Official Report 323KB pdf
Our next agenda item is the first evidence-taking session in the inquiry into freight transport in Scotland that the committee recently agreed to undertake. Today we will have two panels of witnesses.
I have no detailed introductory remarks to make other than to say that I am delighted to be here and look forward to having an opportunity to help the committee to answer some of the important questions about how to create the best way forward for an important industry for Scotland.
Diageo is a significant creator of freight and, although all our transport is contracted out, we are cognisant of the fact that we are major road users. As a major freight user, we are happy to give committee members an opportunity to ask any questions that they might have on our operation and to give the committee a flavour of it.
We have received representations on the logistics of rail freight and its provision to organisations such as Diageo. What is your experience of trying to arrange rail freight at the coal face?
We have been working with our haulage contractors to try to transfer as much road freight as possible on to rail. For example, in the past year, we have run a pilot that has increased our rail freight transport by 10 per cent and eased congestion on the Kingston bridge.
Does the rail industry co-operate with you as you would expect it to?
We certainly receive a lot of co-operation from our haulage contractors, who are keen to invest because they see the benefits of doing so.
The challenge for us is the rail network. We move a significant amount of containerised volume—I am talking about probably around 500 or 600 containers every month on average—from Scotland to our warehouse in Daventry, which is near Birmingham. There is a fairly established rail network for us from Scotland to England, but the challenge is to try to find such a network across Scotland.
What cost differences are involved between transporting freight by rail and transporting it by road?
The difference depends on the journey that is involved. The shorter the journey, the less the cost difference will be. Roughly, the cost of transporting freight by rail will be around two thirds of transporting it by road, but the difference will depend on the journey times and transfers to and from the railhead at each end of the journey.
I thank the organisations for their interesting submissions to the committee. In its submission, CBI Scotland stated:
As Scotland's manufacturing base, including its export manufacturing base, declines, we think that there will naturally be knock-on effects for road haulage due to the lower volume of goods that is transported.
There are obvious things, such as the high fuel duty, that the Scottish Parliament cannot influence. We can make a bit of an impact on European Community directives, although perhaps not as much of an impact as the United Kingdom Government can make.
One issue that we have been keen to discuss and promote is deep-sea access. Comments have been made about transport within Scotland, but around 85 to 90 per cent of what we produce in Scotland is exported overseas. Currently, our exports go either by rail from Grangemouth down to the south of England or in feeder ships from Grangemouth to Rotterdam to be dispatched globally. If the proposed deep-sea access at Hunterston were available, that would be of major benefit to us. However, all the ancillary services would be needed.
Will Alan Mitchell answer my question with reference to the wider Scottish economy? It is useful to hear Diageo's view, but a wider perspective would help.
The solutions to support manufacturing in Scotland as a key plank that underpins the freight and road haulage industries are not unknown to us. We need to invest in the key supply-side drivers of the economy such as the transport infrastructure and education and skills. Support must be targeted at manufacturing. Towards the end of last year, the Scottish manufacturing advisory service was established to try to spread and exchange good practice in manufacturing. That is an example of support. The Executive is considering measures such as linking business rate discounts with research and development and with innovation, which would also help.
It is good that you put that on the record. I read an interesting article by Bill Jamieson in The Scotsman today about how our competitors are undercutting our business rates. The Executive has taken a welcome step on business rates, but some of our European competitors are reducing their rates faster, so we still ain't competing in that arena. That is an interesting aside. I suppose that you folks reflect on such patterns and on what is happening in other European countries.
Absolutely. At any time, some aspects of the business environment are more favourable in this country than they are elsewhere while other aspects are more favourable elsewhere. However, over the piece, we must ensure that we have as much of a level playing field as we can and that we secure whatever competitive advantage we can. We should certainly be on no worse a playing field.
I realise that Diageo takes most of its products out of Grangemouth. Superfast Ferries decided to reduce its ferry service down to one ship. I would have thought that the working time directive would have given Superfast and the Rosyth to Zeebrugge route a bit of a leg up. Has the CBI noticed any impact on service levels because of Superfast's decision?
We have not had much feedback from our members about it. I am aware of the cutbacks and I know, for example, that Michelin in my home town of Dundee makes great use of the service and has found it to be a cost-effective route to market, so it is obviously disappointing that the service has been cut.
The information that we received did not suggest that there was inadequate business uptake. However, it is interesting to note that the ship went to Finland to service the Finnish-German market. Finland is a small country of about 5 million people and is obviously getting something right that we are not getting right.
Although some of our contractors use the roll-on, roll-off service, most of our containers go to Rotterdam for global shipping.
My question is specifically for Alan Mitchell but I would also like to hear Diageo's perspective. There is a degree of inconsistency in the CBI's submission. It says that it is concerned about costs being driven up by foreign operators. I fully understand the answer that Alan Mitchell gave earlier about protecting Scotland's indigenous road haulage or freight transport industry. However, if foreign operators are taking advantage of fuel prices abroad then coming here to transport goods around Scotland and the wider United Kingdom, does that not drive costs down rather than up?
