Orkney and Shetland MP, Alistair Carmichael, has today written to the Chancellor calling on him to consider a delay to planned changes for the usage of red diesel, due to come into application at the end of this month. The planned changes will see all non-agricultural uses of red diesel banned, including its use by the construction industry amongst others. This will lead to a significant rise in tax costs for businesses, coming in addition to already soaring wholesale fuel price rises in recent weeks and months, exacerbated by Russia’s invasion of Ukraine.
In the letter Mr Carmichael highlighted the reality that while fuel tax rises have been justified on the basis of reducing fossil fuel consumption and the transition to cleaner alternatives, fuel costs have risen sufficiently in recent weeks that such an “incentive” is not currently necessary.
Mr Carmichael further called for broader consideration of temporary tax relief on fuel given the prolonged rise in prices expected as a result of the invasion.
Mr Carmichael said:
“There is a broad consensus that reducing the use of fossil fuels in business and personal use should be the goal for our country. Even in recognising this, however, it is worth considering the degree to which rising fuel costs – whether for petrol, gas, red or white diesel – are already acting as a major incentive for businesses and consumers to limit their fuel consumption. Prices at the pump are significantly higher than they were mere months ago without even considering duty.
“The Treasury has overwhelmingly justified these tax increases on the – not unreasonable – basis of climate change concerns. If fuel duty changes are a lever by which to incentivise lower usage of fossil fuels, however, then it must surely also be the case that with prices now soaring beyond recognition, there is already sufficient incentive in place.
“Even if there were a case for the red diesel duty changes at some point in the future once fuel prices return to normal levels, to go ahead with this tax hike now risks being the straw that breaks the camel’s back. Now is the time for the Chancellor to reconsider his plans – before it is too late.”