HL Deb 01 March 2005 vol 670 cc76-92GC

4.34 p.m.

Earl Attlee

rose to ask Her Majesty's Government whether, in order to reduce tax and duty evasion, HM Customs and Excise have determined the feasibility of requiring all heavy goods vehicles leaving Great Britain to do so with a nearly full tank of fuel.

The noble Earl said: Before introducing my Unstarred Question, I should point out that, as your Lordships will be aware, we are acting as guinea pigs because we are the first to use the Grand Committee for an Unstarred Question. It may be an honour, but to be honest, I do not approve of this development. However, I have agreed to do so because my objective is to ask what progress the Government have made in assessing the feasibility of my fuel policy idea. In doing so, I shall try to explain in greater detail how it might work.

I am not really trying to hold the Executive to account; I think that that process should take place only in the Chamber. However, I am grateful for the opportunity to ask my Question this evening. Before saying anything substantive, I remind the Committee that I am the president of the Heavy Transport Association.

For many years, the fuel price on the Continent has been considerably lower than in the UK. Realistically, that is not likely to change even if there were a change in government. Some goods vehicles operators suggest that fuel tax and duty should be slashed. That is naïve. The amount of duty paid by motorists or goods vehicles operators is in proportion to the size of the vehicle and the distance travelled. Road fuel tax for goods vehicles is not a particularly regressive means of taxation. Additionally, it encourages efficient use of road fuel.

The problem is that operators, both United Kingdom and foreign-based, are using cheap continental fuel in heavy goods vehicles within the United Kingdom. Foreign operators now dominate the cross-Channel traffic. Noble Lords should be aware that foreign trucks now cover about 900 million kilometres per annum on UK roads. Additionally, some operators in Kent are sending solo tractor units across to Belgium or France at unsocial hours at very cheap ferry crossing prices, refuelling the vehicles and bringing them back. If they use that vehicle for haulage in the UK, that is undesirable but legal; but if the fuel is cross-loaded into another vehicle, that is illegal but hard to detect.

The availability of low-cost foreign operators depresses the market rate for haulage in the UK, even if in actual fact cabotage is a very small proportion of the UK haulage markets. Very low-cost road haulage operators adversely affect the market for road haulage; and no doubt road haulage not only in the UK but on the Continent as well. No doubt the noble Lord, Lord Berkeley, will have something to say on that.

Some time ago, the Germans experienced a similar problem with adjacent states having much lower fuel costs than the German fuel cost price. Their solution was to measure the quantity of fuel in the tank and if it was in excess of 150 litres they would tax it. But it was very complicated, caused significant delays and would now probably fall foul of EU competition law.

The Government are proposing their lorry road user charging scheme, and no doubt the Minister will be extolling the virtues of that scheme. But I expect that my noble friend Lord Luke will have some searching questions for the Minister about the LRUC.

The Government are proposing fitting satellite tracking equipment to all 400,000 trucks operating in the United Kingdom. Operators will be charged per mile travelled, but the charge will be modulated according to the time of day and the particular type of road used. It might be quite expensive to use the M25 at nine o'clock on a weekday morning.

There are some who believe that lorry road user charging is inevitable. However, in order to deal with the problem of cheap foreign fuel and cheap continental operators, operators will also receive a rebate on the price of the fuel used. There will therefore be a balance between the fuel rebate, on the one hand, and the mileage charge on the other. Operators will pay the balance of the two to the Customs and Excise.

A desired end-state must be that all heavy goods vehicle mileage covered in the United Kingdom should be done with fuel that has had UK tax and duty paid on it. My idea is very simple. All heavy goods vehicles leaving Great Britain should do so with a nearly full tank of fuel. Clearly, operators will bring in their vehicles with a full tank of fuel in order to minimise their costs. They will run round within the United Kingdom and refuel, or maybe not. But before leaving Great Britain, they will refuel. Now, if all vehicles had to leave with a completely full tank, this would cause mayhem at the port of Dover. However, because they will have to be only nearly full, they could refuel their vehicles at Clacketts Lane or Thurrock services and on arrival at Dover or the Channel Tunnel, they would still have a nearly full tank.

Enforcement would be simple. A civilian customs auxiliary would take a quick look inside the tank to see if it is nearly full. If there is thought to be a problem, an official Customs officer would take over. The principle would be that a heavy goods vehicle would not get on to the ferry or enter the tunnel if it did not have a nearly full tank of fuel. Since heavy goods vehicle drivers and operators hate delay, particularly missing a ferry, they will ensure that they are compliant by filling up late enough in their journey.

