Got to pinch a penny or two
April 1st 2011 The transport and logistics sector claimed a victory last month when the Chancellor scrapped the planned fuel duty increase. But Geoff Dossetter suggests that the industry should look to the long term.
As a student of the road transport industry I settled down to watch Chancellor Osborne’s March Budget with a mixture of concern and excitement. For months the motoring lobby and the logistics industry had been telling him that the increase in fuel duty of 1p per litre planned for April, which together with an adjustment for inflation would make up a total increase of about 5p per litre, would be a disaster. Osborne had flirtatiously responded in February by suggesting that he understood the problem but that we would all have to ’wait and see’ what was contained in the Budget. So what would he do?
He kicked off his speech by suggesting that his Budget would be ‘neither tax raising nor giveaway’. No clue there. As his predecessor Ken Clarke took a judicious nap, Osborne ploughed through the usual forecasts for growth, employment, borrowing, debt, inflation, GDP, regeneration, incentives and all of the rest of the figures and jargon and mumbo jumbo that most of us, well me at least, find pretty impenetrable.
Just as I was about to join Mr Clarke in the land of nod my ears pricked up as he started to talk about real life and the transport matters that I was interested in.
He voted an extra £100 million for local councils to help with potholes, an issue close to the hearts of all readers of HSS. He announced additional funding for work experience and an increase in apprenticeships. He talked about some further support for rail infrastructure. He said that Vehicle Excise Duty for cars would only be increased in line with inflation and that, better still, for HGVs the rates would be frozen.
Getting warm now.
At last, and this was clearly close to the end of his speech, he started to talk about fuel duty. He mentioned that the price of oil had increased by 35 per cent in five months, explained that this was not his fault because it was down to the world prices, but that, under the circumstances, he was going to scrap the fuel duty escalator and delay the inflation uplift until next year. He would introduce a new tax on North Sea oil production to fill the hole. There. The industry had won its campaign. There would be no increase in fuel duty in April 2011.
But, hold on, there was more.With a flourish he ended his speech by announcing ‘not only that’ but that he was reducing fuel duty by 1p per litre. For a moment I was dumbfounded. Not only scrapping the proposed 5p increase but actually making a 1p cut! Incredible.
Sadly my euphoria was over almost immediately when I came to realise just how tiny that a cut of 1p per litre was, considering that the stuff had actually gone up by almost 20p per litre in the last six months or so. However, it is welcome all the same as a 1p cut is far preferable to the 5p increase that was on the table, especially when you consider the annual fuel bill for a 44 tonner doing 70,000 miles per year at about 7.5 miles to the gallon! In the words of a substantial truck operator I know ‘Every little helps’.
The UK transport and logistics sector has wrestled with high fuel prices for many years now. And the problem has always been emphasised by the fact that we suffer from the double whammy of highly priced oil being matched in the UK by truly excessive duty levels, much higher than our European and worldwide competitors. The truth is that as welcome as a penny off is, what we really need now is a major review of commercial vehicle fuel taxation. It is ludicrous that we are actually facing the prospect of fuel costs amounting to almost 50 per cent of total transport costs within the next two or three years. The Government, with its acknowledgement of the link between transport and economic growth, should recognise how harmful this is and take some steps to rebalance the situation.
Some hopes.
Which means that we really must take an even closer look at our fuel use and how we are going to maximise our efficiency in a scenario where we are now looking at the end game for oil production within forty years while, at the same time, demand continues to increase.
Of course, the absolute reality that goods and services need to be moved means that technology must find a way to power those movements. That could be gas, electricity, hybrid, oil, or maybe something that none of us have even dreamed about yet. A solution will have to be found.
For the present the ever increasing cost of fuel means that the smart transport operator should, in the short term, start to consider some plans for the long term.
Collaboration has been a big theme in recent years with operators, even commercial rivals, sharing vehicle space, improving vehicle utilisation, and thus reducing journeys and tonne/miles. The cost of fuel is going to force a great deal more of that.Moving more goods on fewer vehicles is a no brainer. What about local sourcing? Better to, wherever possible, obtain supplies of food, drink, building materials, retail stocks or whatever, from local suppliers with minimised transport costs.
And the just-in-time strategy – it is entirely conceivable that the financial and production benefits of JIT will have to be carefully balanced against the price of fuel and transport.Maybe the costs of higher stockholdings will be preferable to the extravagant cost of transport powered by spiralling oil prices.
Whether we like it or not the supply of oil really is running out. Its demise is not much more than a generation away. Better to face up to that sooner than later. That’s what the smart guys will be doing.
Meantime, thanks for the penny George. But can we have some more please? More articles from Handling & Storage Solutions: | 
