£95 million New Year fuel tax headache for industry condemned by FTA

Friday 31 December 2010

"Fuel duty is not a lever that can be pulled to reduce the logistics sector's carbon emissions, suggesting otherwise is simply ‘greenwash’."

Simon Chapman, FTA's Chief Economist

The Freight Transport Association has condemned the latest increase in fuel duty planned for 1 January 2011 as a New Year’s present from the Chancellor that will leave the freight industry with a £95 million hangover. The increase of 0.76 pence per litre from January is the third rise since April 2010 and will push diesel prices to within four pence per litre of the all-time highs reached in July 2008 when oil prices were at $145 per barrel.

Simon Chapman, FTA’s Chief Economist, said:

“Diesel is not an optional extra for industry. It is essential to keep shops stocked and businesses supplied with materials. Rises in fuel commodity prices have already left operators facing diesel prices nine pence per litre higher than a year ago – adding £3,800 per year to the bill for running an articulated truck. This latest fuel duty increase, together with those previously introduced this year, will add a further £1,200 per year.”

Diesel currently represents 35 per cent of the cost of running a truck. With carriers already struggling to pass on higher costs resulting from rising crude oil prices, the latest fuel duty rise will make commercial viability all the harder for the sector.

Chapman continued:

“The Chancellor is treating the road freight sector as a bottomless well from which cash to bolster the public finances can be drawn. At the same time he has embarked on a savage set of cuts to transport infrastructure which will see spending on national road schemes fall by 45 per cent and local authority budgets for capital schemes slashed.

“For the UK to trade its way out of recession its supply chains need to be cost competitive and its roads must provide reliable routes to market. Neither is achieved by a tax base spiralling well above inflation and a transport network starved of investment.”

FTA is concerned that the Government may be tempted to augment Treasury coffers by using environmental issues to justify fuel duty rises beyond the current commitment. The argument for increasing the rate of fuel duty for companies in the transport sector to reduce carbon emissions is dubious and could even be counter productive.

Chapman concluded:

“There is a propensity for government to disguise revenue raising exercises under a large green banner. However, while fuel duty hikes may influence the behaviour of the private motorist – who can substitute car journeys with public transport – lorries simply have to be driven if we want our shelves stocked.

“Ironically, raising fuel tax simply reduces the amount of cash the industry has to invest in eco-driver training and newer, cleaner engines. Fuel duty is not a lever that can be pulled to reduce the logistics sector's carbon emissions, suggesting otherwise is simply ‘greenwash’.”


Notes to editors

Duty on diesel rose by 1 pence per litre to 57.19 pence per litre (ppl) on 1 April 2010 and by a further 1ppl to 58.19ppl on 1 October 2010. It is set to rise by another 0.76 pence per litre on 1 January 2011 to 58.95 pence per litre.

Fuel duty represents 56 per cent of the cost of a litre of bulk diesel (excl. VAT) as at 17 December 2010.

The 0.76ppl fuel duty increase from 1 January 2011 will cost the road freight industry an additional £94.25 million per year on top of the £7.22 billion per annum already taken from the industry in fuel duty.

For further information please contact:

Simon Chapman, FTA’s Chief Economist, on 07818 450504 or 01892 552274.

FTA’s media team can be contacted on 01892 552255/01892 552253 or, out of hours, on 07818 450425. 

FTA Press Office

01892 552255