Red diesel tax hike to go ahead for waste sector

The Treasury has said it has not found “compelling evidence” that scrapping the lower rate of fuel duty on red diesel from April 2022 will increase the cost of recycling. Some in the waste sector had warned the Treasury that the fuel cost increase could push up recycling costs.

The stance from the Treasury came in its comments on industry responses to a consultation last year on what the impacts might be if the duty on red diesel was increased.

A lot of heavy machinery uses red diesel as fuel, and some companies have warned that the tax relief cut will raise costs

The consultation response document was published yesterday alongside the Budget , and a document outlining the government’s plan for ‘Building Back Better’ after the pandemic.

Red Diesel

In last year’s Budget, the government announced plans to scrap the lower rate of fuel duty on red diesel —which many operators use to power machinery — to bring it in line with ordinary diesel which is liable for the standard rate of fuel duty.

The government says those entitled to use red diesel pay a duty rate of 11.14 pence per litre, which is “significantly less” than those using standard road fuel diesel, which has a duty rate of 57.95 pence.

According to the government, businesses using red diesel are “therefore paying far less for the harmful emissions they produce than individual car owners, even though the emissions produced from using one litre of diesel are broadly the same in both cases”.

Waste sector

 The government received 436 written responses to the consultation. This included responses from 244 companies and trade bodies, 7 public sector organisations, 8 charities, and 177 individuals.

From the waste sector, the British Metals Recycling Association,  Environmental Services Association, Enva, FCC Environment, Veolia and Viridor were among those to submit responses.

The summary of responses said respondents from the waste management sector had argued that removing their red diesel entitlements could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.

‘Not compelling’

However, the government said it “did not find compelling evidence that the risks they identified of waste being diverted to landfill are likely to materialise, and so does not believe that these arguments outweigh the benefits the government expects from removing red diesel entitlements”.

“[We] did not find compelling evidence that the risks they identified of waste being diverted to landfill are likely to materialise”

Treasury response to waste sector

It added that the government has decided that April 2022 is the right time to implement the reforms.

However, for some sectors the government will allow the lower rate to continue. This includes some households and other non-commercial buildings, such as hospitals, may not be connected to the electricity grid and may rely on red diesel for electricity generation or to power back-up generators.

Also, as the government “has been persuaded by the cases made by representatives of the water freight sector and passenger ferries, the government has decided to maintain the entitlement to use red diesel for the whole commercial boat operating industry”. 

‘Building back better’

Meanwhile, in a busy day for government announcements, which also included the national recycling figures (see letsrecycle.com story), a plan for growth was also published .

The plan for growth was described as a “a call to arms” to try and solve the problems caused by the Covid-19 outbreak.

The only mention of waste was under a section on ‘prioritising our natural environment’.

Reiterated in the plan were ambitions to take action to “fulfil our commitment to be the first generation to leave the natural environment in a better condition than we found it”.

It says the government is “progressing major waste reforms which will drive new jobs and investment in a more circular economy”.

Budget 2021

With a focus on recovery from the Covid-19 pandemic, the Budget made no direct reference to waste and also appears not to have mentioned the plastics packaging tax, which was set at £200 a tonne last year.

Rishi Sunak unveiled the 2021 budget yesterday (Picture: Shutterstock)

However, a new UK infrastructure bank was announced in Leeds with £12 billion initial market capital, which will invest at least £40 billion. This forms part of the government’s  “real commitment to green growth”.

Signal

One view of the day’s announcements came from John Scanlon, CEO of Suez recycling and recovery UK. Mr Scanlon said: Government has sent a clear signal that a post pandemic economy has to square the circle of industrial regrowth combined with a reduction in carbon emissions – only a green recovery will secure much needed new jobs whilst helping the UK achieve our 2050 net zero ambition.

“Suez and the wider recycling and waste management sector is ready to invest further in the infrastructure needed to tackle carbon emissions from managing the over 200m tonnes of waste we produce in the UK each year and to achieve greater circularity”.

Useful links

Reforms to the tax treatment of red diesel and other rebated fuels: Summary of responses to the consultation

Build Back Better: Our plan for Growth

Budget 2021

 

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