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Economic expert warns “haulage tax” will cost jobs       2/2/11

A Scottish economist has condemned plans to withdraw RET for haulage vehicles on ferries - a move which is feared to dramatically raise the cost of goods imported into the Western Isles.

Dubbed the haulage tax” the move to axe the subsidised road equivalent tariff scheme means charges will go up by about 175% on some sea routes.

Neil Kay, professor of business economics at Strathclyde University highlights the consequents would threaten the islands’ economy and adversely affect local businesses.

He stressed: “What is the point of offering a shop assistant in Stornoway cheap fares to the mainland if she cannot afford even those fares because the business she worked for has just gone bust? You do not need an economist to answer that question, not even a shop assistant, just common sense. “

Mr Kay, who was a fervent critic of the road equivalent tariff trial which provided lower fares across the Western Isles sea routes for the last three years, stressed: “By just abandoning RET on commercial vehicles, the Government has made my point about the RET trial being a self-negating folly which has already wasted millions "if the pilot is expected to expire in the short term and leave them back where they started" - as indeed it has, for commercial vehicles.”

He said axing haulage RET risks putting island suppliers to the wall by forcing businesses to pass on the extra transport costs.

Mr Kay pointed out: “Island businesses depending on exporting outside their island will find their transport costs pushed up and could also threaten their survival in some cases, especially those operating in competitive markets.”

He believes: “To have very low fares for island residents and very high fares for commercial vehicles is the worst possible combination.

“The knock-on effect of high island prices and cheap fares for residents mean that that the island resident will have every incentive to head for the mainland and stock up themselves and their cars with mainland goods and services, diverting consumer spending from the islands (and its businesses) to the mainland.”

In addition “it might be thought that low fares from tourism would be a great boost to the island economies. Not really, the tourists that will not be deterred by the high costs of island living created by this "No RET on CVs" policy will make a point of stocking up themselves and their transport with their own goods and services before coming to the islands as self-sufficient as possible, and in turn minimise their own spending and economic input into the islands when they are there.”