Freight data feasibility study: progress report

Publications

1. Introduction

Context

Haulage Industry Task Group

1.1 In the December 2005 Pre-Budget Report, the Government announced the setting up of the Haulage Industry Task Group. The purpose of the Task Group was to build a better understanding of the issues raised in the "Burns Inquiry" into fuel prices, freight taxes and foreign competition (published by the Road Haulage Association, RHA, and Freight Transport Association, FTA, in December 2005), and to extend the work begun by Burns into other areas affecting the haulage sector.

1.2 The Task Group consisted of officials from HM Treasury and the Department for Transport (DfT), Robbie Burns, Chairman of the Burns Inquiry and representatives from the RHA and FTA. Representatives from the Confederation of British Industry and the British Chambers of Commerce also attended a number of the meetings. A steering group jointly chaired by the Financial Secretary to the Treasury and the Minister of State for Transport oversaw the Task Group.

1.3 The Task Group enhanced the Government’s understanding of key issues within the sector and HM Treasury subsequently published a summary of the evidence gathered.

1.4 When examining the cost differentials between operators of large goods vehicles in the UK and their foreign counterparts, the Task Group found that the fuel tax differential is partially offset by lower labour taxes and other employer costs in the UK.

1.5 The Task Group also:

agreed that fierce competition and tight margins are a structural feature of the UK haulage market;
noted that the sector exhibits the features of an economically “perfectly competitive” industry – that is, one where competition between many small suppliers quickly erodes profit margins;
noted that the official measure of cabotage (where an operator registered in one country picks up and delivers a load within another country) suggests that such activity in the UK remains very small in line with the average for Western Europe:
considered that cabotage has very different impacts on different areas in the UK and different sectors of the haulage industry. The impact of cabotage activity is stronger around the Channel, North Sea and Irish Sea ports;
agreed that the impact of cabotage on the haulage industry extends beyond the direct loss of market share - in particular, through the threat of foreign competition having a wider impact on some buyers’ price expectations; and
drew important conclusions in the area of enforcement. It observed that a higher proportion of foreign vehicles fail to comply with UK safety regulations concerning, for example, vehicle weights or driving hours, and non-compliant operators enjoy an unfair competitive advantage when they are not caught.

1.6 As part of the Task Group process, the RHA and FTA jointly asked the Government to establish a means by which the identity of ownership and the compliance history of foreign-registered vehicles visiting the UK can be supplied to VOSA to assist in targeting enforcement actions and prosecuting any offences.

1.7 The December 2006 Pre-Budget Report responded to this request, saying that:

"Further work is now being undertaken by the Government to explore ways of delivering more targeted enforcement on foreign vehicles. This could be done by introducing a database covering all foreign hauliers entering and working in the UK. One way this could be achieved would be via a ‘vignette’ – a time-based charge for the use of UK roads designed to make foreign hauliers pay for some of the damage they cause on UK roads. If such a scheme were introduced it is very likely to be administered through the existing VED registration process in order to minimise the administrative burden on domestic hauliers. The Government will undertake a detailed feasibility study into options for establishing a database, including through a vignette."

1.8 In April 2007, following a competitive tendering process, the Department for Transport awarded a contract to a consortium of consultants, led by LogicaCMG, to carry out a "Freight Data Feasibility Study". The objective of the study is to identify realistic and legal options (including a HGV vignette scheme) to deliver a database to link non-UK vehicles to their operators, including an appraisal of associated costs, benefits and risks for each option.

1.9 The main phase of the feasibility study is divided into two main parts. Part One involved generating options and sifting these against defined criteria, in order to develop shortlisted options for agreement with Ministers, with a more detailed analysis of these remaining options forming Part Two of the work.

Wider enforcement context

1.10 Since the start of the Task Group's work, and in parallel with the work on the Freight Data Feasibility Study, UK and European enforcement policy has continued to develop.

