Scrap fuel duty revenue raising ruse, FTA tells Treasury

Monday 28 February 2011

In its submission to the Treasury ahead of the Budget on 23 March, the Freight Transport Association (FTA) has called on the Chancellor to abandon plans for an above-inflation fuel tax increase this year. It argues the fuel duty rise, estimated to be 3.5 pence per litre as a minimum, will heighten the misery being felt by transport businesses as they desperately try to stay solvent amid rapidly rising fuel costs, squeezed credit terms and weak levels of business activity.

Simon Chapman, FTA’s Chief Economist, said:

“Political instability in other countries and the impact this has on the price of a barrel of oil is beyond the Chancellor’s control. However, the level of tax he then heaps on top of it is certainly not.

‘The Budget needs to prioritise measures which create an economically sustainable environment in which businesses have confidence in the future. The planned fuel duty hike is simply a revenue raising ruse. It offers no benefit to the economy, serving only to push up costs and inflation and erode competitiveness. The freeze in fuel duty in April, which FTA has asked for, will help check rising prices and improve cash flow for businesses in the UK.’

FTA’s Budget submission calls for tax on diesel and gas oil to be left unchanged this year and supports actions to introduce a fuel price stabiliser, provided it can be made to work for the industry. FTA represents thousands of companies from the road, rail, aviation and maritime sectors and its Budget submission encourages the Government to ensure that a decision to freeze duty rates for road fuels be extended to cover fuel used by low-carbon transport modes like rail.

The uneven playing field between domestic and foreign hauliers could be addressed by introducing a lorry road user charge, argued Chapman:

“Ensuring foreign lorries pay their way on our roads reflects industry’s desire for fairness within the tax system. It will also let the Government bolster its coffers without doing irreparable damage to the economy. However; such a scheme must be tax neutral to UK carriers and not impose additional costs or new layers of bureaucracy, or it will create a bigger headache than it will solve. ”

Reflecting the global interests of many of FTA’s members, Chapman continued:

“International freight movements are already complicated enough, and their complexity and responsiveness must not be compromised through a ‘per plane tax’ as this would put the UK’s long-term commercial viability in jeopardy. Replacing air passenger duty in this way will only serve to push business away from our airports and towards those on the Continent whilst saving nothing in emissions."

Investing in environmentally-friendly technology is not inexpensive and FTA has asked that Government takes the lead in encouraging the logistics sector to consider low and zero carbon vehicles. Chapman concluded:

“Companies should be incentivised to switch from conventional but trusted diesel-engine vehicles to low or zero carbon vehicles which are, after all, untested and represent a bigger commercial risk. At the same time, trucks are an anywhere, anytime service and depend upon a comprehensive refueling infrastructure on the road network.”

To support the Fair Fuel UK Campaign which is calling for the fuel duty rise planned for April to be scrapped, sign the petition:

Fuel duty facts:

  • If fuel duty rises by 1 pence per litre above inflation in April it will leave industry footing an additional fuel bill of £450 million as a minimum. 
  • For a vehicle operator with a fleet of ten heavy goods vehicles this will mean having to find another £14,000. 
  • Fuel duty accounts for well over half the cost of a tank of diesel 
  • World oil prices have risen from $79 per barrel at the beginning of 2010 to a current price of $111 
  • Bulk diesel costs went up 15 per cent in 2010 alone, adding £6,464 to the annual operating cost of a typical 44 tonne articulated vehicle. 
  • Fuel accounts for over a third of the cost of running an HGV 
  • Operating margins average around 4% 

FTA’s budget submission asks the Chancellor to

  • Ease cost pressure on domestic freight activity, and the knock-on impact higher freight costs have on business input costs and consumer prices. Fuel duty should be frozen at current levels, lorry Vehicle Excise Duty left unchanged and the Coalition’s manifesto commitment to introduce a time-based lorry road user charge must only go ahead if there is a clear business case to do so. 
  • Support businesses involved in international trade. In particular, he must resist pressure to add to the cost of international freight movements, such as proposals for a ‘per-plane’ tax to replace the current regime of Air Passenger Duty. 
  • Help freight industry actions to reduce its environmental footprint by widening the scope of low-carbon hgv investment grants and providing the right investment environment for the development of low-carbon refuelling infrastructure.