It should be possible for a continental operator to deliver, say, to the East End of London and return to Dover without needing to refuel at all. But noble Lords will be aware that a serious problem exists in Northern Ireland, both with laundered fuel—on which Customs and Excise do tremendous work to try to detect—and with legal cross-border purchases and DERV smuggled in from the south. Since the Good Friday agreement, DERV sales in Northern Ireland have fallen by well over 100 million litres a year.

My proposal will not work with respect to between the north and south of Ireland because the border is open and there are too many road movements. But that does not matter too much because under my policy, HGVs leaving Great Britain—which does not include Northern Ireland—for Northern Ireland would have to leave with a nearly full tank of fuel.

As a further and rather more controversial proposal, consideration could be given to harmonising tax and duty on fuel between the north and the south of Ireland. There would then be no point in purchasing fuel in the south because it would not be any cheaper, and if a haulage company or garage was offered a tanker-load of cheap fuel, it must be laundered. It could not smuggled, which in Northern Ireland is probably seen as being reasonably respectable. However, no haulage company would want knowingly to purchase a load of laundered fuel because it would damage its vehicles.

To be honest, the object and motivation behind devising my idea was to torpedo the LRUC, but in this respect my policy may be a miserable failure. I may have done quite the opposite. A weakness of the LRUC is the complexity of any rebate scheme. Moreover, the LRUC is not expected to come into operation until at least 2008. My idea could be implemented fairly quickly, but it would drastically simplify the LRUC by eliminating entirely any need for the rebate scheme. It would also eliminate the need to employ at least 1,000 civil servants or contracted staff to administer the scheme. However, I accept that that might be a little disappointing for senior officials in Customs and Excise.

I have one anxiety about my idea that might possibly be shared by the Minister. My plan envisages refuelling all heavy goods vehicles within about 50 miles of the port of Dover or the Channel Tunnel. However, there may not be sufficient refuelling capacity in south-east England, especially in Kent. Extending the radius to include South Mimms services on the junction between the A1 and the M25 would not help since that motorway service area for trucks is already grossly overloaded. We know also that provision for rest facilities for HGV drivers in the UK is dismal, to say the least.

A possible solution might be to create refuelling points exclusively for heavy goods vehicles. They could be designed to cope with a very high throughput with no rest or refreshment facilities. They would exist purely for refuelling HGVs. The gain would be very significant increases in Treasury revenue. I am thinking along the lines of the German rastplatz halt on autobahns where there are no facilities, but you can pull off the motorway. They might not be much more than super lay-bys, so they would not take up a huge amount of land, but trucks could be refuelled quickly. However, it may be that the Minister has identified another show-stopper. I hope that he is in a position to explain any such proposal to us.

I first proposed this scheme on 17 January during Starred Questions and I was extremely grateful to the Minister for his response at the time. I now look forward to his careful and considered response to my idea.

4.45 p.m.

Lord Berkeley

I congratulate the noble Earl, Lord Attlee, on achieving this Unstarred Question in the Moses Room. I rather like this room because the five of us might have rattled about a bit in the Chamber. The important thing is that we are able to have this debate. Whether it attracts any more publicity is open to question, but I think that the Moses Room is a good place.

I declare an interest as chairman of the Rail Freight Group. I shall not talk much about rail freight, except as it affects issues of competitiveness and to say only that there is a need for fair competition. I certainly favour road user charging for freight and I have not yet been persuaded that I should not. It will provide a chance for us to see how it works before a scheme is introduced for cars and other vehicles, which I am sure will come eventually.

The key to all this is to ensure that payment is made at the point of use. Charges should be variable depending on where you are and when you are there. That is a good concept which will have to be introduced, probably for all vehicles, as soon as the technology is in place. I do not think that it is yet working properly in Germany, but it most likely will do so quite soon.

The proposal put forward by the noble Earl is very interesting. As he has said, it has the advantage of simplicity. We must take great care to ensure that we do not go into a kind of "foreigner bashing" mode. I do not suggest that the noble Earl has done that and I am not going to because I believe that, if they operate legally, continental drivers have as much right to be here as anyone else. This is not about foreigner bashing, even though people do talk about that at times.

However, as the noble Earl said, there are clearly problems at the moment. I am in frequent communication with a couple of trucking companies based in Kent—perhaps for historical reasons, although it does not matter. They tell me about the frequency with which lorries arrive over here with one of their six axles missing. That sounds a little Heath Robinson. although I do not think that the work is carried out in a blacksmith's. One axle is replaced with an enormous fuel tank containing a very large amount of fuel.

