 20,000 and more probably 30,000 drivers, perhaps more. If even one third of those drivers send home 10,000 each, that is a potential loss to the economy of 100 million annually and 20 million in VAT million could, under the RHA proposal, fund the training of more than 6,000 UKresident individuals to drive lorries. They would then be qualified to work in sustainable, well-paid employment. 26. Many foreign lorry drivers are enterprising, hard-working individuals. It has made sense for individual employers to hire them as many of our largest companies have done in large numbers as an alternative to training UK residents. The option of a foreign driver has been particularly attractive since the EU Accession states joined the EU after 2004, especially when at first only the UK and Sweden would accept workers from those countries. However, while some settle in the UK - and that was especially the case with the first Polish drivers the large proportion do not. They send their disposable income home and they return home after a while. The UK Treasury loses the VAT from the money sent home that would otherwise be spent here and that money is taken out of the economy. We suspect that Treasury would recoup its money spent in training a UK resident to drive a lorry in a year or less. 27. For the medium term, there is substantial interest among the RHA s membership in the concept of a structured training scheme such as will be bid for in BIS s Trailblazers programme and the RHA is actively involved in that. However, a more targeted, urgent scheme that answers the pressing needs of the industry and the economy is needed in the meantime. 4

5 Under-investment statistics 28. Department for Transport figures show the total number of individuals going to LGV test since (Pre-2007 stats subject to FoI request from DSA.) ,766 65,852 46,426 43,894 46,549 46,246 48,283 Q1 1412,623 This year s 12,623 in first quarter reflects a 7% increase on the quarter 12 months before. 29. Were these figures reflecting the number of drivers coming into the industry, we would not face a driver shortage. The numbers shown must be viewed alongside three considerations: - the failure rate over the period is c. 50% - the numbers shown include retests (for which we do not have a number and that could only be gained through an FoI request) - a driver licenced to drive an articulated lorry requires to take two tests (assuming he passes them both first time), C and then C +E. These tests are taken and counted separately from each other. 30. This to replenish a driver workforce to serve 400,000 HGVs, many of which are double-shifted and require sickness and holiday cover etc. A minimum driver workforce in excess of 500,000 and probably nearer 600,000 is engaged by the industry. A year ago, the Department for Transport calculated that there are 750,000 PCV and HGV drivers currently and of these around 640,000 were engaged in Driver CPC training. 31. We disregard, for this purpose, the sector skills council estimate of nearly 300,000 individuals driving LGVs professionally, The figure is drawn from the Labour Force Survey of employment status by occupation. We do not regard the figure as meaningful in terms of goods movement by LGVs. 32. A startlingly high proportion of fleet operators have a driver workforce with an average age in the 50s. 5

6 Drivers leaving for medical reasons 33. LGV drivers must pass an initial medical examination, then a medical at age 45 and every five years thereafter. From age 65, the medical is an annual requirement. 34. The RHA has surveyed members on their experience over the past two years. Responses varied significantly but indicate that in the order of 1% of drivers before age 65 are known to drop out having failed a medical test. There is a suspicion that the true figure for those leaving for medical reasons may be as much as double that, insofar as some drivers leave without, their employers suspect, giving the true reason for leaving. Not all drivers are willing to disclose to employers that they failed a medical or that they are avoiding a medical altogether in anticipation of failing, or simply no longer feel up to the job for medical reasons. 35. The figures for drivers leaving will reflect the ageing driver workforce Drivers over 65 pose a new set of challenges, following the change in the law on mandatory retirement. It may be that the increase in drivers working on past 65 has provided some temporary relief from the driver shortage issue. In reality, the industry is now increasingly faced with a new challenge how to apply employment law to prevent ageing drivers from driving, or reduce their driving, when they have a medical certificate to show they are safe to driver but employers are increasingly uneasy about them doing so due to the safety risk to themselves and others. Relationship of the RHA s proposal with BIS Trailblazers scheme for apprenticeships 37. The RHA is fully engaged with the logistics sector s Trailblazers bid to BIS for apprenticeship funding for LGV drivers (and other roles). However, we will have nothing in place for two years. Neither the industry nor the economy can afford delay in getting new recruits into driving LGVs. We see little scope for accelerating the process. The bid team is under no pressure from BIS to accelerate the bid; nor would the logistics bid team want to do so in any case. They are clear that Trailblazers is a major opportunity and they want to ensure that they get it right. 38. The RHA s proposal for targeted funding is therefore temporary and time-limited and essential. In two years time, we hope to have something better in the industry but we need what the RHA and members are proposing in the meantime. Funding for driver testing by DVSA 39. There is a potential bottleneck at the DVSA at present, we fear, that will hold up the flow of new entrants into the industry. For years the demand for testing has been fairly static and in a time of budget tightening, resources have been trimmed to meet demand with little in the way of margin to respond to for sudden growth. 40. Sudden growth in demand is what we have identified is needed and the DVSA must be resourced to meet such an increase. 6