If the entry into the Scottish market of overseas competitors who enjoy a natural cost advantage means that Scottish hauliers go out of business, there will not be any more hauliers in the general market, so there will not necessarily be enough competition to have any effect on prices.
The point is that a healthy dose of competition is always good. One cannot argue with the economics of that, but I back up what Alan Mitchell said. Our operation involves long-term partnerships with large hauliers such as W H Malcolm of Carntyne, John G Russell (Transport) Ltd and McPherson of Aberlour. Those companies' operations are strategically placed. In the case of W H Malcolm, our partnership has enabled it to invest in the transfer of freight to rail, which we have benefited from.
It would be possible to increase competition by bringing in European hauliers. If one considered cost alone, that would increase competition. However, the value of working with the suppliers that we work with is that they understand our business needs in relation to service, quality and flexibility. Those needs would not necessarily be met by some of the bigger players in Europe. Suppliers such as McPherson of Aberlour and W H Malcolm of Carntyne help us to make numerous highly complex moves. For example, in the north, barley and grain are taken to distilleries, by-products are taken away and new-make spirit is transported south. Not many big companies would be prepared to invest in the specialised equipment that is required in some areas. The advantages that we gain from working with the suppliers that I have mentioned relate not only to cost, but to a whole package that involves service, quality and flexibility. That is why we want to work with them in the long term.
Bruce Crawford mentioned the impact that European Union directives can have on industry and we have been told that the working time directive will have a huge impact on the road haulage industry in this country. Would it not have a greater impact on foreign companies that wanted to operate here, because they would incur costs in providing a sufficient number of drivers from abroad to cover the working periods?
All things being equal, the working time directive ought not to be an issue. The implementation and enforcement of regulations, on the other hand, has been raised with us and in evidence to the committee. The industry believes that a much more rigid approach is taken to implementation and enforcement in this country than is the case elsewhere. We have no evidence to back that up, but the point has been made to us and in submissions to the committee. All things being equal, the working time directive ought to be creating a level playing field, but its implementation appears to be causing a major problem in a Scottish context.
Surely when foreign operators operate in the United Kingdom, where the directive is enforced more stringently, they must comply with the rules with which UK-based hauliers must comply. Does that make it more difficult for people who are working outside their usual area of operation to supply drivers?
It is possible that many operators who are from countries that recently entered the European Union are one-man-band owner-drivers, as opposed to logistics providers—or however they are described in a freight contracting context—who shuttle back and forth on full tanks of fuel from eastern Europe, where fuel is cheaper. I am not sure how such operators are policed, but the anecdotal evidence suggests that that is the situation.
A one-person operator probably has more difficulty with the restrictions that the directive imposes on their ability to move around than will an indigenous operator who can call on a ready supply of drivers.
Often when a driver from continental Europe brings imports to Scotland they take the back-haul opportunity, by which I mean that they take a load back from Scotland. When they do that, they rob an indigenous haulier of a route, which might also be an in-bound route. From an ad-hoc business perspective such activity creates pressure, in that routes are lost to our hauliers.
I presume that our hauliers try to take advantage of back-haul opportunities when they take loads to the continent from the UK.
Yes they do, in some cases.
I do not understand the argument that a haulier from eastern Europe who fills up his tank before coming to the UK is undercutting UK hauliers. Surely our hauliers fill up their tanks before they cross the channel.
I presume that they do so and that hauliers who cover the same routes are in the same situation. However, hauliers from continental Europe are using one tank of fuel to do shuttle routes in the south of England before they head back across the channel.
Is that a matter more for the freight industry in the south of England than for the Scottish industry?
Yes.
Scottish hauliers who want to work on those shuttle routes must also bear the high cost of getting to England. The further north they are based, the further they must travel before they can access cheaper fuel overseas.
The UK is a member of the European Union and we cannot exclude EU-based foreign operators, given that there is a single market. There seems to be little point in labelling foreign operators as bogeymen. Such operators will not go away; they are part of the marketplace and they are probably driving down costs. Surely the root of the industry's complaint is the lack of a level playing field, as the CBI said in its submission. The CBI went on to identify matters such as fuel duties, the impact of the working time directive, tax burdens and red tape, the remedies for which are the responsibility of our Governments. Instead of creating bogeymen and complaining that it is terrible that there are so many foreign operators we should ask our Governments to address the problems that the CBI described. Do you agree that if we addressed the fundamental issues, Scottish hauliers would have nothing to complain about?
Yes, absolutely.
Yes.
Yes.
We should move the emphasis of our discussion away from the notion that foreign operators are dreadful people and instead consider road haulage in the European Union in the context of what delivers the most competitive return for our businesses and consumers. That is the most logical approach.
I hope we did not give the impression that we think that foreign operators are bogeymen. I take your point about considering haulage in the European context. The industry cites as an example of its concerns the presence of hauliers from other countries, but foreign operators are not the greatest issue that affects road haulage and freight transport in Scotland.
I agree.
