Somerset residents have been warned by Somerset Waste Partnership that continued staff shortages will mean delays and interruptions to rubbish collection services across the county. The contractor, Suez, is struggling to cope with a lack of staff to drive their bin lorries and has called on people to be patient while they attempt to recruit more. Somerset is hard hit, they say, because it is home to a large number of logistics companies who are also looking to recruit drivers.
National shortage of drivers: the Brexit factor
The context is a national shortage of drivers made worse by Brexit and the unwelcoming environment for foreign nationals now fostered by government. According to Logistics UK some 79,000 European workers have returned home, seriously exacerbating problems caused by Covid-19 and a history of under-investment in training. The Road Haulage Association (RHA) has called the shortage of HGV drivers a “situation of catastrophic proportions” and has written to the prime minister demanding action.
While several factors have contributed to the problem, the RHA is clear that Brexit bears a substantial part of the blame for the crisis hitting the industry. In their letter to the prime minister they describe as key factors:
“COVID – Many drivers returned to their country of origin during extended periods of lockdown and restricted travel. The vast majority have not yet returned.”
“EU exit – The uncertainty of Brexit and future rights to live and work in the UK forced many drivers to do the same. Again, the vast majority have not returned nor are they expected to.”
Around 10 per cent of UK-based drivers were EU nationals before the pandemic and replacing them will be difficult.
The shortage means not only that bins won’t be emptied in Somerset but shelves won’t be filled in supermarkets. Business leaders in a range of industries have called on the government to ease restrictions to encourage EU drivers to return but it may take more than temporary work permits to repair the damage. Post-Brexit Britain is likely to be seen as a less welcoming and less attractive place to live.
Logistics sector’s particular problems:
There is, however, another reason why the logistics sector is in trouble. Haulage is one of those industries where employers sought to avoid their responsibilities by pretending those who worked for them were not employees. Drivers increasingly became designated as self-employed sub-contractors – a status which enabled firms to avoid responsibility for sick pay, holiday entitlement and pension contributions.
The loss of these benefits was partly mitigated for drivers by the fact that being self-employed has tax advantages. Employees are taxed on earnings whereas the self-employed are only taxed on profits. A further, recent development has been the practice of drivers registering as limited companies and taking most of their income as dividends, paying corporation tax at 19 per cent rather than the higher income tax rates. This loophole has now been stopped by a piece of tax legislation known as IR35 .
The Treasury estimates that the practice of engaging workers as subcontractors in transport and other sectors has cost around £1.3 billion in lost taxation. The new rules require firms to determine the tax status of their sub-contractors and if subsequent enquiries show that they are, in effect, disguised employees, the firm, rather than the employee, faces stiff penalties. This has made the practice much less attractive.
The impact of IR 35 has not only been to increase hauliers’ costs directly. It has also cut drivers’ potential earnings substantially and many appear to have sought to recoup the loss by asking haulage companies to pay more. According to the RHA “The introduction of IR35 has resulted in agency labour withdrawing their services as low-profit margin logistics businesses (typically 2-3%) cannot sustain demands for £5-£6 per hour rate increases.”
Lack of investment in training
The crisis in the industry has been exacerbated by a lack of investment in training. In general haulage companies seek to recruit staff with the appropriate qualifications rather than train them themselves. Accurate figures are impossible to obtain but a call to the RHA confirmed that in general drivers are expected to pay for their own training. In a highly regulated industry that could involve costs of up to £5,000 for practical and written tests plus medical examinations.
It is tempting to ask for government support for individuals facing these costs. For good reason, however, government policy has always been to underwrite general education but not industry-specific training. Transferring the costs of all firms’ training needs to the state would be a huge and expensive step.
Covid first disguised but ultimately compounded the problems of the transport sector – a sector which touches almost every aspect of life. The lockdown depressed demand for the movement of goods, but it also closed down training and the testing service. The RHA estimates that some 30,000 tests could not take place, reducing new entrants to the industry while older drivers still retired. Now that the economy is picking up the shortfall is only too apparent.
The crisis in the haulage industry will not be easy to solve. Firms will need to take on all the costs associated with employing staff and pay wages that attract sufficient recruits. They will need to do this without resorting to shady employment practices and tax loopholes.
There is a good case for helping individuals meet the costs of training, but we cannot just transfer the burden to the taxpayer. There needs to be a new settlement that shares the cost equitably between individuals, employers and the state.
Finally, a more civilised approach to Europe and workers from EU countries would have helped manage the changes that the transport sector has to work through. That opportunity has been wasted. A blinkered approach to Brexit is not the only cause of the industry’s woes – but it has certainly made a bad situation much worse.