7 OTHER ISSUES Diesel duty 41. The RHA position on fuel duty is well-known. We support the FairFuelUK campaign alliance and we have a particular concern about the duty level on diesel. The Coalition s decisions to block increases in fuel duty are one of the reasons the economy is starting to grow. However, diesel duty remains by far the highest anywhere in the EU and represents a heavy tax burden on the operation of the UK supply chain. 42. The Chancellor should commit to having diesel duty no higher than its current level; and should cut the duty level. Research by NIESR funded by the RHA for FairFuelUK has shown that a reduction in duty will lead to more growth and job creation. Duty on methane 43. The RHA s deep scepticism over the government s promotion of methane as an HGV fuel is a matter of record. It is, if anything, strengthened in the light of developments in this area. We reject any suggestion that this is being done at the request of the road haulage industry; rather, it appears to be driven by a small number of (mostly) very large companies. The evidence suggests that there is little interest in the industry as a whole. 44. We also the report of the Committee on Climate change report in July 2014, which has added to the published advice towards caution (p273: _web_2.pdf) 45. We note that in the past two years the UK government has committed, by our estimate, at least 25 million to the promotion of methane as a mainstream HGV fuel. We strongly urge that alternative avenues to reducing carbon and emissions be explored before any further funding is committed to the promotion of methane for lorries. The RHA would welcome the opportunity to engage with government to explore alternatives. Scrappage scheme for lorries 46. There has been significant media interest in the option of a scrappage scheme for older lorries. Were ministers minded to develop this idea, the RHA would be keen to engage in discussions as to what as scheme should look like. 47. It seems apparent that Euro VI lorries offer significant gains over earlier vehicles and achieve what they are supposed to achieve in urban running, in a way that Euro V and earlier standards did not. In addition evidence suggests that Euro VI lorries are 7

8 delivering improved fuel economy and that fears that they would deliver poorer fuel consumption have proved to be mis-placed (as the RHA predicted was likely). Vehicle Excise Duty rates 48. The RHA recognises that the Chancellor has (in the main) held VED rates for lorries throughout this Parliament. This is an entirely appropriate approach to this area of business taxation and we urge the Chancellor to continue with the established policy. With diesel duty still the highest in the EU, that is especially relevant and appropriate. Annual Investment Allowance 49. There should be no diminution of the AIA, which provides a welcome incentive for investment. Roads investment 50. The RHA welcomes the reforms at the Highways Agency, the broadening of the remit of Passenger Focus and the increase in spending planned for roads. We are concerned, however, that it does not go far enough. Roads budgets are modest in comparison with other transport investments, relative to the importance of our road network and the proportion of transport movements it carries. 51. The cost of congestion is as relevant to local authority roads as to the strategic road network but often overlooked. We have serious concerns over budgets for local road maintenance and improvement and urge that more money be targeted in this area both the road surface and intelligent signalling to smooth traffic flow. The news that Devon County Council is to use volunteers to repair potholes is worrying reflection of what we may expect in the future. 52. Road reflect the economy they serve. They are also the work place for the road haulage industry, as shops, factories and offices are for others. There is real concern that we are slipping backwards and that this will deter investment in the UK economy. The government should be setting out a clearer vision for the road network as a whole, based on progressive signalling and IT, smooth and low-noise surfaces, and reducing levels of congestion and funding accordingly. 8