Sadly, we have no distilleries in the Borders. We are looking with interest at some of the rail links, such as Stirling to Dunfermline, because there are possibilities in that for us. Any investment in the rail network is good and will help with the movement of goods. None of our stock goes out by air freight; it is too expensive.
Even Johnnie Walker?
Even Johnnie Walker.
It is too expensive.
When the working time regulation that affects drivers was introduced, the UK Department for Transport estimated in its regulatory impact assessment that the regulation would add £1 billion to the costs of the haulage industry in Britain. One assumes that in Scotland there will be a pro rata figure—or even higher than pro rata. Although the regulation has been in operation for only ten months or so, is there any evidence that it has led directly to an increase in transport costs?
Yes, there is. It will be hard to judge whether the impact will be £1 billion across the industry, but we are certainly experiencing an increase in labour rates as a result of the regulation.
We have also had that feedback from some of our members in the industry.
Is an ex post facto assessment made as to whether that original regulatory impact assessment was borne out in practice? Is the assessment evaluated one, two or three years down the line to gauge whether it was correct, turned out not to be as bad as people feared or was worse than people feared?
Are you referring to studies conducted by the CBI?
Yes. Are such studies done, either by the CBI or the Government?
The starting point for us in such a project would be the feedback from our members. For example, at a simple level we would consider whether they were more or less vocal about the effects of a particular measure before it came in. From that, we would make judgments as to how serious the situation appeared to be, and whether we should do detailed research on it, bearing in mind our resources and other projects in which we were involved. One problem is that Government never stops governing and another regulation is always coming down the line.
We are surrounded by water and by thousands of miles of coastline. If we had modern port facilities, would they provide an opportunity to increase small coastal traffic of containerised goods, or open goods such as forestry products?
Some opportunity must undoubtedly exist, but how much and for what products remain to be seen. The economics of freight vary according to what is being transported and how far it must travel. We certainly have coastline, and some of our port facilities, particularly the deepwater facilities, ought to have potential for development. We can, for sure, do more with other modes of freight transport, but we must be clear about the cost and the practical impacts of each mode as it relates to each industry and sector, because the economics of freight vary from sector to sector.
In general, shipping costs per mile are far lower than road or even rail costs.
We understand the rationale behind the proposal—it offers advantages for capacity and flexibility in road haulage—but an increase would place pressure on the road network. Who would pick up the tab for the maintenance costs? We understand the logic behind the idea, but we have not considered it in great detail. We would want more guidance and soundings on that before we reached a view on whether, on balance, it was the right solution for the economy, given the fairly perilous state of many of our roads.
And bridges.
And bridges. However, the proposal cannot be discounted. Analysis is needed.
What is Diageo's view on increasing the weight limit for lorries?
I echo Alan Mitchell. We understand the attraction of the idea, but many of our distilleries are in areas where the road infrastructure is not the best. We must understand those pressures and issues.
Julia Williams said that a push was on to consider having more rail freight, and the need for more co-ordination between road hauliers and rail operators was highlighted. The CBI's submission talks about cost and practicality. It is obvious that there are barriers to rail freight. The submission also refers to Network Rail's route utilisation strategy. Will you say more about the barriers and about the way ahead under Network Rail's route utilisation strategy? Can we suggest anything to the Executive to help you to move more freight to rail?
Ultimately, the key issues for any business are cost and the time to market. Business wants the quickest and most cost-effective route to the market. Any business that can switch from one mode to another will do so. Simply going from A to B is fine, but most journeys are a bit more complicated than that. The transition in a journey that starts on road and switches to rail is incredibly time consuming and costly. The more of those transitions one builds into a journey, the more inefficient and costly the chain becomes. Economics are economics—if mode X is more expensive than mode Y, all things being equal, business will choose the cheaper option. Because of the nature and type of routes that businesses will use to bring in and move around raw materials, there will often be movement from A to B to C to D and road will often be the most effective and cost-effective way of moving goods to all those points.
Alan Mitchell is right to say that we must take into account not just the rail journey, but getting the goods to the railhead and taking them to the customer's warehouse at the end of the journey. We are exploring those railheads that are as close as possible to our physical operation. As I mentioned earlier, we have a facility in Grangemouth, where we already have some warehousing. We are taking cargo south by rail, from Grangemouth to Daventry. We use Freightliner in Coatbridge to take cargo from Scotland down to the south coast ports, where it is put on to deep-sea vessels. As Peter Smith mentioned, we are trialling a link between Linwood, where there is an established railhead, and Grangemouth. We are attempting to utilise areas where a rail network is already in place.
Thank you—that was a really helpful answer.
Sylvia Jackson asked about Network Rail's route utilisation strategy. Joined-up thinking will be required to reach decisions. We have to consider the balance in road versus rail, in freight versus commuter, and in rural versus urban. The national transport agency; the regional transport partnerships; the fact that power over the railways has come up to the Scottish Executive; the national transport strategy and, within that, the freight strategy and the rail utilisation strategy—all the bodies and mechanisms are in place to allow us to think sensibly, to bring together the right stakeholders, and to make the best judgments. We want a balanced economy; that means that we need a balanced transport infrastructure. I do not think that anybody knows what that will look like in practice; however the structures and frameworks are in place.
