Saturday 22nd Oct 2016 - Logistics Manager

Chancellor misses opportunity on fuel duty

Chancellor George Osborne had the opportunity to ease cost pressure on domestic freight activity and stimulate economic growth by cutting fuel duty by 3p – but failed to take it.

Instead, he chose simply to cancel the 3p rise that was due in September.

The Freight Transport Association welcomed the Chancellor’s decision to cancel the planned rise, but has expressed disappointment that the pleas of industry and consumers to reduce fuel duty have been ignored.

22146  George Osborne

James Hookham, managing director of policy and communications at the FTA said: “While we are relieved that the immediate danger has passed, to get the UK back on the road to economic recovery it is vital that we have a cut in fuel duty and a long-term strategy to prevent future rises and uncertainty.

“The Chancellor has once again squandered an opportunity to support UK industry, jobs and economic recovery, by failing to reduce fuel duty rates.”

The Road Haulage Association welcomed the decision. “We urged a ‘no increase’ announcement and the chancellor delivered – although we would have liked him to go further by cutting diesel duty,” said RHA chief executive Geoff Dunning. “This is another massive achievement for the road haulage industry and the FairFuelUK campaign, which the RHA co-founded three years ago. We have transformed the debate around fuel taxes.

And he warned: “The RHA also has a strong message for hauliers’ customers. Diesel prices have been rising sharply this year and, according to the RHA’s weekly fuel price survey, a key industry indicator, has already stands at 115.14ppl (ex VAT). “Customers have to accept that their haulage charges must rise if they are to continue to receive the services upon which they depend.”

The FTA acknowledged that duty rates for natural gas and biomethane relative to diesel rates have been fixed for a further year. However, the payback period for gas-powered trucks is at least 10 years and the fragility of the business case for these vehicles is such that uncertainty over even small increases in gas duty rates renders these investments uneconomic.

“The Chancellor has bought some time for discussions with the industry,” said Hookham. “However, there must be a long term fix in gas fuel duty rates to provide the certainty needed to stimulate investment in low-carbon fuelled vehicles to the benefit of businesses and the environment.”

In his budget statement, Osborne downgraded his growth forecast for the economy to 0.6 per cent in 2013. In December, he said growth would be 1.2 per cent.

Osborne set out a number of measures to promote growth including an extra £3bn for transport and infrastructure projects every year from 2015-16 until 2020.

In addition, he said, corporation tax would be cut by 1 per cent to 20 per cent in 2015.

* BIFA director general Peter Quantrill responded to the budget saying: “I hope that today’s scrapping of September’s planned increase is a sign  that the government will now eliminate fuel duty rises for the rest of  this parliament. That would go someway to delivering the sort of long term certainty  that our association’s members want, but it does not mean that we will  stop asking for an outright cut, the introduction of an essential user  rebate and some form of fuel duty stabilisation mechanism.”

Prior to the budget, BIFA expressed hope that the budget would bring  some positive news about investment in transport infrastructure and  Quantrill also welcomed the news that the government will allocate an  extra £3billion every year from 2015-2016 to 2020 to infrastructure  projects including roads and railways.

* Pall-Ex welcomed the decision to cancel the planned 3p rise in fuel duty. Adrian Russell managing director, said: “The Government will be relying on haulage companies to play a key role in delivering on their investments in infrastructure. The decision not to increase fuel duty will allow a competitive and healthy road transport industry to continue to service the businesses of Britain.

“Pall-Ex urges the Chancellor to continue the freeze on any rise in Fuel Duty. The effectiveness of the money the tax raises, versus the business it loses for the UK, is a fine balance that could have disastrous consequences if tipped in the wrong direction.”

But Phil Harrold, PwC automotive partner, sounded a not of warning: “While the freezing of fuel duty is welcome to the beleaguered motorist, the offsetting risk is the exchange rate with the US dollar. As the British pound falls, then petrol prices, which are dollar driven, are forced higher as witnessed over the last two months.

“Moving into the wider transport industry, UK hauliers can also be assisted by the freeze as they are competing with their European counterparts, who in turn are suffering from the inflated dollar. By holding back on fuel duty this will help create a more level playing field with Europe.”