Thursday, October 28, 2021

A Mixed Reaction from Transport and Logistics to the Autumn Budget

And Nothing for the Environmentalists as COP26 Opens
Shipping News Feature

UK – It seems politicians have given up the secrecy regarding important national announcements and switched from leaking information to simply announcing various policies before they become officially in place. And so it was with the Autumn Budget with many of the big issues already known to the press and public.

So with most of the the big ticket items already in the public domain when the Chancellor rose to speak, how have the relevant sectors of the logistics industry reacted to those lesser known issues affecting them directly? The comments from the British International Freight Association (BIFA) are a fairly typical mix, with praise, doubt and criticism in fairly equal measures. Robert Keen, Director General, commented:

“We welcome the news that the planned increase in fuel duty has been scrapped, and also welcome the further funding for apprenticeships and training, as we encourage our members to recruit youngsters into the sector.

“If the increased budget that the Department for International Trade will see over the next few years does indeed support UK business to take full advantage of trade opportunities and improve the UK’s exports that will be positive news for our members that facilitate the movement of much of the country’s visible trade.

“The commitment of £180 million to build a UK Single Trade Window, to reduce trade costs by digitally streamlining trader interactions with border agencies, will also be welcomed by our members that have to deal with those myriad agencies, especially if it helps reduce the duplication of work that takes place at present.

“The additional finance for the three years to 2024-25 to complete the delivery of critical customs IT, including the new Customs Declaration Service (CDS) that is replacing CHIEF, recognises the challenges that design and implementation programme still faces.

“[However] our members and the customers they serve remain concerned about the potential impact of the transition from CHIEF to CDS, as well as the timetable for the implementation of the Border Operating Model on their activities at the UK border and elsewhere in the supply chains that they manage.

“The promise to consult businesses on customs processes, the intermediaries market and transit facilitation to ensure that government and industry can work in partnership together to deliver a world class customs regime is also welcome. We hope that promise is not just spin and look forward to active engagement.”

For its part Logistics UK takes an unusual line, claiming the continued freeze on fuel duty will assist the logistics sector in its move to decarbonisation by 2050. Elizabeth de Jong, the organisation’s policy director explains her organisation’s belief that the announcement will enable businesses to make the switch to alternatively fuelled vehicles more smoothly.

Additionally Ms de Jong also sees other positives in the Chancellors announcement, but again at the end of her observations, that doubtful note of whether actions will match words, creeps in. She said:

“The impact of the pandemic on the economy, and our industry in particular, has made vehicle replacement planning particularly challenging. The logistics sector traditionally runs on extremely narrow margins, with limited amounts of money available for vehicle purchase. so the removal of uncertainty over fuel duty levels for another year will give our industry time to plan vehicle replacements more effectively.

“Logistics is at the heart of all sectors of the UK economy, and it is encouraging to see many Budget announcements which will help business operations in our industry. The freezing of HGV excise duty and the extension of the suspension of the HGV levy for a year will make the operation of vehicles more cost effective. In addition, the continued investment in road and rail infrastructure, as well as in customs and transit arrangements is welcome news which will help goods move smoothly.

“Logistics UK is pleased to hear the Chancellor’s commitment to improve the quality of HGV parking spaces available. However, as the government’s own figures estimate there is currently a shortfall of more than 1,400 spaces nationally, there is still more to be done. [We] will remain in close contact with government on this issue, to ensure that the spaces needed are finally delivered, after more than three years of promises which are yet to be fulfilled. This is vital to acknowledge the contribution which HGV drivers make to the UK’s economy and help industry attract new recruits to the sector.”

Belgian headquartered international accountancy group BDO produced their usual full analysis of the Budget figures and points out the changes relevant to transport, particularly the first substantive reforms to UK tonnage tax since it was introduced in 2000. Following the UK’s departure from the EU, the Chancellor’s aim is to maintain the UK’s status as a leading country in the maritime industry by creating a more flexible and attractive system that will encourage overseas shipping groups to relocate to the UK.

The complex flagging rules imposed on the UK by the EU from 2005 will be abolished. Instead, the UK flag will be a more important factor in determining whether a company satisfies the strategic and commercial management requirement for entry into tonnage tax. This is a welcome simplification to the rules for shipping companies already in the tonnage tax regime, especially where these rules may have impacted commercial decisions on flagging in the past.

The current 10-year exclusion on re-joining the tonnage tax regime will be reduced to 8 years. There will be greater discretion to admit companies who missed an election window if there were good reasons. Further guidance on what HMRC will accept as good reasons will be key, and the ability to grant an additional election window into tonnage tax remains in place but there is no indication as yet on whether this will be made available to companies that previously qualified and would therefore need to rely on an additional election window to enter tonnage tax.

HMRC provides detailed guidance on vessels that can qualify for tonnage tax. Sensibly the guidance on qualifying vessels will take account of developments in technology, to allow additional types of vessels to potentially qualify for tonnage tax. There will also be greater importance placed on investment in decarbonisation and pollution control when considering the qualifying status of vessels eligible for tonnage tax which is obviously intended to support the Government’s net zero plans. BDO’s full analysis can be read HERE.

Obviously with COP26 about to open there were comments from various groups regarding the sustainability, or lack of it, mentioned in the Budget. The Transport Salaried Staffs' Association union (TSSA) which represents workers in the transport and travel industries were definitely not impressed, calling this ‘the wrong budget for a climate emergency’. In his budget speech the Chancellor announced cuts to fuel duty, and a lower rate of air passenger duty for domestic flights but offered no reduction for rail ticket prices despite the growing climate crisis.

The TSSA points out that domestic air flights cause seven times the carbon impact of rail journeys, and car journeys produce more than four times the greenhouse gas per passenger mile as travelling by rail. Yet, with COP26 just around the corner, the Chancellor opted to use his budget to subsidise road and air travel rather than incentivising rail travel. TSSA General Secretary Manuel Cortes said:

“This is the wrong budget for a climate emergency. It will do nothing to decarbonise travel. We should be encouraging people to take the train by cutting rail ticket prices and investing in station staff to make the railways more attractive. We have a budget speech today that actively encourages people to increase their carbon footprint. The Chancellor, Rishi Sunak, has got this badly wrong.

“Glasgow hosts COP26 next week. Britain will have no moral authority to lecture the rest of the world on reducing their carbon footprint unless we start getting serious about making rail travel cheaper and more attractive. That means investing in infrastructure, investing in staffing, and cutting ticket prices. Not incentivising air and road travel!”