UK action

1.11 In July 2006 the South East International Transport Pilot was launched. The aim of the Pilot was to assess what level of improvement the Vehicle and Operator Services Agency could deliver in tackling non-compliance by high risk HGV’s through the use of improved targeting. The focus was HGV’s in the southeast and HGV’s on international journeys – identified as being at highest risk of non-compliance through random surveys. Targeting was improved through the use of intelligence on risk and technology such as ‘Weigh in Motion’ sensors in the road, linked to Automatic Number Plate Reading (ANPR) digital cameras, to identify overloaded vehicles. This includes £2m of investment announced in the 2005 Pre-Budget Report. The final report into the pilot concluded that by targeting high risk vehicles a greater number of non-compliant vehicles and drivers can be tackled, bringing broader road safety and other benefits and reducing costs to the compliant.

1.12 The 2007 Budget announced that VOSA would triple the amount that is currently spent on the South East International Traffic pilot and on 1 October 2007 the Secretary of State announced an extra £2 million per annum, from 2008/9, for VOSA's work to enforce road safety laws for hauliers, focussing particularly on those undertaking international journeys. This is funded through expected additional revenues accruing to HM Treasury from the Graduated Fixed Penalty & Deposits Scheme.

1.13 In August 2006, as a result of the Task Group process, the Department published a clear statement of its interpretation of the European cabotage rules.

1.14 The Government is also improving enforcement through the introduction of a Graduated Fixed Penalty and Deposit Scheme. When implemented the Scheme will enable police officers and the Vehicle Operator and Services Agency (VOSA):

to issue fixed penalties, in respect of both non-endorsable and endorsable offences;
to request immediate financial deposits from offenders who do not have a valid United Kingdom address (equivalent to an on-the-spot fine) - either in respect of a fixed penalty or as a form of surety in respect of a fine where an offence is to be prosecuted in court; and,
to immobilise vehicles in any case where a driver or vehicle has been prohibited from continuing a journey if it seems likely that they will abscond, or in any case where they decline to pay a requested financial deposit.

European action

1.15 Since this study was commissioned, in May 2007, the European Commission published a package of new proposals designed to modernise, simplify and streamline the existing EU rules laying down the requirements for entering the international road haulage and road passenger service markets and the occupation of operator.

1.16 The Commission considered that the current legislation lacked clear principles for applying the rules consistently across different EU Member states and also in the way the rules are enforced and monitored. As a consequence it considered there was unfair competition and problems of compliance with road safety and social rules. This approach, in part, reflects the UK response to Commission's earlier consultation that stressed the need for common standards and enforcement across Member States.

1.17 The proposed Regulations include a range of measures to improve enforcement and compliance of existing operators across the EU. These include:

a new definition of cabotage activity, which the Department currently considers is likely to prove significantly easier to enforce;
measures to improve the co-operation and exchange of information between Member States.
the use of targeted checks based on an enforcer’s view of the risks involved - rather than random or blanket checks - by an approach similar to VOSA’s current Operator Compliance Risk Score, which targets domestic vehicles on the basis of their operator’s compliance history.
powers for the Commission to require a Member State to undertake compliance checks on individual operators; and
a proposal for an electronic database of operators and transport managers in each Member State. The Commission has proposed that these databases would be interconnected by 2010.

1.18 The Commission's proposals for databases do not currently include a requirement to capture the vehicle registration marks of the operator’s vehicles - which makes the intelligence provided less readily usable in the context of roadside enforcement. However, were this to be included these databases have the potential to deliver the outcomes sought from the Freight Data Feasibility Study for international haulage operating from inside the European Community.

1.19 The Department intends, subject to a consultation this autumn on its negotiating position in relation to these proposals, to press for the inclusion of vehicle registration marks in the databases.

Outline

1.20 The purpose of this document is to outline progress to date with the Freight Data Feasibility Study, to the end of the Part One work. It sets out:

the different options for achieving a database of all hauliers entering and working in the UK; and
a summary of the assessment that has been performed of those options.

2. Assessing the options

2.1 This section outlines the options identified as part of the current freight data feasibility study. It then explains how leading options were determined from those options.

