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Fuel Duty – 2p increase now unthinkable – 25p cut required

The Freight Transport Association says that the imposition of the Chancellor's proposed duty increase on diesel of 2p per litre, planned for October, is unthinkable. The Government must now make a reduction in duty in the order of 25p per litre, so as to bring the price of diesel for the UK transport industry down to a level more in line with the rest of Europe.

Fuel duty for diesel in the UK is 50p per litre compared with a European average of just 25p per litre. FTA says that a reduction of around 25p is essential bearing in mind the forthcoming liberalisation of EU regulations which will allow foreign vehicles to come to the UK to carry out haulage on a contractual basis at very much lower costs than apply to the domestic fleet, mainly due to the high tax burden on UK diesel. The latest research shows that due to lower fuel and labour costs, foreign lorries working in the UK are able to do so at between 10 and 15 per cent lower cost than UK operators working in the UK.

FTA Director of Policy James Hookham said, 'Yesterday's protest meeting in London gave a very fair representation of the problems experienced by the road transport industry as a consequence of high fuel taxation and growing oil prices. Those involved are to be applauded for their dignified and articulate description of the problems, and of potential remedies which include abandoning the proposed 2p per litre duty increase, arranging an early duty rebate for essential vehicle users, and redesigning future tax arrangements to decouple the way duty is charged on commercial vehicles from private cars. By contrast the calls from Wales for 'action by the Prime Minister within seven days or we will blockade refineries and ports' were crass and unhelpful.

'The current fuel price problems are further complicated by the threats to UK haulage from Brussels with the prospect of liberalisation of cabotage arrangements. New regulations are likely to allow foreign vehicles not only to work at far cheaper rates in the UK than can be achieved by the domestic fleet, but also to do so without the application of the UK Operator Licensing safety and maintenance regulations, which must be met by UK lorry operators and which have resulted in a good and improving safety record for these vehicles.

'The consequence of this is that we face the prospect of vehicles coming into the UK at the start of the week, carrying out a number of contracted jobs, then leaving the UK at the end of the week without buying any UK taxed fuel or paying any UK road charges. At the same time, less stringent continental licensing arrangements mean that there would be an inevitable further deterioration in the poor safety record which we have seen from foreign vehicles in the UK in recent years.

'The threat of increased and unfair foreign competition must be considered as great a problem to the commercial operation of UK transport as the cost of fuel. Reducing diesel duty to a level more in line with the rest of Europe would help to create a level playing field and a far fairer competitive environment.'

FTA Chief Executive Theo de Pencier will be in Brussels on Monday (2 June) for discussions with senior UK officials regarding the EU proposals.

Cabotage is haulage work carried out by vehicles from one EU country within the borders of another member country. Presently the regulations prohibit regular contracted work. The new EU plans would allow greater flexibility and permit foreign vehicles to work in the UK on a regular contractual basis. The cost of bulk diesel for the transport industry has risen by 40 per cent from 76p per litre in May 2007 to today's price of 106p per litre.

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