03.01.2005

Consultation Paper on future of Red Diesel

In his pre Budget speech in December, Chancellor Gordon Brown referred to the need to review the lower duty of rebated oils. In real world speak it is clear that he intends to end the use of the virtually tax free red diesel in cranes and access equipment that are registered for road use.

As a follow up, HM Treasury has issued a Consultation Paper on the subject. The Paper focuses on reviewing certain categories of plant, in respect of their continued use of red diesel but it is clear that cranes and truck mounted aerial lifts are near the top of the target list given their high road usage, telehandlers will also be in the firing line. : Here is a link to the site
www.hm-treasury.gov.uk/pre_budget_report/


The CPA has naturally jumped to the defence of what it considers to be its member’s interests and is preparing to defend the right to continue to use red diesel although it has asked for members input on the subject.

When asked for an immediate response most crane and access people feel that defending the use red diesel is paramount BUT.. There is a different view, held at least by some members of the UK crane hire fraternity. We explore the arguments for and against the right to use “rebated oils”.

In the 1930's when the use of "rebated fuels" began, cranes were largely site based machines that only occasionally used the road to move from one construction site to another once the first was complete or to travel a short distance between two industrial plants. Clearly there was a strong argument for Cranes to be treated in the same way as farm tractors or excavators.

With the arrival of the telescopic crane in the 1960’s that all started to change and today mobile cranes spend a large part of their time on the road, with smaller units often covering three or more lifts a day in different parts of a local area. While large machines all too often travel the length and breadth of the country for even short term work.

Many lifts these days are also carried out from the street itself, so that some days a crane might never even leave the public Highway! So where is the justification for the use of off road fuel? Some might say.

Clearly the case For retention of cheap fuel is:... that the crane industry simply cannot absorb the extra cost of fully taxed diesel which would effectively triple crane company's fuel bills, and what about the vehicle excise duty? The next step would surely involve the same punitive costs and rules that the haulage industry already has to deal with.

The extra cost overall of using fully taxed fuel on such large equipment would be massive, if the crane and access industry were able to pass the full cost on to the end user it would hit contractors with increased construction costs. This could raise the cost of hospitals, schools and other infrastructure projects.

If cranes could not travel so far so cheaply they would become more local so more cranes would be required to cover the same number of jobs across the UK which could result in more congestion at least locally and in total burn a lot more fuel.

End users in remote locations or smaller towns would have less competition as outsiders could not afford to send cranes in without charging a hefty mileage fee. The net effect would be to penalise the provinces.

On the Other Hand….

What would really happen if starting next year cranes were obliged to use white diesel? Well first of all hire companies would need to think twice before sending a crane on a four hour round trip for a low priced daily minimum. They would most likely have to charge the end user mileage. Perhaps in such a world crane companies would work closer together so that the situation no longer occurs where a London based 250 tonner passes a Glasgow based 250 tonner somewhere around Manchester as each goes to do a job in the others back yard.

Annual mileage levels would drop, to levels more similar to those on the continent, carrier maintenance costs would fall, UK based cranes might find a ready market again in continental Europe and second hand prices might rise.

What about rates though? Well who knows? Perhaps with companies less willing to send cranes into a distant competitor’s back yard perhaps, just perhaps, hire rates might rise??

Environmentally less fuel would be burnt, leading to less pollution, with fewer long distance trips, perhaps congestion might ease a fraction? Wear and tear on the roads might also be slightly reduced?

And finally red diesel is a much cruder fuel than low sulphur white diesel, it is close in consistency to heating oil, causes more pollution and is harder on the engine.

In fact the more you look at it perhaps an edict from the treasury might not be such a bad thing after all?

What do you think?

Email your opinion to [email protected] marked “Red&White diesel debate”

We will publish the results here and in Cranes&Access in February

Once again to take a look at the consultation paper go to the HM Treasury website

www.hm-treasury.gov.uk/pre_budget_report/prebud_pbr04/prebud_pbr04_index.cfm

If you are a CPA member also make sure that you respond to its members survey in this subject.