Objectives

2.2 The objective of the Freight Data Feasibility Study is to identify realistic and legal options to deliver a database to link non-UK vehicles to their operators, including an appraisal of associated costs, benefits and risks for each option in order to enable better targeted enforcement of non-UK vehicles.

2.3 Any option identified at the conclusion of the study as a realistic proposal for future implementation needs as a minimum to be lawful and offer value for money in accordance with the Department guidance on value for money policy^[2].

Full range of options

2.4 The process of generating options for delivery of a database started with two workshops where representatives of key stakeholders in any potential scheme were invited to brainstorm ideas. The invitees included representatives of the RHA, FTA, port authorities, ferry operators, Eurotunnel, Transport for London, Northern Ireland Executive, Scottish Executive, National Assembly for Wales, Highways Agency, HM Revenue and Customs, the Home Office, HM Treasury, VOSA and the Driver Vehicle and Licensing Agency (DVLA).

2.5 These led to a number of ideas that were consolidated into eleven options, as listed in Table One.

Table One: Overview of options identified

Option	Description
a Vignette	Provide a permit (physical or otherwise) allowing a vehicle access to UK roads. Issue of the permit would require the operator to supply (and permit the use of) the desired data.
b Data from Government databases	Obtain feeds from existing Government data sources (e.g. HMRC data collected on entry) to build up database.
c Data from ports, transport and toll operators	Obtain feeds from private or public sector port authorities, ferry operators, tunnel operators, toll road and bridge operators.
d Data from industries servicing freight operators	Invite organisations serving freight operators to supply data, e.g. those selling, leasing, maintaining, insuring vehicles, providing driver accommodation etc.
e Data from other EU governments	All EU states are required to maintain registers of freight operators; gain access to this data.
f Road pricing	Introduce charging based on time, distance, place or other parameters and gather the data as part of the charging process.
g Roadside checks	Stop all vehicles, e.g. at port exits, and require them to supply necessary information.
h Voluntary registration	Invite operators to register and supply the data (perhaps on the understanding that they are thereby less likely to be targeted for roadside checks).
i ‘Gold standard’ scheme	Invite operators to register, provide registered operators with a ‘gold standard’ certificate and motivate haulage customers to use certified hauliers.
j Data from haulage customers	Use data supplied by haulage customers such as manufacturers, freight forwarders or importers.

Identifying the lead options

2.6 This list of options was narrowed down to a set of four lead options for further and more detailed analysis. The choice of the options for further study was driven by qualitative scoring against set criteria. These criteria were chosen to favour the options which were likely to produce the highest quality of data while also considering other factors identified in the workshops, such as practicability, acceptability and policy compliance.

2.7 The criteria used for assessing each option fell in to five categories with a series of considerations given to each:

'Data', the considerations being:
- Would the data's scope allow capturing adequate proportion of foreign freight vehicles.
- Would the data be of adequate accuracy.
- Would the data be from a trustworthy source.
- Would the data be robust enough to prevent fraudulent data corruption.
'Processes', the considerations being:
- Sustainability: would it give ability to track changes in vehicle & operator relationship.
- Detection: would it support detection of non-compliant operators.
- Enforcement: would it support enforcement.
- Prompt implementation: would it be able to realise its benefit within two years.
'People', the considerations being:
- Stakeholder buy-in: would it be supported by key stakeholders.
- Communication: could it be communicated effectively to the target audience.
'Legal and policy', the considerations being:
- Legal: would it be legal or could be made legal with achievable changes to current legislation.
- Policy: would it support current Government policy or at least not contravene any.
'Cost', the considerations being:
- To Government: what would the cost benefit ratio be.
- To industry: would it be within acceptable limits.

2.8 On the basis of these criteria, four options were identified for further analysis. These were:

implementation of a vignette scheme;
collection of data from Government sources;
derivation of database from existing industry sources; and
a voluntary registration scheme.

3. Lead options

3.1 This section provides a fuller explanation of the four lead options identified for further study by the project team and identifies their key strengths and weaknesses.

