Fuel duty freeze welcomed across sector

Following pressure from industry trade groups, the cancellation of a planned rise in fuel duty announced by the Chancellor Rishi Sunak in the recent budget was welcomed across the sector.

Despite plans for an increase the budget saw the announcement that fuel duty would continue to be frozen for a further 12 months – the 12th year in a row that this tax has been unchanged.

Business group, Logistics UK welcomed the announcement having been calling for a freeze on all fuel duty until diesel trucks are phased out in 2040, to give businesses time to plan and make the necessary investment in alternatively fuelled vehicles as reported here.

As David Wells, the organisation’s chief executive explained, any duty rise would have severely impacted on the industry’s ability to meet the government’s decarbonisation targets commenting prior to the budget: “A fuel duty hike would do nothing to help our sector on the road to recovery and would make it even harder for our members to achieve their Net Zero ambitions. It would be nothing more than a direct tax on our sector’s ambitions to achieve Net Zero.”

“With our industry’s revenues still returning to normal after the economic shut down, and logistics businesses already operating on incredibly narrow margins, there is simply not the cash available to fund investment in new technologies as well as paying any additional charge on fuel,” he says.

“At present, diesel is one of the single biggest running costs in operating a large fleet of HGVs: our own research indicates it accounts for more than 30% of an HGV’s operating cost and is a commodity which our members simply cannot do without.  Any duty rise would do nothing to help our sector switch to new, alternatively fuelled vehicles, and would simply slow the industry’s rate of recovery at a time when logistics businesses are already under intense financial pressure.”

A boost for decarbonisation of logistics

The continued freeze on fuel duty will assist the logistics sector in its move to decarbonisation by 2050, according to Logistics UK. Elizabeth de Jong, policy director explains how the announcement will enable businesses to make the switch to alternatively fuelled vehicles more smoothly.

“The impact of the pandemic on the economy, and our industry in particular, has made vehicle replacement planning particularly challenging,” she explains. “The logistics sector traditionally runs on extremely narrow margins, with limited amounts of money available for vehicle purchase – so the removal of uncertainty over fuel duty levels for another year will give our industry time to plan vehicle replacements more effectively.

“Logistics is at the heart of all sectors of the UK economy, and it is encouraging to see many Budget announcements which will help business operations in our industry.  The freezing of HGV excise duty and the extension of the suspension of the HGV levy for a year will make the operation of vehicles more cost effective. In addition, the continued investment in road and rail infrastructure, as well as in customs and transit arrangements is welcome news which will help goods move smoothly.

Increasing fuel prices already risk economic recovery

Brian Madderson, PRA chairman, commented: ”The levy has been frozen at 57.95ppl for petrol and diesel since March 2011,” he said. ”The cost of a barrel has more than doubled over the last year, from $40 to around $85 now. Some analysts predict this could pass $90 by the end of the year.

”With pump prices at an eight-year high, PRA has been lobbying Government and the Treasury, in particular outlining the potentially damaging effects on the economy and household budgets of even an inflation-linked rise, so it is positive to hear the Chancellor’s commitment.”

An opportunity missed

Howard Cox, founder of campaigning organisation FairFuelUK, said he warmly welcomed the freezing of Fuel Duty for the 12th year. However, he believes it was an opportunity missed too: ”With pump prices at their highest ever, meaning the Treasury is wallowing in a £1bn unexpected windfall, it was a time for the Government to have cut Fuel Duty significantly. It was a time too, to incentivise drivers to move to cleaner fuels and put a moratorium on the unpopular 2030 ban on new diesel and petrol car sales, until more cleaner fuel technologies come forward.”

“For these reasons, it is imperative to take these points on board: UK drivers still remain one of world’s top three nations’ highest-taxed motorists, face an uncontrolled pump pricing lottery, congestion, and clean air charges plus a perpetual demonisation for all the environmental ills of our planet.”

“FairFuelUK, will continue to campaign for UK’s 37m drivers to be treated better by this disappointingly anti-driver Conservative administration. On behalf of motorists, motorcyclists, taxis, van drivers and much maligned hauliers, we will continue to fight hard for fairer taxation, improved road user policies, better more practical and equitable ways to lower emissions, and for all politicos to recognise that drivers are not just cash cows, but vital contributors to a successful economy and recovering from the Covid caused fiscal crisis.”

Sue Robinson, chief executive of the National Franchised Dealers Association, said: “As people’s reliance on cars continues to increase, it is positive that fuel duty will remain frozen for another year, supporting motorists through a period of financial pressure.”

Sue also welcomed a £21bn package to improve the road infrastructure: “An efficient and secure transport network is a vital component of the economy of the UK. We welcome the Government’s investments into the UK’s road infrastructure, which will benefit the movement of goods and people across the country”.