letsrecycle.com

UROC leads review call over red diesel tax change

A letter sent by skip hire trade association UROC – and co-signed by a string of waste organisations – has called for the Chancellor of the Exchequer to review the upcoming change to red diesel tax rules.

red diesel
Red diesel is used to power a range of recycling machinery and before today (1 April) was cheaper than white

And the letter, which has also been signed by the Chartered Institution of Wastes Management, has urged Chancellor Rishi Sunak to instead adopt a phased-in approach for the change.

On 1 April 2022, the Treasury is set to remove the lower duty applied to red diesel for the waste management sector, after previous pleas fell on deaf ears (see letsrecycle.com story).

This will add around 40 pence per litre to the waste and recycling sector’s fuel bills, as many use red diesel to power machinery.

‘Different now’

However the letter to Mr Sunak says that the landscape is “incredibly different now to when the policy change to remove the entitlement to use rebated fuel was announced”.

The letter adds: “The use of red diesel is imperative for recycling with the majority of plant and machinery running off diesel powered engines. There is not yet any market ready kit using alternative fuels to replace that in existence.

red diesel
A large proportion of waste and recycling equipment is powered by red diesel

“Further, there is still very limited capacity on the grid to convert sites to run on electric and insufficient infrastructure to power remote sites in rural locations”.

UROC called on Mr Sunak’s department to conduct “a review of tax treatment for red diesel”, and instead phase in the tax, as was done with the landfill tax.

The UROC letter was co-signed by:

  • Approved Authorised Treatment Facilities organisation
    Phil Conran OBE: chair
  • British Frozen Food Federation
    Richard Harrow: chief executive officer
  • British Metals Recycling Association
    James Kelly: chief executive officer
  • Cast Metals Federation
    Dr Pam Murrell: chief executive officer
  • Chartered Institution of Wastes Management
    Sarah Poulter: chief executive officer
  • Federation of Small Businesses
    Craig Beaumont: chief of external affairs

Changes

The changes were announced in the 2020 budget and 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”.

 The difference between red and white diesel represents  a 55% increase
Jenny Watts, UROC chief executive

Customers

UROC argues in the letter that the Treasury’ impact assessment  which said there will not be any macroeconomic impacts, “does not reflect the true picture on the ground”.

red diesel
Chancellor Rishi Sunak laid out plans for the tax in his first budget in March 2020

The letter said: “Based on the average price at the pump this time last year, paying the cost differential between red and white diesel represents in the region of a staggering 55% increase, which is simply not financially sustainable and may be the last nail in the coffin for many operators”.

UROC warned that operators will inevitably have to try and pass the cost on to customers, which will mean local authorities will bear the brunt.

Phased in

The government has always insisted that removing the lower rate will encourage the market for alternative, greener, fuels.

UROC stated that it isn’t against the government’s ambitions, but instead wants to see a different approach taken.

The letter explained: “In order to support the Government’s economic policy objective of achieving strong growth and employment, whilst securing the environmental outcomes motivating the removal of the entitlement, it is proposed that a phased approach would strike the right balance.

“ As a comparable, the Landfill Tax Escalator introduced a year-on-year increase to stimulate development of recycling technology and drive waste away from landfill up the waste hierarchy. This resulted in significant investment and a step change in practices to meet recycling targets”.

Useful links

UROC letter to  the chancellor 

[Cover picture of red diesel from Shutterstock]

Share this article with others

Subscribe for free

Subscribe to receive our newsletters and to leave comments.

Back to top

Subscribe to our newsletter

Get the latest waste and recycling news straight to your inbox.

Subscribe