That is very helpful. Would Julia Williams provide us with more information on her experience of the existing rail network, and on the help that could be offered with freight? That information would be helpful to the committee.
Okay.
I share the concern expressed by Diageo and the CBI about the level of fuel tax, which is the highest in Europe and quite outrageous, and about the working time directive, which is possibly the worst piece of legislation produced in the past couple of decades. However, with respect, I do not really think that questions on those issues are best directed at you. I will perhaps ask other witnesses about them later.
We certainly would use Hunterston. Two of our main packaging plants are at Kilmarnock and at Shieldhall in Glasgow. Shieldhall produces about 22 million cases a year—it is the fastest bottling line in the industry—and Kilmarnock produces 10 million or 12 million cases. We would not use Hunterston for all of that, but the attraction of Hunterston is the access to deep water, which would obviate the need for the same number of containers to go across to Grangemouth for the feeder vessel to Rotterdam. I am not sure about the precise numbers, but we would support the use of Hunterston.
We would use it, but the question is whether the shipping companies would be attracted to Hunterston before going to ports in our 180 markets. The challenge is to make Hunterston attractive enough for some of the bigger shipping companies to bring their vessels to it. If they came, we would use them; there is no doubt about that.
Good. That is encouraging. I hope that we will hear more evidence about the feasibility and relative costs of using Hunterston—and, indeed, Scapa Flow, which is the other option that has been mooted in some submissions. As one might expect, there is some scepticism in the existing ports that more than feeder operations could be made financially viable. Mr Mitchell is not the only one who would subscribe to the view that there is a risk that, if the port was not affordable, companies would not use it. We can come back to that matter.
I thank you for the opportunity to wax lyrical on Scotch whisky. It is always dangerous to make great predictions; when does a blip become a trend? However—touching all the wood there is—we are certainly seeing some good movement in the industry at the moment.
You refer, in paragraph 7 of the current issues section of your submission, to the extra costs that result from the increase in Chinese exports. I presume that those higher costs result from there being more volume to ship without the same level of increase in the shipping industry's capacity and that, therefore, the costs go up because the containers are simply not available as they are being used in the Pacific. The cost is being pushed up by the growth in international maritime freight that has been caused by the resurgent growth in the Chinese and Indian economies. I hope that we will be able to consider that in a wider context, because it seems to me to be relevant for the whole topic in the longer term.
Yes. If we want to shift freight from road to rail, the opportunities for us lie primarily in transporting containers of cased goods to global markets. You are right. We buy some 460,000 tonnes of cereals. We have a policy of buying from farmers in Scotland and some 90 per cent of our raw materials come from Scotland. We produce animal feeds as part of the distillation process. Individual farmers can turn up with their tractor and trailer to take away a load of draff, or 25-tonners can take away animal feeds for further processing. Those animal feeds are mainly used on farms in Scotland, although some are exported to places such as Belgium. However, the freight movements for our production processes by and large involve short journeys within Scotland; the big rail opportunities lie in transporting containerised goods.
I have a tiny point to make about containerised goods. We shall soon hear from Friends of the Earth Scotland, which has said:
The issue takes us back to what Julia Williams said about facilities at railhead interchanges, in which we think much more investment is needed. I see the logic behind having larger W10 containers, which would mean that routes would be used more efficiently, but the issue is more about road and rail interchanges.
Routes might be used more efficiently, but I suppose that many tunnels would require to be re-engineered so that the larger containers could get through them. Would the investment that would have to be made be worth the return for your operations?
I am afraid that I am probably not competent to answer that question.
I do not think that it would be. If there are bigger containers, significant investment by the hauliers would be required in trailers to take equipment and to put things on to the rails. I do not have enough information, but my gut feeling is that there would not be enough return for us on the investment that would be required.
That is useful to know before we ask our next panel questions.
That concludes members' questions. I thank Julia Williams, Peter Smith and Alan Mitchell for attending.
Thank you for the opportunity to answer your questions. You will be aware that you solicited evidence from Friends of the Earth, and I know that TRANSform provided evidence in advance.
Thank you. Does Colin Howden wish to add to that?
I have nothing to add, other than to put on the record the fact that our paper was submitted jointly with Freight on Rail, which was not able to provide a witness today, although it is willing to come back at a later date.
I open up the meeting to questions from members.
I thank Duncan McLaren and Colin Howden for coming to give evidence. You heard in the evidence from our previous panel that more than 70 per cent of Scottish firms sell more than half their goods and services in Scotland, which I suppose makes you reasonably happy, given your support for economic localisation. However, is that happening at the expense of a declining manufacturing base for export? How do you view the whisky industry in that context?
I suppose that the whisky industry is an exception. We would support its continued success as long as it is managed in a way that does not create excessive environmental impacts. I was pleased to hear that Diageo was making efforts that run ahead of many in other sectors to shift to rail and look for the targeted investments that will allow it to use rail and sea transport rather than road transport. To my mind, that adds up to the potential for a sustainable export industry.
