Further fuel tax cuts ‘vital’, trade groups warn

By Categories: NewsPublished On: Wednesday 20 July 2022

Despite slight falls in fuel prices at the pump over recent days, industry stakeholders have continued to warn of the impact of high prices on haulage and logistics operations, as well as the trickle-down effect on the economy as a whole.

Observing that prices remain at more than 60p per litre higher than a year previously, the Road Haulage Association (RHA) said yesterday that the continuing volatility of the price of Brent crude made certainty around future fuel costs difficult.

It pointed to a rise in the price of crude oil in recent days, following the failure of the American president Joe Biden to secure a pledge to increase in output by Saudi Arabia during his recent trip to the country.

Last week, Logistics UK called on the newly appointed Chancellor of the Exchequer, Nadhim Zahawi, to take “decisive action” to protect the supply chain with “the immediate introduction” of a further 6p per litre cut in fuel duty.

The alternative, according to Logistics UK policy director Kate Jennings, was increased costs for consumers and businesses.

“77 per cent of all UK supply chain journeys are by road while others always have a road element to provide first- or last-mile deliveries,” she said.

“With forecourt diesel prices increasing by 34 per cent since the start of the year, the cost of delivering for UK plc has risen significantly in that period. This ongoing inflation is placing an unsustainable burden on logistics businesses which operate on very narrow margins and so cannot absorb increased costs at this scale.

“The UK’s logistics operators are already paying duty at a rate which is 63.5 per cent higher than the EU average, and with labour costs also rising, the current exceptional cost of fuel is putting unprecedented pressure on the businesses which the country relies upon to keep it supplied with the goods it requires.

“And while a 5p per litre cut to duty was welcomed earlier in the year, this has been already absorbed in the ongoing increased running costs for business. A further 6p per litre duty reduction, implemented immediately, would be good for the cost of living, good for business and economic growth, and good for supply chains.”

Logistics UK estimated that its proposed cut would result in an average saving of more than £2,400 per year for a 44-tonne lorry.

The organisation also proposed a potential solution to rising prices in the form of a dynamic system similar to that deployed in Portugal, whereby the duty rate is reduced on a weekly basis if there is an increase in VAT revenue from the sale of fuel.

“An increase in the material cost of fuel will still enable the Treasury to achieve tax targets through VAT payments,” said Kate Jennings.

“However, by introducing a dynamic, price-related taxation mechanism, the government can ensure that fuel duty doesn’t add to the inflationary pressures faced by consumers and business.”

The RHA also continued to call for action, including via its posited 15p per litre ‘essential user rebate’ to help hauliers, which it said would also assist with the cost of living and wider economic pressures.

“We are calling on members to write to their local MPs on the issue of fuel prices – and have set up a website with a template letter explaining the need for a rebate,” said the RHA.

“We’re pressing the Treasury hard for this measure which is similar to schemes in several European countries and supported by a number of MPs. But we need to get more parliamentarians on side to help us win the argument.”

Earlier in July, the Transport Exchange Group (TEG) highlighted soaring fuel costs as among the causes of an upward surge in road freight prices, with its latest data for June indicating that average price-per-mile rates for haulage and courier vehicles were up on 18 per cent compared to three years ago – and at the highest level so far this year.

Lyall Cresswell, TEG’s CEO, said: “From operational costs to ongoing driver shortages, we hear about industry issues every day from our members. However, they’re coping admirably with the pressures and the constantly shifting landscape.

“With consumer confidence at a record low, we may well see a slowdown in demand for road freight, as fewer people shop online. But this might actually give the industry a little breathing room, softening the impact of driver shortages and supply chain bottlenecks.”

“Nobody really knows what the future has in store, but we’re obviously very keen to see an essential user rebate. There’s no question that hauliers and couriers are essential users and such a move would provide some respite for the industry – and consumers.”

Kirsten Tisdale, director of logistics consultancy Aricia Limited, added: “The TEG Road Transport Price Index continues to give insight into the UK freight market.

“The ever-tightening squeeze on the profits of the road transport sector and the impact on customers can also be seen in the latest Business Insights survey by the Office for National Statistics, where one in eight of the responses for Transport & Storage companies indicated that they were having to seek financial support (up from zero in the previous survey where this question was asked), aggravated by the trend for increased stockpiling.”