Progress on Government review of Mode Shift Grants and Sensitive Lorry Miles
On 24 September 2007 DfT held a stakeholder seminar to launch its review of Mode Shift Grants and Sensitive Lorry Miles.
There are three schemes in place in GB that are used to promote the use of modes other than road for the transport of freight. These facilitate the purchase of the environmental benefits that result from using rail or water for freight transport. The schemes are operated by the DfT and by the Scottish Government and the Welsh Assembly Government, with devolved budgets. The schemes are:
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Freight Facilities Grants (FFG) - which helps offset the capital cost of providing rail and water freight handling facilities;
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Rail Environmental Benefit Procurement Scheme (REPS) - which assists companies with the operating costs associated with running rail freight transport instead of road (where rail is more expensive than road); and
- Waterborne Freight Grant (WFG) - which assists companies with the operating costs associated with running water freight transport instead of road (where water is more expensive than road).
We are reviewing the grants in order to decide whether they should run beyond the year 2010 and if so, what the shape of the grants should look like.
Key messages about the grants expressed at the stakeholder seminar were:
- their general shape is OK, with one or two exceptions
- clawback of grant for non delivery of freight volumes is sensible and improves applications
- the budget is insufficient
- the application process is cumbersome
- water is not treated equally with rail
Having considered all the views expressed by stakeholders at and since the seminar, and following subsequent discussions with the devolved administrations, we have developed some initial ideas. The important one, for rail and water freight businesses, is that we propose to continue the grant schemes beyond spring 2010, subject to continued EC State Aids clearance.
Initial thoughts on what the specific schemes might look like follow. These are very much initial ideas on which we would welcome views. If we choose to proceed with their development they would be subject to agreement by DfT Ministers and the European Commission through the State Aids process.
Freight Facilities Grant (FFG)
We do not propose making any significant changes to this grant. We believe the balance is about right and there is no desire to change the principles of the scheme. Stakeholders have called for an increased budget but this is outside the scope of this exercise. They have also asked for simplification of the application process. We will examine whether administrative steps can be taken to simplify procedures for applicants without compromising evidence needs.
Rail Environmental benefit Procurement Scheme (REPS)
Government and stakeholders appear to be generally content with the existing scheme. To offer greater certainty to business we are considering seeking a State Aid clearance to operate the scheme for 5 years but we propose to keep grant funding contracts with specific companies at the current length of not more than 3 years.
A significant change we would like to pursue with the EC is the inclusion of inland waterways in this grant scheme (which would then need to be renamed). This would mean inland transport - rail and water - would be treated equally in our encouragement of mode shift.
Waterborne Freight Grant
If the above change was made the WFG would continue for coastal and short-sea shipping. EU state aid rules (which are different for rail and maritime transport) prevent us from materially amending this grant. However we intend to pursue with the EC the idea of improving the flexibility of the scheme by providing WFG funding periods of up to 3 years (currently grants are fixed at 3 years, no more, no less).
Sensitive Lorry Miles (SLMs)
We are also seeking to update the monetary values placed on removing a lorry mile from the road network. These values underpin the assessments of grant funding for mode shift to rail and water. SLMs were last reviewed in 2003 and we wish to update them to secure State Aids clearance to continue mode shift grants beyond 2010. Economists in the Department are currently working on this aspect and will be circulating a technical paper to stakeholders in May, setting out the methods and principles being followed.
Next steps
The target is to have the review and associated work streams completed by the end of this year. We would welcome any further views on the above ideas. These should be sent to:
Keith Hughes
Freight and Logistics Division
2/14 Great Minster House
76 Marsham Street
London SW1P 4DR