Such lorries can do their cabotage in the UK for what may be many weeks, but the disadvantage is that five axles have to take the weight that should be carried by six, resulting in extra damage to the roads. That, I think, is quite significant. Over the past few months I have tabled one or two Questions for Written Answer about enforcement. I have been told that the Vehicle Inspectorate does not, cannot and will not undertake enforcement in the vicinity of ports because of complaints that if such inspections took place outside their port—I include the Channel Tunnel in these comments—drivers would find out and make for another port where there was no enforcement. That is only hearsay evidence, but I suspect that it could be true. Indeed, if the inspections were undertaken too often, someone might make a complaint about foreign drivers, although in fact this is done by drivers coming in from the Continent rather than foreign drivers, who are being unfairly targeted.

However, the situation is bad and it is true to say that a number of UK haulage companies are in severe financial difficulties or are going bust as a result of the problem so well described by the noble Earl, Lord Attlee. His proposal provides a very easy way of levelling the playing field.

Looking at whether it can be done, I worry about the definition of "nearly full". It is a point about which lawyers would love to argue: how "nearly" is nearly?

Earl Attlee

My proposal envisages regulations which would mean that the number of litres allowed in the tank of, say, a maximum-weight artic would enable a driver to get from Clacketts Lane services to Dover with nearly enough fuel in the tank, even if his vehicle does six miles to the gallon. However, if a maximum-weight artic does six miles per gallon, it is a seriously sick vehicle. The allowance would depend on the configuration of the vehicle. A little four-wheeler would have a smaller allowance because its fuel consumption would be lighter.

Lord Berkeley

I accept what the noble Earl says. I am sure that there is a way of doing it, but I still worry slightly. I hope that that is not the reason that Ministers will say it is not possible—that is my concern. The noble Earl says that there is a problem with filling stations in Kent. I spent 10 years working on the Channel Tunnel in Kent, so I know it pretty well. There are not that many, but there probably could be a lot more. I would not rule out the Channel Tunnel or the port of Dover, which are the two biggest ports in Kent. However, there are ports in other counties, including Southampton and all the way up in Humberside. We must look at the whole of the country when considering getting to the Continent, leaving Ireland aside.

The Channel Tunnel has a refuelling point but it is on the incoming side, although there may be a way of sorting that out. It may not be big enough. I do not think that many people use it because only a fool would fill up in the United Kingdom having just come from France. That is a possibility.

I would have thought that Dover would have found some way of providing for refuelling if it could make some money. Let us face it: if the other tunnel made enough money on fuel, it might save its financial bacon, so it might be quite a good idea. Rastplatzen sound fine. I trust that there are toilets in the German ones; it would be pretty horrible if there were not. Again, I am sure that there are places in Kent where you could fill up. The issue certainly is not insuperable and it has the advantage of real simplicity.

The noble Earl, Lord Attlee, said that it would take 1,000 officials to administer the rebate scheme. It sounds very complicated; I do not know whether it involves 500, 1,500 or more. It compares unfavourably with half a dozen people going around with dipsticks if that is required. The noble Earl's idea is very attractive. I hope that the Minister will develop the positive answer he gave in response to the Starred Question tabled by the noble Earl. I will be interested to see how the matter can be taken forward as it is well worth looking at.

4.52 p.m.

Lord Bradshaw

The problem of foreign lorries is huge because they do not pay any tax in the United Kingdom and they buy little or no fuel here. They also flout our laws by overloading. They probably do not take account of drivers' hours regulations and they block our roads. Like noble Lords who have spoken earlier said, this is not an anti-foreign rant, but it is a plea for equity and fairness.

The Channel Tunnel is no solution unless radical steps are taken to make freight access competitive with ferries and to overcome French railway resistance to "throughout operation", which we have not overcome. I believe that the Channel Tunnel is heading for financial disaster unless some sort of reconstruction can be arranged. It will result, I am told, in lots of banks spending lots of money in France, trying to get their money out.

The proposal of the noble Earl, Lord Attlee, is elegant in its simplicity. I do not believe that it is safe to encourage increasingly large quantities of fuel to be carried on ferries. Lorries are big vehicles, and when a ferry is full of them it carries a lot of fuel. I am not sure whether that is a good idea, but I will be interested to hear what the Minister has to say.

Lord Berkeley

Does my noble friend agree that many safety experts believe that it is safer to have a tank full of fuel than one with a little bit in the bottom which is full of fuel vapour and so on?

Earl Attlee

Further to that, there would be little point in losing load capacity in a heavy goods vehicle by having a big tank. Drivers would not be able to run around in the United Kingdom using cheap continental fuel prices, so they might as well have just a standard-size tank. My policy would, to an extent, address the noble Lord's concerns.