Key issues considered

3.2 In considering the relative strengths and weaknesses of these options, the project team considered four main areas. These were:

Operation and feasibility

The approach taken to analysing the operation and feasibility of the options was to describe how the options would operate in practice, and who would do what to make them work.

Financial and economic viability

In parallel with the operation and feasibility analysis, the financial and economic workstream examined the likely costs associated with the identified operational model of each of the options. It also examined the financial and consequential economic benefit arising from the different options. The economic benefit assessment used the expected quality and comprehensiveness of the data to ascertain the level of road safety and environmental benefits resulting from the option.

Legal considerations

The legal stream looked at the operation of the options and identified the common areas where legal issues or obstacles remain. For each of the individual options further legal analysis was then carried out. The role of personal information (which would have a significant bearing on the ability of other bodies to share data) was examined in some detail for the intended purpose and the relevant case law for other schemes operational in Europe examined, particularly in the case of the vignette option where European examples exist.

Marketing and communications

For the marketing and communications element, the relative needs, costs and effectiveness of the necessary campaigns were examined. There is some variation between the options and the sophistication of the campaigns.

Vignette

3.3 A vignette (French for ‘label’) is the name given to a permit which would be granted on payment of a daily, weekly, monthly or annual charge for access to the UK road network paid by all hauliers. It is envisaged that UK hauliers would be required to pay this charge on an annual basis alongside their VED - which would be reduced by the same amount as the vignette charge. So this would only be an additional financial burden for non-UK vehicles.

3.4 A vignette scheme is provided for explicitly in EU law^[3]. The so-called "Eurovignette Directive" sets out the maximum that can be charged for a HGV vignette and details the means by which such a charge can be introduced in a way which is fair and does not inhibit trade. The maximum rates that could be charged under the directive are set out at Annex A.

3.5 The scheme would require provision of operator and vehicle details for enforcement of the charge. In principle, if appropriate legislative powers were in place, this data could be used for wider enforcement purposes.

3.6 The project team consider that a vignette scheme offers the following strengths. It:

would be likely to achieve a comparatively high percentage of registrations in a short space of time;
would allow a charge to be levied which brings in additional revenue to pay for the scheme;
would require self-registration and thus force individual operators to take responsibility for registering;
would allow relevant information to be captured from the source (the HGV operator) thereby improving data quality; and
has fewer strategic legal concerns (for example compliance with European law on the free movement of goods) associated with it than some of the other options - because of the existence of specific European legislation governing its use.

3.7 But against this, a vignette:

would require significant investment in technology to process registrations and payment;
would offer comparatively slow realisation of benefits if the database was compiled only from journey registrations;
would require a significant marketing campaign to make operators and drivers aware of the need to purchase a vignette;
would require detailed legal risks in the detail of the Eurovignette Directive (such as whether cash payment kiosks are required across the country, and relating to the precise coverage of roads included in the scheme) to be addressed
could take up to 3 years to implement from a decision to progress the scheme (assuming relevant legislative provisions could be included in a Finance Bill); and
would have a business case that was highly dependent on difficult to predict revenue estimates.

3.8 Of all the options considered, a vignette scheme would have the potential to generate a database with the highest percentage of relevant vehicles recorded. But the project team observe that financial revenue to Government would be relatively limited, due to the restrictions imposed by the Eurovignette Directive. They estimate that (because of the need to adjust maximum levels to sit alongside UK VED rates) the average cost of a daily UK vignette would be £7.45 and the average cost of an annual UK vignette would be £671.48, with the exact charge varying depending on the type and size of vehicle. The average charge per vehicle per day will be considerably lower than the estimated £7.45 average for a daily vignette (because some hauliers will opt to purchase monthly or annual permits).

Collection of data from government sources

3.9 Under this option the database would be derived by consolidating data already collected by Government departments using existing mechanisms. The current collection of data would continue, for example from ship manifests accessed by HMRC, and would begin to be shared across UK Government.

3.10 New collection mechanisms might be introduced or existing ones enhanced and the data would incrementally build up from successive encounter information. In practice, to be deliverable, this would be likely to require an increase in VOSA checks.

