In 2020, the government said it would reduce the list of businesses entitled to use red diesel, which many operators use to power machinery, from April 2022.
Abena Oppong-Asare, who is also MP for Erith and Thamesmead, requested in her letter to Helen Whately that the Treasury review the impact assessment undertaken on the policy.
It is thought that Ms Oppong-Asare has written the letter amid heavy lobbying from the waste and recycling sector, particularly metals recyclers.
European Metals Recycling (EMR), one of the world’s largest metals recyclers, has a facility in Ms Oppong-Asare’s constituency in Erith.
The British Metals Recycling Association (BMRA) has also been a vocal critic of the policy.
Impact assessment
In its impact assessment when the tax was first announced in March 2020, the Treasury said the policy “is not expected to have any significant macroeconomic impacts”.
It also said it will have “a negligible administrative impact on those businesses and civil society organisations that will lose their entitlement to use red diesel”.
Review
However, Ms Oppong-Asare called for this stance to be reviewed.
In her letter, she explained: “As I am sure you are aware, businesses in a number of sectors – including construction, manufacturing, recycling, and waste management – have raised concerns about the impact of removing these entitlements at this time.”
Ms Oppong-Asare added: “In particular, there are concerns that small and medium businesses will find this upcoming tax increase especially difficult.”
The MP, who was elected in 2019, remarked that the changes to red diesel entitlements come as many businesses are still recovering from the impact of the Covid-19 pandemic and as employers face higher national insurance contributions from April.
She explained that Labour “support efforts to encourage the transition away from diesel and towards cleaner fuels and electric vehicles and machinery in industry, but is aware of difficulties to businesses with the ‘new economic situation'”.
Questions
With just 15 days until the tax is set to be introduced, the Labour MP called for a set of six questions to be answered as soon as possible.
These were:
- Have you undertaken a detailed sector-by-sector assessment of the estimated cost to businesses of the changes, and if so, will you publish it?
- Have you made an assessment of the number of businesses that may cease trading as a result of the changes, and how many jobs are at risk as a result, and if so, will you publish it?
- Have you undertaken a specific assessment of the impact on small and medium businesses, and if so, will you publish it?
- Have you made an assessment of the extent to which this duty increase will be passed on to consumers, and if so, will you publish it?
- What steps is the Government taking to increase the availability of alternative fuels and/or electrification of vehicles in the affected sectors?
- What estimate have you made of the reduction in emissions you believe the measure will lead to?
Lobbying
The letter comes after several MPs and companies reached out to the MP with concerns on the issue.
From the waste sector, there have been a number of pleas in recent months calling for the tax to be phased in.
A number of trade associations spoke with letsrecycle.com recently, with some branding the red diesel changes a “stealth tax” (see letsrecycle.com story).
In December 2021, the BMRA outlined its frustrations at the Treasury’s stance on the issue (see letsrecycle.com story).
The BMRA explained: “If the move was purely about reducing emissions, then simply removing the sector’s entitlement to use red diesel will not achieve this because plant powered by cleaner alternatives to diesel cannot be used safely and effectively in a hostile environment such as on a metal recycling site.”
It added that electric alternatives to red diesel need to be physically plugged into a power supply. “This means ‘mobile’ plant either cannot move or it has to trail high voltage cables behind it – not practical on a busy site that deals with metals with sharp edges.”
Related link
Abena Oppong-Asare’s letter to Helen Whately on red diesel
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