Lord Bradshaw

Yes, it would, to some extent, and I take the point that a nearly-empty tank is more explosive. However, if a ferry tips over, those considerations go by the board.

That brings us back to the issue of road pricing, to which the noble Earl, Lord Attlee, referred. We all know what has happened in Edinburgh recently. I must ask the Minister, because it is an opportunity to raise the issue, whether a referendum is the best way of determining such an issue.

Lord Berkeley

Democracy is bad!

Lord Bradshaw

I am not saying that democracy is bad; I am saying that the way in which referenda have recently been conducted in this country shows that there is enormous influence exercised by people who have money to spend. They may be editors of local papers and people who run local radio stations. They are not what I call the electorate but the influencers of the electorate. We must be careful to ensure that people decide as a result of careful consideration rather than blatant misrepresentation. What does the high turnout in Edinburgh tell us? What were the people voting for? Were they voting to pay less tax? Were they voting for more congestion? Were they voting against better public transport? Were they informed voters or was it a manifestation of sheer prejudice?

Congestion charging can work. Twenty years ago I was in Oslo, where the system worked perfectly well. At the time the department said that it was considering introducing the charge but that there were technical studies still to do. Two weeks ago I saw the system working perfectly in Singapore, where it has worked perfectly for 20 or 25 years. It represents a scheme that would allow all lorries, British and foreign, to pay a fair price for the use of the highway, which is, after all, what all of us are concerned about.

Some heavy users of cars and lorries, such as those who use the busiest motorways at the busiest times and those who insist on going into city centres at peak hours, would pay more. But—here is the main "but"—most motorists and road users would pay less, and some of them would pay a great deal less. We would get rid of the unfairness that we exhibit towards some motorists such as the old-age pensioner and many others.

What is the Government's policy and can we expect something to happen? We can always wait for some grand, all-singing, all-dancing type of scheme, which will take in Europe and perhaps the rest of the world. But all electronic schemes—I am very aware of them from my experience in the police—have a very short life. It takes only eight or 10 years before technology has moved along so quickly that you are on to the next scheme. For a relatively quick and dirty scheme that could be implemented quickly, I ask the Government not to put the matter on the referendum list. If you put things to referenda, given the influences that are brought to bear on voters the scheme will not materialise and neither will many other things. The Government should have the courage to put something in the manifesto for the election—which, I expect, will take place at some time in the future, although I do not expect the Minister to tell us when—and actually say that they are going to do something.

In summary, what are we going to do about road pricing? That may not be what the noble Earl wanted.

5 p.m.

Lord Luke

I am grateful to my noble friend for introducing the Unstarred Question in such a novel location. I believe that this is the first ever Unstarred Question in the Moses Room and I hope that due note is taken of that fact.

I certainly understand why my noble friend has taken this opportunity to follow up his interesting suggestion made on 17 January in his Question to the noble Lord, Lord Davies. As we have heard, he has suggested requiring all heavy vehicles leaving Great Britain to do so with a nearly full tank of fuel. At the time, many noble Lords were somewhat surprised by the encouraging response from the Minister.

My noble friend has described his proposals today with his usual succinctness but he omitted to ask how much money might be involved. As we know, fuel purchased from other EU countries carries less tax and duty but it is by no means tax free. So, effectively, it seems that foreign treasuries are receiving tax revenue in respect of road fuel used on our roads over this side of the Channel. Indeed, it might be said that the French, Belgian, Irish and other treasuries are receiving what should be our taxpayers' revenue.

It would be extremely helpful if the Minister could indicate roughly how much fuel tax and duty is being lost in the way described by my noble friend and, if it is feasible, by how much my noble friend's proposal could increase Treasury revenue.

My noble friend has touched on how his proposal might simplify the lorry road user charging scheme (LRUC). I share his anxiety about HGV refuelling capacity in the south-east. If these problems are held to be insurmountable we will need to take a closer look at the LRUC. For instance, is it designed to level the playing field in respect of cheap fuel for foreign trucks, or is it rather more to do with reducing congestion from HGVs, or both?

My noble friend claims that his proposal would eliminate the need for the fuel rebate component of the LRUC. On the face of it, the LRUC appears to be somewhat bureaucratic. There is a claim—I am not sure where it came from but it has already been discussed—that at least 1,000 civil servants or contractors would be required to operate the rebate scheme alone.