To flip that round a bit, can you tell us which manufacturing or other export industry in which Scotland involves itself is not a good thing?
That is an interesting question. That is not the approach that I expected this afternoon.
The question is an inevitable consequence of the argument about economic localisation.
The starting point for economic localisation is to consider whether we can better meet our needs in Scotland through Scottish industry supplanting imports, rather than through attempting to increase Scottish exports as the first principle.
Yes, but the converse is also true. If we had such a policy in Scotland, other economies would operate in the same way and therefore Scottish manufacturing exports would have a more difficult time. Therefore, the question about which industries we should stop or get out of still arises.
The Scottish economy has shown that it is not highly competitive in manufacturing exports. Our recent growth has been in industries such as financial services. I do not see why we should hanker after and attempt to protect industries that are otherwise proving to be uncompetitive. To give an example that illustrates the sort of investment in economic localisation that I am looking for, at present, the food that is served in Scottish hospitals is road freighted in from Wales. Why not procure the food from local providers in Scotland? That would provide fresher, healthier food, have less environmental impact and deliver economic benefits for Scotland.
I accept that there are some arguments about the food agenda, but I could go on forever about the issue. Does your argument mean that we should use prawns from the west coast of Scotland in Scotland rather than export them to Spain or France? We could take the argument down to an incredible level.
The key point is not to get down to that level of interventionism in the economy, but to set the principles that would allow the economy to drive towards sustainability. To be frank, that steers us toward issues that are the territory of the UK Parliament, such as fuel prices and the overall costs of transporting rather than producing locally.
I am struggling to understand one statement in your submission, but I am sure that you will help me get there. It states:
My apologies if the language is a bit technical. The so-called two-way street hypothesis is relatively well-known in transport circles. The idea is that if we improve access in one direction, we also improve access in the opposite direction, which raises concerns for peripheral economies. To give an example from outside Scotland, when the A55 in north Wales was improved, the Post Office, gas companies and other firms centralised their distribution facilities in Warrington and Chester rather than continuing to operate along the Welsh north coast. As a result, jobs were lost rather than gained in the more peripheral part of the economy, and the impact of the improvements in transport infrastructure was directly contrary to the expressed aims of those who had chosen to invest in the improvements.
We have heard from the CBI and others about the need to get goods to markets at reasonable cost and on time. The argument was that we should invest in our transport infrastructure to help businesses to do that because, otherwise, they will not be sustainable. Perhaps I have got the CBI wrong entirely, but that is what I think that I heard.
I believe that you have interpreted the CBI correctly. Far be it from me to say that I know better, but I believe that the CBI is happily indulging in the game of trying to persuade Government to improve transport infrastructure to get a free good. As business would benefit from that and would not have to pay any more for it, the CBI says, "Let's do it." In my opinion, however, the CBI is not in fact expressing a view about the net benefit to the economy or about the potential for employment in Scotland arising as a result of that.
In contrast with improving road links, you would obviously not be so agin upgrades to the rail network—or would you?
If you follow through the paper that we have presented, you will note a sequence of arguments. At the top level, we set out the relationship between freight, or transport, and the economy. Further down, we are saying that, accepting that we have a certain amount of freight transport at the moment, it is desirable to shift that from the most damaging modes, which are air and road, to the least damaging modes, which are rail and water-borne transport. Therefore, investment should be targeted in such a way as to stimulate that modal shift, rather than at increasing—in my view, in a misguided way—the overall amount of transport.
If the Forth road bridge closes to HGVs in 2013, what are we going to do?
That is a good, if hypothetical, question. Personally, I would want all the facts at my disposal about the condition of the bridge before suggesting what should happen. My understanding is that, early next year, the Executive will receive the findings of a report into the current condition of the bridge and the potential for extending its life. At that point, I would feel equipped to answer the question.
Surely it is the job of this committee, of Government and, I would have thought, of non-governmental organisations to deal with such what if questions, so that we can start to do some forward planning.
The what if is addressed by gathering the information that will allow us to understand whether there is a real risk, what the scale of that risk is and what the options are. At the moment, I would be forced to conclude that it would be premature to advocate the commencement of work to construct a new road crossing.
If the findings that the Executive has commissioned consultants to produce show that there is no fix for the present bridge, where would that leave us?
That would leave us having to consider the costs of and alternatives for different replacement crossings.
In the section of your submission that is headed "Freight and the economy", you state:
Thanks for that question, Mr McMahon. I understood that this was a transport committee, rather than a venue in which MSPs' local interests were to be paraded.
To clarify, in our inquiry we are considering the environmental and economic impacts of the freight transport industry. It is therefore not outwith the scope of the inquiry for members to raise questions about economic impact.
Mr McLaren tried to dodge a couple of other questions and I can understand why he wanted to dodge that one as well.
I cannot offer any information on that because the Executive does not provide data on the green jobs strategy broken down by region. However, the strategy would support tens of thousands of jobs throughout Scotland. I do not expect that the number of jobs that are supported by freight transport in your locality would outweigh that benefit to Scotland.
