Comment

Give rail freight a fair deal

Philippa Edmunds, manager of Freight on Rail and a member of the Campaign for Better Transport, says the road haulage industry is propped up by a mass of hidden subsidies, in turn affecting the competitiveness of rail freight.
In order for the economy and society to get the best freight solutions, there needs to be a level playing field within road and rail freight transport policy.

What is not generally realised is that the lack of parity between the two modes is a key reason why it is so difficult for rail to compete with HGVs, especially in consumer markets.

So the Campaign for Better Transport carried out research using existing government criteria to investigate this market distortion. The analysis found that HGVs receive a subsidy of about £6.5bn a year and pay less than a third of the costs associated with their activities in terms of road congestion, road collisions, road damage and pollution – which have to be picked up by the taxpayer instead. These conclusions are in line with an MDS Transmodal study in 2007, which found a very similar amount of underpayment: £6bn.

Although the financial framework for rail and road are different, it is generally accepted that in both cases, revenues from moving people (in fuel duty, vehicle excise duty and fares) are to some extent used to support the movement of goods.

Furthermore, this research also highlights that in a number of areas, such as congestion, air pollution, infrastructure maintenance and accidents costs, that once all these factors are recalculated using updated values, the likelihood is that the real subsidy to HGVs will be even greater than this research shows.

The reasons for reviewing these values are as follows:

• As road damage from the heaviest lorries is estimated to be 160,000 times higher than for a typical car, infrastructure damage is being under-estimated. Roads have to be built to a higher specification to cater for HGVs.

• The cost of road collisions involving HGVs are undervalued, as HGVs are now six times more likely than cars to be involved in fatal accidents on local roads.

• Congestion is not properly measured, as government analysis uses undervalued and outdated figures to calculate the cost of delays imposed on others.

• There is a pressing need to review air pollution impacts, especially relating to nitrogen dioxide and particulates despite EU engine improvements.

We believe the government needs to be transparent so the level of subsidy is acknowledged and mechanisms can be used to correct these distortions. The scale of subsidy to HGVs makes a compelling case for equivalently supporting sustainable freight modes, which impose much lower costs on society and the economy. The government’s mode shift grants are designed to recognise the wider advantages of rail but currently support less than 15% of rail traffic.

A long-term stable affordable charging regime that enables direct competition with road freight would allow rail freight to compete more fairly with HGVs. Ongoing investment in the strategic rail freight network and other key routes to enhance capacity and capability for more diversionary routes would add resilience to the network, to make the rail freight offering more viable. Continued and expanded rail freight grants, which are awarded in recognition of the value of removing HGVs from our roads and are only paid for the actual containers removed from the road network, are fundamental to maintaining rail freight traffic. Otherwise, the external costs, i.e. those that HGVs impose on others that are not included (internalised) in their normal operating costs, will continue to be a huge problem to society and the economy. In fact, rail freight produces only about a tenth of the external costs, i.e. costs imposed on others, than HGVs per tonne-km.

The new role of the Office of Rail & Road (ORR) monitoring Highways England (HE) represents a key opportunity to improve integration between the different freight modes. The ORR, which says cost transparency is necessary to support effective decision making, already has core skills in assessing performance that it can use to analyse outcomes on HE projects, set benchmarking and monitor expenditure against budgets to allow more scrutiny. The ability to compare costs and subsidies across both modes would be very valuable, as it would enable government to fully compare the costs and benefits of different modes, social outcomes and opportunities for efficiency.

Worryingly, as a result of the economic distortion caused by a lack of internalisation of HGV costs, not only is there poor economic efficiency but also scarce government resources could be misallocated as funding decisions are made on flawed premises. Currently road haulage is very competitive but not very efficient; almost 30% of HGVs are driving around completely empty and almost half of HGVs are partially loaded either by weight or volume.

As an industry, we all know that rail freight has excellent economic, social and environmental credentials with far lower adverse impacts on UK plc and on society than HGVs. Road and rail complement each other; as well as traditional bulk cargoes, rail is well-placed to offer long-distance trunk haul. Rail freight is worth £1.6bn per annum to UK plc and as rail minister Claire Perry MP mentioned in June has seen a “remarkable rise” recently.

Each year the rail freight industry carries goods worth over £30bn, ranging from high-end whiskies and luxury cars to supermarket products, steel, cement and coal. A quarter of consumer goods imported into the UK are transported by rail. A fair deal for rail freight would be a win/win for the economy, society and the planet.