CPN collects reactions from across the industry to Chancellor Rishi Sunak’s Spring Statement, particularly to the news that the change in red diesel laws will go ahead on 1st April despite the fuel crisis.
Click here for a reaction to the statement from the Construction Plant-Hire Association
Click here for a reaction from the Construction Equipment Association.
Hire Association Europe and Event Hire Association
Changes to the law concerning the use of red diesel are coming into effect from 1st April, affecting thousands of hire and construction companies across the UK. Hire Association Europe and Event Hire Association (HAE EHA) is urging its members and the wider hire industry to ensure they are fully aware of the changes to avoid finding themselves on the wrong side of the law.
Under current regulations rebated gas oil (red diesel) and rebated biofuels, can be legally used for any machine which is not a road vehicle, for example earthmoving equipment and mobile generators. From 1st April, this entitlement will be removed for all but a handful of specific sectors, including farming, forestry and community-based landscaping such as hedge and verge cutting. Any individual found guilty of breaching the new regulations may be subject to criminal sanctions and fines, and HMRC can also seize vehicles and machines found to be running unlawfully on red diesel.
There is no requirement to flush out engines, and any rebated fuel still in tanks can be used up after 1st April, so long as it can be proved that it was put into the vehicle or machine legally, prior to the changeover date. HMRC has also acknowledged that traces of rebated fuel are likely to remain in fuel tanks for some time, but it is essential that businesses make a point of retaining evidence that any red diesel was put in before the rules changed and that the vehicle has been refilled with white diesel from 1st April onwards.
HAE EHA has taken a number of actions including creating revised terms and conditions of hire and putting in place training and general guidance for members. Ann Harrison, group marketing and communications manager, explained: “These changes have the potential to raise multiple issues, particularly where hired equipment is concerned. Difficulties arise for example with equipment that can be used for both allowed and non-allowed purposes. The use of the appropriate fuel in each situation is the responsibility of the hire company and not the individual hiring the equipment, therefore it is imperative that hire companies clearly inform customers about the changes to the law.
“It may be that hire companies choose to designate some pieces of equipment as acceptable for use with red diesel and some as white diesel only, and have these clearly marked. On the other hand, it’s important to bear in mind that HMRC does carry out random spot testing, and the only way to ensure customers have complied is to dip test, and flush out tanks in between every hire if necessary. So, some hire companies may prefer to stick to a white diesel only policy in order to avoid confusion and unnecessary risk.”
The Scottish Plant Owners Association
The Scottish Plant Owners Association (SPOA) has accused the Chancellor of the Exchequer of failing to listen to the construction industry in his Spring Statement, delivered 23rd March.
Despite almost 16,000 signatures to a petition calling to delay the removal of red diesel entitlement from the construction industry, a concerted and united effort by the construction sector appealing directly to the Chancellor in a letter co-signed by the National Federation of Builders; Federation of Master Builders; National Federation of Demolition Contractors; Scottish Building Federation; Right Fuel Card; Construction Plant-hire Association; Builders Merchants Federation; Build UK; Construction Alliance North East and SPOA; no mention was made of the legislation which will likely result in companies going out of business.
Speaking about the Spring Statement, Callum Mackintosh, President of SPOA, said: “This is yet another blow to the construction sector. Over the last few weeks, and since the Russian invasion of Ukraine, the price of fuel has skyrocketed. We have come together as an industry to reason with the Chancellor to delay the removal of red diesel entitlement for the construction industry. Whilst the fuel duty cut of 5p per litre is welcome and does represent a reduction in duty of 8.63% on both red and white diesel, the reality is that the construction industry faces an increase of fuel duty of 42.77p per litre from 1st April.
“With cost pressures on construction at unprecedented levels, the spring statement should have been the chancellor’s opportunity to inject confidence into the construction and associated industries but instead the industry was disappointingly overlooked.
“Furthermore, the Chancellor could have taken the opportunity to put some of the projected £1.28bn revenue raised over the next 12 months from red diesel rebate removal to good use. 2021’s red diesel replacement competition of £40m can be seen as nothing more than virtue signalling by our members now.
“We were told red diesel rebate was a tax relief on pollution, but this government has done nothing to incentivise uptake on greener alternative fuels instead choosing to tax them at the same rate of duty.
“I am afraid to say that the consensus in the construction industry is that the removal of red diesel entitlement is simply a tax grab.”
The clock is ticking with the legislation removing the red diesel entitlement due to come into force from April 1st and the price of red diesel and white diesel sitting at 122p per litre plus VAT and 143p per litre plus VAT respectively and alternative fuel HVO Green D+ priced at 190p per litre, many businesses in the construction industry are fearing the worst.
SulNox Group
The government was urged to radically rethink its plans to hit businesses with a massive hike in fuel tax in a move that will come into effect just days after the Chancellor cut fuel duty by 5p a litre.
Fuel technology specialists SulNOx Group Plc said the move to end the rebate on red diesel would hit consumers in the pocket while having a minimal impact on improving the environment.
From April 1 rebated diesel, more commonly known as red diesel, and rebated biofuels will no longer be allowed to be used as they are currently and will only be legal for a small number of industries in a tightly controlled way.
The move has sparked concern, with reports suggesting that around half of affected firms in industries like construction could be put out of business due to staggering fuel cost rises of around 55% from red to white diesel.
The government says the new rules will help to ensure fairness between the different users of diesel fuels, as well as encouraging the development and adoption of greener alternative technologies and encouraging fuel users to improve the energy efficiency of their vehicles and machines, or to use less fuel.
But Nawaz Haq, Executive Director of SulNOx Group Plc, said the timing of the rule change, particularly in the current climate with record fuel prices, was worrying.
“A radical rethinking of the government’s fuel policies is needed,” he said. “At the moment, fuel policies are not aligned to the economic needs of consumers or businesses and do little to combat emissions and improve air quality. The red diesel taxation is nothing more than a deadly tax without purpose that will not only threaten the survival of half of affected businesses at a cost of £500 million, but also threaten the government’s own waste strategy.”
Mr Haq, who is also a Member of the Royal Institution of Chartered Surveyors, added: “It is clear to see that we are not at a stage where construction plant vehicles for example can be electrified – the technology either just isn’t there or is nowhere near being viable if it is. What also doesn’t make sense is the fact that cleaner fuels such as HVO are also being penalised by this taxation.”
Recently, a number of construction industry bodies including the Federation of Master Builders, the National Federation of Builders, Build UK and the Home Builders Federation, wrote to Chancellor Rishi Sunak and Business Secretary Kwasi Kwarteng warning that the end to the red diesel rebate could threaten construction projects, force house prices up and “risk the viability of local builders”.
“Crippling taxes and no viable greener vehicle and machinery options mean businesses must focus and prioritise improving efficiencies and reducing fuel consumption” said Mr Haq. “This is essential, especially in our time of fuel and climate crisis. That is exactly where SulNOx can make a big difference, by optimising combustion and increasing fuel efficiencies of diesel, biofuels, HVO and other fuels.
“Our simple to use, biodegradable products, enable significant financial savings through reduced fuel consumption with fleets currently saving around 10% in fuel and maintenance costs. The environmental benefits are reflected in a huge percentage of net carbon and emissions reductions. Tests have also shown over 50% reductions in Particulate Matter with significant potential to dramatically improve air quality.
“With such benefits on offer and with fuel compliance certifications in place, there are no barriers to simultaneously fight back against high fuel costs and help to meet environmental responsibilities.”
