Chancellor Rishi Sunak plans to scrap the rebate that users of off-highway construction machinery currently enjoy for their diesel. From April 2022 they will have to pay the full tax rate (currently nearly 58p per litre) instead of just 11.14p per litre for their state-subsidised red diesel.
Construction industry representatives say that the sudden switch will cause problems and a ‘road map’ approach would be better.
The Treasury has been consulting on its plans to scrap the subsidy; the consultation period closed at the beginning of this month.
Eight associations have come together to speak as one against the plan: the Civil Engineering Contractors Association, Build UK, the Construction Plant-hire Association, the International Powered Access Federation, the National Federation of Builders, the National Federation of Demolition Contractors, the Scottish Plant Owners Association and Construct (the concrete structures group).
They say that the planned removal of the rebate on red diesel in 2022 “will impose a heavy burden on companies that have already been badly hit by Covid-19”.
The Treasury hopes that scrapping the rebate will help wean the industry off diesel and encourage the use of alternative fuels. The construction industry lobby says that, while the industry is moving in that direction, there is not yet the infrastructure for a wholesale shift.
And the transition away from diesel needs to be phased over the lifecycle of the machinery itself so as not to destroy fleet values that underpin the viability of the entire plant sector.
Civil Engineering Contractors Association director of external affairs Marie-Claude Hemming said: “Greener growth must be workable for businesses and consumer for the long term. Our sector will be negatively impacted by this planned change in what is already a severely challenging economic environment.
“Many of our members work on long-term frameworks with fixed pricing, and although the cost for new works will eventually be passed on to customers, existing priced work means that this risk will fall on contractors.
“We estimate that the new rules will cost the construction industry a staggering £280m-£490m a year. These increased costs could slow down decisions on going ahead with construction projects and will negatively impact the UK’s economic recovery.
“We are calling on government to work with industry, plant manufacturers, and other stakeholders, to identify those practical measures, such as providing incentives to use renewable fuels and developing a targeted route map for future changes, that will achieve cleaner emissions for the future and a workable solution for all.”
Kevin Minton, chief executive of the Construction Plant-hire Association (CPA), whose Members supply 85% of construction plant in the UK, said: “What the industry needs now is stability and no unnecessary or untimely burdens if it is to meet the PM’s ambition of ‘Build, Build, Build’. We have put forward a number of measures to Treasury, along with our concerns, to emphasise the importance of proper, sustainable growth and development so together we can deliver a greener economy in the long term.”
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