Ms Verona Murphy:

I thank the Chairman and members for the invitation to appear before them for what I believe is the first presentation by the Irish Road Haulage Association, IRHA, before the committee. The association is the representative body for the licensed haulage sector in Ireland. We estimate that 47,200 people are employed in the road freight, distribution and logistics sectors in Ireland, accounting for 2.5% of total national employment. Our members play a key role in the sector.

I will outline the economic context for the road haulage sector. Merchandise trade is a very important component of the economy. Exports and imports of goods are key to the functioning of the economy, both from a consumer and a business perspective. In 2017 Ireland’s merchandise exports totalled €122 billion, while its merchandise imports totalled €79 billion. When combined, total merchandise trade was equivalent to 68% of gross domestic product, GDP, in 2017. The road haulage sector is central to this two-way trade in goods and, consequently, the proper functioning of the economy. As such, it is essential for Ireland’s future growth and prosperity that the sector be as efficient and effective as possible. IRHA members are a key cog in the efficient functioning of a vibrant and dynamic economy. In a very real sense, we can be described as the wheels of Irish trade and commerce.

The operating environment for road hauliers is very challenging and the sector is also facing many pressures and uncertainties in the coming years. Our challenges include increasing costs, especially fuel costs, but also high insurance premia and new daily levies being imposed in the United Kingdom on Irish trucks which do not apply to UK trucks operating here. Very high levels of competition are driving down margins to unsustainably low levels. New regulatory impositions are leading to a tougher and costlier operating environment. One change resulted in some members' loading capacity being reduced by 7%. There is a labour shortage which is really stretching our members' capacity to recruit drivers. Currency fluctuations, in particular, recent movements in the value of sterling, are having a negative impact on many operators. The difficulties exporters are facing are being directly visited on hauliers who are having to deal with lower business volumes.

Future challenges are even more concerning, including Brexit which poses enormous potential challenges for the sector. Ireland is the only EU country that shares a land border with the United Kingdom. Each week there is €1.2 billion worth of trade in goods and services between Ireland and the United Kingdom. In addition, more than 80% of road freight to continental Europe travels through the United Kingdom. Anything that might act to disrupt this trade such as adverse currency movements or border controls would be damaging to Irish road haulage activities and, consequently, the Irish economy.

The risks to the economy from a hard Brexit are very clear. The road haulage sector is the one that is most exposed to Brexit and already feeling its impact through increased currency differentials, a loss of business confidence and declining credit for future investment in rolling stock and support services. The road haulage industry is at the forefront of the economic relationship between the United Kingdom and Ireland; hence, it looks to be the most vulnerable and exposed sector in the event that there is a negative Brexit outcome. Policy makers need to ensure this vital component of Irish economic life is supported to the greatest extent possible. One way of supporting the sector is to ensure we will not introduce new domestically conceived charges, taxes or rules which would add to the challenges we face as a sector. We cannot deal fully with the uncertainties that are emerging from what increasingly looks like a chaotic Brexit, but we can ensure we do not make the economic position of exposed sectors any worse through misdirected or inappropriate new rules or charges.

Fuel costs are a very significant overhead for licensed hauliers, representing up to 35% of the operating cost of a vehicle. Licensed hauliers have no alternative but to use diesel. They do not have alternative fuel sources which they can choose as prices fluctuate. Diesel is the most cost effective carbon and energy efficient fuel for use in heavy road transport. It offers the best combination of power, torque and cost efficiency. Other fuels require more space such as gas or weight such as batteries, reducing payload and increasing the number of journeys. Even in the USA where cars and light commercial vehicles are predominately run on gasoline, heavy duty trucks run on diesel. Furthermore, as a fuel, diesel has slower combustion characteristics compared to petrol. Diesel vehicles produce higher torque at lower speeds, the primary requirement of a heavy goods vehicle. High torque is needed to move heavy loads. The diesel engine remains the only viable option for hauliers. In simple terms, diesel is the only readily available fuel source for hauliers and any increase in its cost represents a direct and immediate charge on the cost of business for a haulier. A proposal to equalise the excise duty between diesel and petrol would lead to an immediate 10% increase in fuel costs for our members.

Regrettably many of the public policy debates on this issue are conducted with a very poor understanding of the complex issues underpinning the use of diesel by the haulage sector. One particularly poor piece of analysis was conducted by the ESRI which was published in February. The report suggests a worryingly misinformed point of view in favour of the recent narrative that sees diesel as a bad fuel type, no matter what the circumstances. The IRHA contends that the significant analytical flaws and lack of objectivity demonstrated in the report should preclude its use to inform Government taxation policy on fuel excise levels. It is certainly not fit for that purpose. The report completely misses the point that the road haulage industry has no alternative but to use diesel and that modern trucks are leading the way in slashing air quality pollution levels. It also ignores the vast investment made by truck manufacturers in designing highly efficient diesel engines in line with Euro 6 emission standards.

I will now address sustainable transport modes.