London, UK: Temperature-controlled operators will lose the duty relief on red diesel within two years.
Fuel subsidies for non road going vehicle engines – known as red diesel – will be scrapped “for most sectors” in two years’ time. Farmers and rail operators will be excluded, chancellor Rishi Sunak announced this afternoon.
The fuel attracts a duty of 11.1p a litre compared with 57.7p for diesel for road going vehicles. The Cold Chain Federation estimates using road taxed diesel in diesel-powered truck fridges instead of red diesel could cost the refrigerated haulage industry £150m a year.
Shane Brennan, chief executive of the federation, said: “Removing access to red diesel for cold chain hauliers adds £150 million of costs to the businesses we rely on to keep our food safe. Two years is not enough time for businesses to make the changes to their fleet.”
“Far from supporting businesses to make investments in greener alternative technologies, this tax change will force businesses to batten down the hatches and use existing equipment for longer.
“Raising taxes in this way will generally undermine the confidence across the food supply chain and we now seek urgent talks with ministers to understand if they are serious about helping food chain businesses to adapt to this change.“
Brennan said in a Tweet that “two years is better than nothing, but a realistic time frame for companies to adjust to this new £150m tax would be at least five years.”
Brennan earlier said that by removing red diesel from refrigerated vehicles the chancellor would be imposing “devastating, unavoidable, costs on to hard-pressed hauliers”.
“This proposal could not come at a worse time for a food chain that has been battered by three years of politically created uncertainty, planning and re-planning for shifting Brexit scenarios,” he said last week.
The federation – which is backed in its opposition by the Federation of Wholesale Distributors – had been discussing a gradual phasing out of diesel in favour of low-emissions alternatives with ministers for months, Brennan said. “Hauliers needed time to develop low-emission technologies and provide the infrastructure required by diesel alternatives, like electric charging stations,” he said.
The move, which will increase temperature operators’ costs, could have exactly the opposite effect to that desired, making it even harder for businesses to afford new, cleaner vehicles and equipment and keeping older ‘dirtier’ equipment on the road for longer, Brennan said.
Rod McKenzie, managing director of policy and public affairs, Road Haulage association, said in a Tweet that the loss of the tax exemption was “a big blow to the operators of refrigerated trailers responsible for the movement of millions of tonnes of foodstuffs – delivery rates and therefore food prices may rise.”
Christopher Snelling, head of UK policy, FTA, said: “This move will not incentivise companies to transition to newer, cleaner diesel units, because they are no more fuel efficient; if anything, it will slow progress as companies will balance the increased running costs by keeping their current equipment longer.”
“While newer diesel equipment produces substantially lower local air quality emissions, this is achieved by cleaning the exhaust before emission, not through reduced fuel use.
Snelling said: “We are currently working with governmental departments to assess how to accelerate progression to cleaner units, but instead of waiting for this solution, we believe the government is taking this blunt, ineffective and costly action to give the appearance of progress, without regard to the realities of the use of these units.”
The British Frozen Food Federation said that the policy could further hurt the environment by discouraging use of frozen food. “Frozen food has a massive role to play in helping reduce the incredible amount of food wasted in this country every year,” said Richard Harrow, chief executive, British Frozen Food Federation.
“Adding costs, and thus possibly increasing the price of our products, could limit our ability to encourage consumers and professional kitchens to use more frozen food to the benefit of the environment,” he said.
In other Budget news, the chancellor announced a raft of measures to support business affected by the corona virus outbreak. Firms with fewer than 250 staff will be refunded sick pay payments for two weeks and small firms will be able to access “business interruption” loans of up to £1.2m.