Can you give any examples—from Europe or elsewhere—of successful initiatives to move freight from road to rail?
There are certainly countries in which rail has a much greater modal share. I do not know whether Colin Howden has any information on that.
That is not a question that I prepared for, but an example that comes to mind is Switzerland, where, in the past 10 years or so, there has been a concerted attempt to move cross-Alpine freight trips from road to rail. That came about as part of a citizens' initiative that was voted through by referendum. It was a popular initiative because there was a lot of concern about the impact of heavy goods vehicle movements through Alpine valleys. That is an example of a popular initiative to shift freight from road to rail.
Does Switzerland have similar export and import statistics to Scotland?
I cannot help you on that. I would have to look into it, but freight transport in Switzerland certainly involves long-distance flows—stuff comes from Italy and goes to northern Europe and vice versa.
Not everyone lives near a nice rail network that can carry all the freight, so there are challenges. You accept that there will always be some road freight, but you say that we should improve the rail network. Do you have any figures on the investment that you expect? I would have expected Friends of the Earth to have bombarded us—if not in your submission, then perhaps in an e-mail—with information on the investment that would be required to bring the rail network up to the standards that are found in other parts of the world. How can we learn from other countries if we do not have that information? Is Friends of the Earth showing any creativity by setting out examples of what we should be doing?
I cannot answer for Friends of the Earth. However, I can answer for TRANSform Scotland and I can give examples of rail freight projects that we want the Executive to take forward. We tend not to provide evidence papers that simply comprise wish lists of infrastructure projects, although I can certainly list some of the projects that it would be sensible for the committee to consider in terms of rail freight investment.
What impact would those projects have in the context of the challenges that Duncan McLaren mentions in his submission? Would they have a massive impact? Would the road freight trade be put out of business or would there be a percentage decrease in its business?
Road freight will certainly not be put out of business. Tom Hart's evidence paper says that between a third and a half of all freight tonne-kilometres could conceivably be carried by rail, but a lot of short trips—white-van deliveries, milk floats and so on—will never be on rail. You could spend infinite amounts of money on rail freight, but you will still need a large amount of road haulage.
It would be interesting to hear more about the W10 issue, because that has worked in the south-west. Is expenditure required first on the Inverness route or on the Aberdeen route? How much do you estimate will be needed to do that upgrading work? Resources are finite, but the committee might judge that upgrading the route to Aberdeen, with fewer tunnels and lower costs, might be an effective way to get more of the oil-related goods off the north-east corridor on to rail and to take all the food-transport issues out of the equation. A list of priorities, indicating the direction in which you think we should go first with estimates of what it might cost, would be helpful.
I would be happy to come back to the committee with something like that.
We would certainly be happy to do our best to help, but I urge the committee to ask Network Rail and the rail industry what the investment would cost. That is not information that we have to hand and we would have to invest time and resources in gathering it.
I shall ensure that we ask those questions of the appropriate people.
The information that the committee has received from its adviser about the level of tax on diesel and the cost of diesel in various European Union states suggests that the UK has the highest tax and the highest costs by a considerable margin, to put it bluntly. The figures that we have been given say that the cost of supplying 1,000 litres of diesel in the UK is €1,400, compared with an average cost in EU states of just under €1,000. Even worse, the average level of duty—tax, in other words—is twice as high in the UK as it is in other EU states.
Colin Howden is prepared for that question.
As members might expect, we were expecting that question. First, I refer the committee to its adviser, Professor McKinnon. I will quote from his paper, "Haulier than Thou: An Assessment of the Road Haulage Industry's Grievances", which was published in 2001. When talking about fuel taxes, he says that the analysis that Fergus Ewing cited is
Would you try to answer the question that I asked? In the paper—
Let the witness answer in full—then you can come back in.
I want clear answers. Other members have also had problems with that today.
I would like to give the witness the chance to answer the question, then I will let you back in, Fergus.
I will address the question of whether diesel tax is too low. I cite good practice and refer you to the "Surface Transport Costs & Charges Great Britain 1998" report by the Institute of Transport Studies, which is generally seen as the state-of-the-art report in the UK on the external costs of road haulage and car use, which include environmental, congestion and road damage costs. The report, which was based on 1998 data and published in 2001, concluded that the road sector covered between 36 and 50 per cent of external costs. We take from that that road use does not cover the external costs of environmental damage, congestion and accidents. That is not to say that we would not recommend that you increase taxes and charges by 50 per cent or two thirds. It means that to move towards an optimal economic result in the transport sector, you should look to increase charges, especially for vehicle trips and freight movements that use more congested parts of the network and which have a higher environmental cost.
My question was addressed to Duncan McLaren, who has not yet answered it.
As I said, Colin Howden prepared our response on this issue. Friends of the Earth policy on fuel prices is that increases should be progressive and well forecast, rather than sudden hikes, so that the industries involved can plan and deal with them.
