Views on the government’s plans to abolish the red diesel subsidy

In next week’s budget, new chancellor, Rishi Sunak, is looking to abolish the 80% red diesel subsidy which presently carries 11.1p duty, compared to 57.7p for standard fuel.
‘At the moment people aren’t incentivised to make the change to lower consumption or alternative fuels. We need to fix that,’ reported a government official.
As part of the government’s commitment to reach net zero by 2050, it is expected that taxes will be used to move fuel users away from fossil fuels. Removing the red diesel subsidy would raise around £2.4bn for government.
UKIFDA, which has urged the chancellor to reconsider, pointed out that red diesel, which is used by the construction, farming and marine industries, accounts for 15% of all diesel sales in the UK.
Any increase in fuel duty will not only have a major impact on UKIFDA members and their customers but could also see significantly increasing costs to farmers and construction companies.

Speaking with John Ford of Ford Fuel Oils, he told Fuel Oil News that in his opinion:
“Scrapping the gas oil rebate not only hits important sectors such as agriculture and construction financially, but what message does this send at a time of severe disruption caused by Brexit and the risks presented by Coronavirus?
“Is there no longer a housing crisis, or plans to build major infrastructure projects such as HS2? Will the country not need to rely on British farmers to produce food in the event of a virus outbreak and supply chain disruption?
“I think everyone supports the green agenda, but a sustainable plan needs to be devised that works long term, ensuring that product quality is maintained and taxed appropriately.
“There will be a lot of angry gas oil users who have experienced product quality problems this year because of the change in FAME level in gas oil, imagine how they feel about being taxed more on this “greener” product?”

“In the short term this decision will affect our farming and building customers in a big way, unless the increases are applied in stages. The impact to cashflows, profitability and credit limits will be felt quickly for these industries and will inevitably lead to reduced trade and more insolvencies. Is this really what our economy needs at the present time in addition to the headwinds of Brexit and the coronavirus?” said Richard Burton, Barton Petroleum.
“Changes to this duty could see farmers face increases of nearly 50p for red diesel,” said NFU president, Minette Batters.
“It is absolutely essential that the red diesel exemption is maintained; removing it will make us immediately uncompetitive with many countries, including EU member states, the US and Canada, which all provide their agricultural sectors with a lower fuel duty on red diesel.”
Also writing to the chancellor, Andrew RT Davies, rural affairs minister in Wales, said:
‘As both a farmer and a politician, I cannot stress how important this support is for farmers in Wales and indeed the rest of the United Kingdom.’
Not everyone sees the subsidy’s removal as a negative with others seeing its removal leading to a more level playing field for all fuel users….
The government’s final decision will be revealed next Wednesday.