Some goods vehicle operators, rather unwisely, keep no records of fuel issues against vehicles. Will it be necessary for detailed records of issues to be kept? How does the Minister intend to avoid rebated fuel finding its way into private cars and light goods vehicles? Will the fuel be a different colour?

My noble friend has referred to how his scheme might work in respect of Northern Ireland. I think it would be wise to avoid commenting on his proposal to harmonise road fuel taxes in the north and the south. However, there is no doubt that there is a very serious problem and that is not going to go away.

As we have heard, we have some 400,000 goods vehicles in the UK and, under the LRUC scheme, every single one will have to have a satellite transponder fitted. I am told that the capital cost of this will be around £2 billion. Is this correct? Does it include the cost of the satellite itself and its dispatch into space—or is it possible to hire satellite space, as it were? Ministers say that the LRUC will be cost—or is it revenue—neutral? For how long will it be revenue neutral and who will fund the initial capital cost of the IT system which will be required?

The LRUC is clearly a precursor to satellite tracking for all vehicles, including private cars. It is a little surprising that those strongly concerned with civil liberties have not woken up to the possibility of the state knowing the precise movement of every motorist in the country.

Finally, the thrust of my noble friend's Unstarred Question is whether his proposal is feasible. One of the key questions is whether there is enough refuelling capacity in the south-east of England, a point referred to by the noble Lord, Lord Berkeley. Does the Minister have any information on the legality of my noble friend's scheme in this country's laws and in the European Union overall? Could it not possibly be considered as a constraint of trade?

We look forward to learning from the Minister's response to this interesting debate where we can go forward, if at all.

Lord Berkeley

Before the noble Lord sits down, can he clarify whether he said it would cost £2 billion to fit this equipment to 400,000 vehicles? I have been working it out while he has been speaking and it comes to £5,000 a vehicle. That does seem rather high. Can he confirm that?

Lord Luke

That is the information I received. It may be incorrect—sometimes information is incorrect—but it may be correct. That is why I asked whether it includes the cost of the satellite.

Lord Berkeley

It might well do.

Lord Luke

I think it might.

Earl Attlee

Surely the question is whether it includes the cost of the transponders and the IT system's ground base. I do not think we need to worry about the satellite, as they already exist and are used for tracking commercial vehicles, but rather the cost of the IT system to balance the fuel rebate and the mileage charge, and the provision and fitting of the transponder to each vehicle.

5.6 p.m.

Lord Davies of Oldham

It has been an interesting debate. I probably foresaw that when I gave an encouraging response to the Question of the noble Earl, Lord Attlee, in the Chamber. A slightly extravagant gloss has been put upon that response. Anyone who consults Hansard will see that I am prepared to look at the scheme, which is likely to be subject to the clearest possible evaluation and consideration. Indeed, as the noble Lord, Lord Luke, indicated, one or two issues in regard to the noble Earl's scheme need to be considered further. That is what I undertook to do and I hope to give a response today that reflects that undertaking.

However, I shy away from the implication in one or two contributions that I expressed considerable enthusiasm for the scheme. On the whole, I express considerable enthusiasm for very little in the Chamber, largely because challenges come from elsewhere rather than the Government side. I give way to the noble Earl.

Earl Attlee

As a Front-Bench spokesman, normally the best I can possibly hope for is that the Minister will say, "I shall draw the noble Earl's suggestion to my right honourable friend the Secretary of State".

Lord Davies of Oldham

Exactly so. It was in exactly those terms that I expressed myself on that day. I am delighted that the noble Earl took great solace from that and has followed it up with the debate today. It gives me an opportunity to respond to those issues and to a number of questions that were raised about the lorry road user scheme that we are looking to introduce in the fullness of time. I hope also to give full value to the Committee in covering those issues.

I want to deal with the important issue of the evasion of tax and duty, which we need to confront, although the noble Earl will recognise that the LRUC scheme is set to cast its net wider than that particular abuse. The course on which the Government are set will be more fruitful and capable of bringing greater rewards than this particular scheme. I shall come on to that in a moment.

I want first to reassure noble Lords that we are, of course, aware of the increasing anxiety of the United Kingdom haulage industry about the sharpness of overseas competition and what is regarded as the unfair aspect of overseas competition—free access to British roads while carrying many litres of fuel in huge tanks which enable them to buy not one litre of fuel in the United Kingdom while plying their important service here. We set up the Road Haulage Forum to investigate and consult on those and other general issues affecting the haulage industry.