I am familiar with the argument that Mr Howden has advanced, which is not new. I accept that there are other factors. Incidentally, the analysis that he has given today is hotly contested. I have no doubt that we will hear our committee adviser's views on the matter, but I know that the RHA argues that the comparative study to which Mr Howden referred is flawed and that the tax burden in the UK is significantly higher than it is elsewhere. It is highest of all in Scotland, because we tend to have higher pump prices and there is further to travel, especially for hauliers that are involved in long-distance haulage and export.
I will respond to the point that you made about information. I understand that the surface transport costs study is still the state-of-the-art report on marginal social-costs pricing in transport, although it may have been overtaken by something else. That, rather than any industry-funded reports to which Fergus Ewing may want to refer, is the key report. It suggests that the road sector covers between 36 and 50 per cent of its external costs. By those I mean costs to the environment, climate change costs and the cost of accidents—people getting knocked over and so on. That does not mean that we recommend that transport prices should be increased by the commensurate amount immediately, or even at any point, or that there should be full-cost pricing; rather, it means that there should be increasing transport prices, so that the sector covers its external costs.
If you say that the transport sector meets only a third of its costs, you are arguing that the contribution that it makes should increase threefold. Is not that correct?
Not necessarily, because there would be other equilibrating effects as prices were changed. We are not dealing with a static situation.
In your submission, you say that the sector should meet "full external costs". Can you put a figure on what you say we should do, instead of just telling us what we should not do?
I understand that fuel duty is a matter for another place. Had I been appearing before a Westminster committee, I would have expected to prepare for such a question. As I said, we support the principle that in due course the sector should cover all, or the majority of, external costs and that that should be done such that the industry can plan for and adjust to increasing prices. As Colin Howden said, the external economic environment is such that if the industry does not plan for increasing prices, it will be making foolish assumptions about the future development of the economy.
I appreciate that you cannot answer the question today because you had not prepared for it. I invite you after the meeting to answer the question directly in writing, in a paper addressed to the committee.
If the committee as a whole wishes me to answer the question in writing, I will happily do so.
It is for other members to say what they think, but I certainly believe that Eurocentral is a national as well as a local issue. I thought that what Duncan McLaren said about Michael McMahon parading that as a local interest was wrong. I hope that other members will agree that it would be useful to hear what FOE is prescribing rather than just what it is diagnosing. I had other questions, but I might just leave matters there.
As Mr Ewing has asked what we are prescribing, he must give me the opportunity to run through what we are prescribing. There are many measures that the committee could recommend that the Executive should take. Fuel prices is an issue on which it has only a peripheral ability to change UK policy.
With respect, that is what I was asking about. I would be delighted to read your other ideas as well, but perhaps we could leave them for another time. I hope that you will be able to tell us how much higher you think fuel duty should be. It seems to me that your answer is that it should be 300 per cent higher and that it should therefore cost about €4,200 to fill a tank in the UK. That would mean that we would have no haulage, no haulage businesses and no goods in the supermarkets and that industry throughout Scotland would be decimated. The effects would be particularly bad in my constituency, in relation to which you have already said that the port of Mallaig is apparently dispensable because it commits the sin of successfully exporting shellfish to Europe.
I do not think that that was exactly what Mr McLaren said. That speech was your interpretation of what he said. Out of fairness, I will give Duncan McLaren a brief opportunity—I know that other members still have questions—to set out some of the devolved dimensions of transport that he thinks that the committee should be considering.
The committee's priority should be to take a close look at the opportunities that the Planning etc (Scotland) Bill offers. In particular, it should ensure that the bill includes a duty to promote sustainable development at all levels of the planning system from the national planning framework down to local planning decisions, such that the external costs of any transport needs associated with those planning decisions are taken into account. That will help to promote the mixed local development that is both job rich and environmentally beneficial.
The committee might want to think about encouraging the Executive to produce an analysis of the true costs of transport in Scotland. Some of the data that are being used are quite out of date. Although I think that "Surface Transport Costs & Charges Great Britain 1998" is still a state-of-the-art report, it uses UK data from 1998—it contains no disaggregated information for Scotland and does not pick up some of the genuine regional diversity that exists throughout the country. We need to be able to compare the true cost of transport in central Edinburgh with the true cost of transport in a remote part of the Highlands, for example. A practical recommendation from the committee's inquiry would be to ask the Executive to do such analysis. It would be entirely impractical for the committee to ask a body such as TRANSform Scotland to produce a full true-costs analysis. If the institute for transport studies at the University of Leeds is not prepared to come up with figures on what the tax and charge levels on fuel should be, it is daft to ask a small NGO to do that. I suggest that it would be better to aim that recommendation at the Executive rather than at us.
Fergus Ewing has covered much of the ground that I wanted to cover, but I wonder whether you could clarify the issue of growth. In the submission, the section on air freight refers to
The first priority on air traffic is to constrain the rate of growth. According to the Tyndall centre for climate change research, which is the UK's prime academic institute on climate change, if air traffic growth is unconstrained, every other sector will have to reduce its climate change emissions almost to zero. That is clearly unacceptable.