3.11 The project team consider that derivation of data from existing Government sources:

would be relatively low cost compared to other options; and
would offer data of reasonable quality and be generally trustworthy.

3.12 But against this, derivation of data from existing Government sources:

would offer too small coverage (only a small percentage is collected by VOSA) to be of use;
would require changes to operating procedures in Government Departments as no government department currently collects the data required in a comprehensive manner;
might require complex legislative change; and
could therefore take at least 3 years to deliver even if a suitable legislative opportunity were available.

Collection of data from industry sources

3.13 Producers, freight forwarders, ports, carriers, and toll operators, and end customers have data on the haulage firms they use and the vehicles that they expect to arrive at their premises. It might be possible to enter into voluntary agreements with some of these organisations (and through them their subcontractors) to gain relevant data - ideally on the operator and the vehicle registration marks of the vehicles brought in to the UK.

3.14 Also, ports and carriers might be offered incentives to collect data from hauliers about their vehicles and who operates them. Most EU hauliers are required to have a numbered Community Authorisation^[4] in their vehicles which might provide a measure of validation.

3.15 The project team considered that although collection of data from existing industry sources would potentially offer a wide group of data sources, there were significant weaknesses with the proposal. They are that:

Government would not be certain that the necessary volume and quality of data would be made available;
the accuracy of the data would be unknown;
the diverse quality and large quantity of data collected would require a high level of data validation;
Government might have to pay for the data; and
it might be difficult and expensive to encourage supply of data.

Voluntary registration scheme

3.16 Under this option Government would provide a voluntary registration system and provide some kind of incentive to operators to use it, such as rating all registered operators as amber or green if no adverse data on them were held and rating unregistered operators as red. Thus unregistered vehicles would be more likely to be stopped, checked and delayed. Registration could be provided through a variety of channels such as a website or on board ferries.

3.17 A voluntary registration scheme:

offers no significant legal concerns;
is relatively inexpensive in terms of its' technological requirements;
would reduce data sharing risks as the data would be provided voluntarily for this specific purpose;
could be introduced relatively quickly; and
would not impose new regulatory requirements on the freight industry.

3.18 But against this, a voluntary registration scheme:

would be likely to require a very convincing, comprehensive and therefore expensive marketing campaign to encourage operators to volunteer to register;
would offer an uncertain level of coverage due to its voluntary nature; and
would be likely to require more VOSA resource to create a ‘real’ incentive to register.

4. Next steps

4.1 The Freight Data Feasibility Study work is continuing, with Part Two expected to be finalised later this year.

4.2 At present, none of the four options identified appears to offer "high" value for money (with a benefit: cost ratio greater than 2:1) under the terms of the Department's guidance on value for money. In part this is because the quantifiable safety, congestion, environmental and other social benefits arising from expected improvements in enforcement appear relatively limited. However, this analysis will continue to develop.

4.3 In parallel, the Department will also be participating in negotiations in the Council of Ministers on the European Commission's proposal for sharing of national freight data across Member States (discussed at paragraphs 1.15-1.19). The Department intends, subject to the outcome of its forthcoming consultation on these proposals, to argue for these databases to include vehicle registration marks.

4.4 The outcomes of the Freight Data Feasibility Study, along with any other information or feedback received as a result of the publication of this report, will be used to develop the Department's future HGV enforcement strategy - in the context of progress with the European Commission's regulatory proposals.

Annex A: Maximum charge levels under Eurovignette Directive

Annual charges are capped at:

Vehicle Emission Standard	Number of axles on vehicle
Vehicle Emission Standard	Maximum 3 axles	Minimum 4 axles
EURO 0	€1,332 (£925)	€2,223 (£1,540)
EURO I	€1,158 (£805)	€1,933 (£1,380)
EURO II	€1,008 (£700)	€1,681 (£1,165)
EURO III	€876 (£605)	€1,461 (£1,015)
EURO IV	€797 (£550)	€1,329 (£925)