CPA appeals against plan to abolish red diesel
Most UK companies will be aware - from last weekend’s newspapers - that the UK government is reportedly considering removing the lower taxed rebated red diesel that is used in all off road vehicles, agricultural equipment and some specialist road going equipment such as cranes and large truck mounted lifts. The announcement - if true - is expected to be included in the budget next week.
The UK’s Construction Plant-Hire Association - the CPA - has written to the chancellor urging him to rethink any plans he might have to do so. It has issued a statement pointing out the impact that such a move will have on the rental industry, not to mention construction.
The full statement is below:
“Reports have suggested that Chancellor Rishi Sunak is set to announce that the subsidy on red diesel will be abolished. The BBC and Financial Times have both reported that Rishi Sunak is expected to announce in next week’s budget that the tax benefit of red diesel given to users of plant machinery and off-road vehicles will be scrapped.
“It is believed this forms part of a bid to encourage a switch to greener alternative fuel vehicles and help the UK meet its climate change targets. Scrapping the red diesel rebate will have significant financial implications for the construction sector as it will mean that users of diesel powered construction plant machinery will pay an extra 47 pence on every litre of diesel used.”
“The Construction Plant-hire Association (CPA), which represents 1,700 companies who are owners of 85 percent of the construction machinery used in the UK, has been quick to react to the reports.”
“Yesterday (04.03.20) CPA Chief Executive Kevin Minton wrote directly to Chancellor Rishi Sunak: “As a key sector within the wider construction industry, we are concerned about reported proposals in the forthcoming budget, to place restrictions on the use of red diesel in construction machines. The CPA set out our concerns in the government’s call for evidence on the use of red diesel back in 2018. It is disappointing to see such measures being discussed again.”
“Restrictions on the use of red diesel in the construction sector would, unfortunately, have a profound impact for our members and the wider construction industry by raising costs and squeezing already tight profit margins. This in turn will limit scope for investment in new skills and new cleaner, greener technology - something the government is encouraging our members to do.”
“Such proposals will only undermine this progress, adding greater uncertainty at a time when construction remains fragile, despite government plans to increase spending on infrastructure.
“We urge you to delay any consideration of this issue until a proper consultation can be carried out, and suitable amelioration measures identified. I look forward to discussing this issue further.”
Red diesel currently accounts for about 15 percent of total diesel sales in the UK and costs the Treasury about £2.4 billion a year in revenue. Red diesel is essentially the same as regular diesel, but it has a dye in it to indicate that it is largely tax exempt.
We totally concur with this message when it comes to off road equipment, although there may be a case for road going equipment - such as cranes - to lose the right to use red diesel, as it in can be argued that higher fuel costs for the crane carrier engine might just stop 'rate cutters' sending cranes, both large and small, a couple of hundred miles or so across country to do a short job that could have been done by a local crane company if it had only slashed its rate to the same non commercial levels. In other words it will penalise those who by doing this cause more traffic congestion and pollution. It would also make it more expensive to run very old cranes with less efficient power trains.
Perhaps a better policy would be to encourage equipment companies to use a red bio/renewable diesel?