So, in fact, you are saying that it is desirable for air freight transport levels to grow, albeit by a more modest amount, but that there should be an absolute decline in the levels of all other transport use.
I indicated that the first priority for air travel is to constrain the rate of growth. Clearly, in the long term, that growth will be capped in the same way that road transport has been capped. Given that, at the moment, the overall impacts of road transport are so much greater and that its other impacts have been widely identified, there is a case for reducing overall road traffic levels. I suspect that there will come a time when there is a case for reducing the overall air traffic levels.
I cannot comment specifically on air freight but, as far as air passenger figures are concerned, we have argued that we can probably squeeze 1 to 2 per cent of efficiency gains out of the air transport sector. If we wanted simply to stabilise emissions, we could probably tolerate that level of annual air transport growth. However, if we want to reduce emissions—bearing in mind, of course, that the UK Government has set a target of a 60 per cent reduction in climate change emissions by 2050—we will have to stop considering relative improvements and start thinking about an absolute reduction in transport trips, be they by road or by air. That is certainly TRANSform Scotland's position.
Do you seriously believe that, by investing in rail and achieving a modal shift, you can make absolute reductions in road transport? If so, have you made any assessment of how much would have to be invested to make the modal shift that you desire?
As I said earlier, we need to start preparing for that. After all, we are facing not only climate change with all its economic and environmental impacts but oil depletion. If we have exhausted 50 per cent of global oil resources, that situation will not improve in future decades. As a result, it would be more sensible to prepare ourselves for a soft landing and build in more sustainable transport provisions instead of more unsustainable provisions.
On a broader economic policy point, from my reading of the submission, you appear to oppose the concept of a free market in the movement of goods among EU member states.
If that comment is directed at me, I have to say that I am not sure where you got that impression.
If I have understood your evidence correctly, you are talking about the need to reduce transport movement. I also believe that you said that we need to promote greater self-sufficiency.
That does not necessarily constitute opposition to a fair and free market. It suggests—
If someone in country A wants to buy from someone in country B and both countries are member states of the EU, should the parties be free to choose or should the state intervene to prevent them from trading?
The state should not intervene. We come back to the question whether transport is paying a fair proportion of its external costs. If transport were to pay a fair proportion of those costs, it would become less attractive to people to indulge in long-distance trade and more attractive to seek more local trading opportunities.
People in Scotland would pay more for their goods.
Not necessarily. If they did pay more, there would be a return in higher wages in Scotland.
That is a non sequitur. Are you seriously suggesting that people in Scotland should pay more for goods that we import from elsewhere in the EU?
That will be the long-term consequence if the external costs of such goods are not being met, which appears to be the case.
We will all be poorer as a result.
I draw the committee's attention to the Scottish Executive document "Choosing Our Future: Scotland's Sustainable Development Strategy" in which, as I understand it, the Executive acknowledges that the measurement of prosperity does not rely entirely on the economic cost of goods that are bought and sold in shops in Scotland. The Executive acknowledges that people regard many other things as important in the richness and well-being of their lives. For example, people are concerned about the likelihood of disastrous events such as a child being mown down on the street by a heavy goods vehicle. They are concerned about the cleanliness of the air that they breathe. They want their grandchildren to enjoy a world that does not face climate chaos. We would be much the richer in that regard if we started to move in a unified way with our European partners towards full internal costing of the goods on our shelves.
Is the Scottish Executive's sustainable development strategy compatible with the Executive's number 1 priority, which is to grow the economy, as the Executive keeps telling us?
The Executive says in its sustainable development strategy that its priority is to grow the economy,
Yes, absolutely.
My view is that high levels of economic growth would be consequential on a policy framework that pursued sustainable development, because of the investments that would be needed, for example massive investments in the rail network and in renewable energy. We encounter problems when we try to pursue economic growth by attempting to compete with countries that enjoy a different balance of costs, such as Germany, Holland and Switzerland, in the core of Europe, which service a large market in a small locality. It is not possible for Scotland to compete with such countries on their terms. We must consider what makes Scotland unique, such as innovation or industries such as the whisky industry, in which we have an advantage as a result of our unique geographical position.
I want to chip in briefly to make a point anecdotally. If I took a lorry and mowed down the Local Government and Transport Committee, or perhaps just Fergus Ewing, the country's gross domestic product would increase, because the police and ambulance services would be called and, if it was thought that I had acted maliciously, I might go to court and be sent to jail. GDP might increase, but I am not sure that the sum total of human happiness would increase—of course, that is a moot point.
When the first railway opened in Britain, a member of Parliament was killed by the train.
That is correct. These things can work both ways—they are multimodal.
The current rate of deaths on rail is a tiny fraction of that on the roads. Among road vehicles, lorries are disproportionately responsible for fatalities.
I agree whole-heartedly. It is a pity that the more hysterical do not agree, as that very point has been made on a number of occasions in the past 10 years.
That brings us to the end of questions. I thank Duncan McLaren and Colin Howden for their evidence.
Happy motoring.
My bike will suit me fine, thank you.
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