We have been increasingly constructive on those issues. It is not just a question of the level playing field which is the objective of the noble Earl, Lord Attlee; we also need to enhance our industry, which is an important part of the economic life of the nation. That is why we have been concerned to develop a list of projects to help the industry: further phases of driver training programmes; a Fuel Economy Advisor programme to encourage more efficient fuel operation; and improvements in the skills of lorry driving, which are not to be underestimated. I know that the noble Lord, Lord Bradshaw, was slightly more restrained than he often is about these issues when we can debate them. However, out of deference to his very great interest in this issue, I think he will recognise that we appreciate the fact that improving the skills of UK lorry drivers is a very important part of road safety issues.

We are also concerned to develop a careers website for the industry. That should be seen against a background whereby some of the large firms in the industry—I shall mention no names as that would be invidious—are very big operations indeed. One wants to see people in such companies developing their driving skills. We should also be mindful of the fact that able drivers are intelligent men and women who would often wish to see career opportunities developing, not least because a driver's working life can be restricted by the onset of disability through age. It is important that they should be able to play other parts in the road haulage industry. We are concerned to help the industry develop skills and a career pattern in those terms.

I want to emphasise, first, that we regard the industry as a very important one which rightly makes calls on the Government to take an interest in the issues and challenges confronting it and in how the Government can help. In our 2001 manifesto we made a commitment to introduce the lorry road user scheme. At that time, we said in rather more general terms that we were concerned that users of our roads should bear a fair cost regardless of their nationality. That was our response to the clearly articulated pressures from the industry. It was also a recognition among all sides of the British people of the need for fairness, not least because we are all aware that lorries make extensive demands on our road structure and the environment more generally.

That is why we introduced proposals for the charge in the UK to be offset by fuel duty cuts for those who buy their fuel in the United Kingdom. Customs and Excise, which has been charged with developing this new tax, is well on the way to procuring the systems it will need. We aim to have the scheme up and running in the latter part of 2007–08. The noble Earl, Lord Attlee, indicated that early implementation was one of the positive features of his scheme. However, features of his scheme also would take some time.

I will not get into extensive debate on how we would solve the issue of sufficient filling stations and filling opportunities near our ports. The noble Earl concentrated almost overwhelmingly on Dover. He would have to go quite a long way from Dover before there were just one or two alternative filling stations. I appreciate what he says, but Holyhead, for example, the departure point for the Republic of Ireland, makes one begin to realise the expense involved in meeting the costs of a new motorway exit and entry. One should not underestimate the costs of constructing just one filling station with no additional facilities; nor would that happen overnight. One should not think that what the noble Earl is positing in opposition to the scheme that we favour could occur at the flick of a switch or overnight.

Any of the big developments that affect an industry require a lead time. So when I quote the date 2007–08, I acknowledge that we all want to achieve the same objective as early as possible, though we would not all follow the same route. But that is what we currently foresee.

Our current proposals reflect the conclusions we reached in consultation with the industry on the best way to introduce the charge in the UK. It has taken longer than we would perhaps have liked. However, I think it will be recognised that it is not a simple business to develop a new way of taxing the haulage industry that uses the very latest technologies. We are looking at a range of technologies. It is not right to identify only one conceivable approach.

Earl Attlee

A moment ago the Minister suggested that he is "well on the way". He is now suggesting that he is looking at a variety of solutions.

Lord Davies of Oldham

Work is under way on these approaches. We have to set up a purchasing structure for them. They require very heavy investment. I am not underestimating the investment, but merely suggesting that we have done a substantial amount of work on it.

I should simply like to refute the rather sinister concept that this is about satellite observation of every vehicle movement in Britain, spreading from lorries to cars. I emphasise that we are about distance-measuring, not about tracking where the lorry has gone. In that sense, we do not really care where the lorry has gone as long as it has paid properly for the distance it has covered in the United Kingdom.

Perhaps such technology will lend itself to specific motorway charges. As the Germans have done with the autobahn, we could take advantage of the technology for that type of tracking. However, such tracking merely concerns the distance that a vehicle has travelled on the motorway. That is a long way from the rather forbidding future that the noble Lord, Lord Luke, foresaw in which government authorities would know the location of every car in the country. It will be more limited than that. We are out to produce a cost-effective system, whereas the one envisaged would be very costly indeed. All aspects of road charging have to be approached with care because of the enormous costs involved. I say nothing about the civil liberties issues because we are a very long way away from anything that encroaches on those. Certainly this scheme does not lend itself to any fears on that score.

When making comparisons with tax levels in other countries it is important to look at all forms of taxation. Although it is inevitable that our industry focuses on the differential that exists between fuel costs, when we looked more carefully at the general operating costs of foreign competitors we discovered that the margin is not as great as a straight analysis of fuel costs would indicate. UK taxpayers pay a lower overall proportion of GDP in total tax than taxpayers in other countries.

So, although we may pay a higher tax on fuel, in more general terms matters are a good deal more even. For example, the UK has lower business rates, lower social security contributions and a lower VAT rate on a wide range of essentials than is the case abroad. I give way to my noble friend.

Lord Berkeley

I thank my noble friend for giving way. Whereas I can understand that his arguments would apply to western Europe and Germany, France, Switzerland and Austria, is it not the case that the new accession countries, whose drivers are alleged to be a part of the big influx, have much lower costs both in terms of what they might earn and social security costs? Of course, they are just as capable of coming in with a big fuel tank as anyone else.

Lord Davies of Oldham

Of course, they have a fair bit of Europe to cover before they arrive at our ports. We all recognise them because it is rather unusual and distinctive when one sees a lorry from Bucharest, or Istanbul or wherever. The new accession countries raise particular issues.

But, as my noble friend knows, the whole point of the European Community and the framework of the single market is that we recognise that such countries have to engage in strategies which inevitably bring them closer to the European average in regard to overall costs. But the point is well taken. That is why we are determined to have a degree of fairness. It is the whole point behind our proposals.

Of course UK hauliers are operating against strong competition, and not only from the international haulage industry. It looks as if it is about 1 per cent of our total operations, so it is easy to exaggerate. However, one recognises that it is an important factor. The UK haulage industry is a very competitive industry in any case and we all know that it is easy for its customers to drive down prices when there are so many entrants into the field. That is also an important part of the issue.

One of our objectives for the LRUC is to provide a means to decouple the taxation of the haulage industry from the taxation of other motorists. We want to achieve a position where we are able to tax heavy goods vehicles separately and on a basis which is fair for all, whether domestic or international. We also want to be able to pursue a strategy in relationship to the industry which recognises its significance and how different it is from the private motorist and a whole range of other road users.

When the lorry user charge is in place, for the first time the Government will be able to take decisions about taxation levels which affect the industry separately from the decisions they take about general motoring taxes. If we therefore want to give benefits to the haulage industry, once the scheme is in place we will be able to do so. That is a significant virtue which will be recognised. The proposal of the noble Earl, Lord Attlee, has some interesting aspects but it does not relate at all to the question of how we modernise taxation. It would leave only the vehicle excise duty rates as a way of varying taxation levels between different vehicles. I think among the British public the demand is there now—and it will increase—for variations to be effected through taxation in a more extensive way than only through vehicle excise duty.

I turn to the specific proposal put forward by the noble Earl. He has created a little history today by initiating the first debate on an Unstarred Question in the Moses Room. Indeed, his family is rather good at creating history. The noble Earl deserves a full response to the issues he has raised.

I have discussed the position with regard to filling stations. We should also consider whether facilities for refuelling could be provided at Customs points themselves. However, I must point out that most of our busy ports, and certainly the operation of Customs and Excise at those ports, lead us to think that this might be a somewhat fraught undertaking. I am not talking about measuring the fuel in the tank, which the noble Earl has distilled into quite simple terms, but the question of directing lorries to turn around and fill up at a nearby facility is very difficult. Let us consider the logistics of any of our large Channel ports, and the same can be said of our ports elsewhere. There is a problem of feasibility in those terms.

The noble Lords, Lord Luke and Lord Bradshaw, both reflected that there are related European issues which we would have to take on board very carefully. Britain's membership of the European Union brings many benefits to our economy and to our hauliers. We are committed to taking an active lead in Europe in developing the single market. It brings with it great benefits in many different ways to UK businesses, consumers and travellers. We support fair tax competition as a way of building growth in jobs and prosperity. Enhancing the performance of member states improves, by extension, the external competitiveness of the EU and increases its attractiveness to investors. I want to reinforce the point that the UK tax system cannot be compared unfavourably with those of other countries in this respect.

However, the single market did not come into being only through the collective will of its members. To make it function properly, rules are needed. The noble Earl will not be surprised to learn that there are rules which we think are quite difficult in relation to his proposal. We must get the lorry road user charging scheme right within those rules; getting it wrong will result either in the waste of much time on something which cannot be implemented or paying people back a lot of money for something that we will not be allowed to do. We have to be very concerned about our own proposals in this area.

The proposals put forward by the noble Earl raise issues regarding quantitative restrictions on imports and exports covered by Articles 28 and 29 of the treaty which established the European Community. The restrictions are defined as measures which amount to a total or partial restraint on imports, exports or goods in transit. All trading rules enacted by member states which are capable of hindering intra-Community trade—directly or indirectly, and actually or potentially—are considered to be measures having an effect equivalent to quantitative restrictions. The issue which will arise in the free movement of goods context is whether a requirement to fill up with fuel before leaving Great Britain creates an obstacle to the free movement of goods.

The noble Earl has stressed explicitly that the scheme would be non-discriminatory between British nationals and other European members. It would apply to all heavy goods vehicles leaving Great Britain. However, the effect of the scheme would be to require hauliers, particularly overseas hauliers, to buy more fuel in Great Britain at higher prices than otherwise would be the case.

It seems likely that this measure would be regarded as having an effect equivalent to quantitative restrictions on imports and exports. I am concerned about this and about the impact of the checks on departing vehicles that would be needed. The noble Earl described that in some detail and I recognise that he set out to show how effectively and efficiently it could be done. However, the proportionality of the enforcement regime would be an important factor. If checks related to the operation of the scheme delayed departing vehicles, that could create a practical as well as an economic obstacle to the free movement of goods.

We believe that the noble Earl's scheme would risk incompatibility with those provisions of European law. I say that against a background of being grateful for the enormous amount of work that he has done on his scheme, but our own considerations of something like it in the early days of trying to solve this problem meant that we have for some time taken clear advice on the legal issues involved. Perhaps I should tell the noble Earl that if he intends to do more work on this he will need to address those significant issues.

There is another European dimension regarding the question of state aid—whether the requirement to fill up with fuel before leaving Great Britain would represent an aid granted by or through state resources and, if so, whether it favoured certain undertakings over others. Some might be thinking not so much of the aid that it would give to British hauliers as to British fuel retailers. After all, we would have a captive market for British fuel retailers, because foreign lorries would be obliged to use them.

Earl Attlee

First, on the noble Lord's last point, operators use fuel cards, under contracts that they negotiate, wherever they buy fuel within the EU. Regarding his other point about EU compatibility, why is it in order, under EU law, for the Government to offer a fuel rebate to UK operators, but riot to continental operators?

Lord Davies of Oldham

We are getting into somewhat deep waters. I do not want to cover the whole range of taxation policy, because, while there are certain areas which are important, the fuel rebate is open to everyone. It is not discriminatory. It is not only British road hauliers who benefit from the rebate. So we must be careful about such issues—which do need to be addressed.

I wish to say something about Northern Ireland. The noble Earl briefly mentioned Northern Ireland, but he did so in a way which had a slightly cavalier quality. He is a man of cavalier qualities, so he should not take that as anything other than a compliment. Obtaining equality of fuel prices between the Republic and Northern Ireland would certainly solve the problem, and I recognise the neatness of the solution. However, he will recognise, first, that it would require us to use our taxation policy for that objective, which would limit the range of the tax. Secondly, there would be separate taxation, as I understand his proposal, between Northern Ireland and the rest of Great Britain. That raises some very thorny issues. The noble Earl will recognise the cardinal point of our taxation policies is that Great Britain and Northern Ireland, as the United Kingdom, is one entity. The noble Earl's scheme would require us to breach that rule. So there are difficulties with that issue as well.

As I mentioned, I have some reservations about the quick-check concept but I do not want to belabour that point too much. Given the ingenuity of government servants when they are directed towards an issue that they need to solve, I have no doubt that they could make considerable inroads to the system that the noble Lord wants of very rapidly checking fuel tanks. I do not think that it is a major issue with regard to this scheme, although it is important.

I am again in the position where I congratulate the noble Earl, on the focus not just of this debate but of his work on an interesting scheme. I think that he will recognise that, in the period between his initial Parliamentary Question and this debate, he has occasioned extensive work in a number of departments. The Treasury, the Department for Transport and Customs and Excise have all had a very keen interest in it. He has occasioned considerable interest in the scheme. At the same time we have cross-evaluated his scheme with our own developing proposals to see the relative merits.

I shall conclude as the noble Earl would expect me to: what we have in common is a great deal of concern that we should get equity and fairness for the UK haulage industry. In particular, we all want fairness in taxation on the use of British roads. We think that our scheme will do that, against a background of much greater sophistication than just charging the foreign driver and operator for full fuel tanks. It will enable us to operate a proper concept of rewards and will lead to the development of the haulage industry. At the same time it will enable us to get the proper returns that the industry should pay for the use of British roads by lorries.

On that basis, I very much welcome this debate. It has clarified minds a great deal. I applaud the noble Earl for his most constructive suggestion and for having introduced the debate.

Committee adjourned at twenty-three minutes before six o'clock.