Budget reaction: fuel duty freeze welcome but fleets need more help

Road transport industry bodies have welcomed the continued freeze on fuel duty unveiled by the Treasury in yesterday’s Autumn Budget, but insist that more can be done to help operators struggling in the face of high pump prices and narrow margins.

Yesterday the chancellor John Healey announced that he would cancel plans which would have seen the temporary 5p per litre fuel duty cut introduced by the Conservatives in 2022 reversed in January, instead extending it by six months to 1 July 2027. A planned increase in fuel duty in line with the Retail Prices Index (RPI) has also been shelved until the same date.

But some are warning that the measures announced do not go far enough to help beleaguered operators in a context of sky-high diesel prices – which are currently averaging at just under £2 per litre according to the RAC Foundation – and persist in their calls for fuel duty rebates for specific sectors.

“The government will continue to monitor fuel prices over the coming months,” said the Treasury.

“Fuel duty is as low now as it has been at any point for over 16 years. Taken together, the government’s decisions on fuel duty across this Parliament are expected to have saved… the average light goods driver £472 and the average heavy goods vehicle (HGV) driver nearly £4,000, compared with plans under the previous government.”

The HGV road tax holiday is to be maintained through July 2027, while the 3.7 pence per litre cut to red diesel duty has also been extended to this date.

In a statement, the Road Haulage Association (RHA) said the chancellor’s decision to delay planned fuel duty rises was “the right call”.

“We’ve been clear: a fuel duty hike is a food price hike, and with businesses and households struggling with additional fuel costs, this will offer some relief,” it said.

But the association added that ministers “should have gone further”.

“Transport firms still face huge cashflow pressures, paying an extra £385 a week per vehicle on fuel, with 85 per cent of businesses in our recent survey reporting reduced margins.

“The government can still support our sector as critical national infrastructure. A 15p per litre fuel duty rebate for essential users, similar to schemes elsewhere, would provide cashflow support, keeping many more haulage, coach and van operators in business.”

The Confederation of Passenger Transport (CPT), which represents bus and coach operators, said the Budget announcements had failed to ease mounting pressure on the sector, and that the fuel duty freeze would offer “little relief against rising employment and operating costs”.

It added that the announced rise in the national minimum wage and national living wage, which are both being increased by 3.9 per cent, would “place additional pressure on an industry already grappling with high diesel prices and increased employment taxes”.

Graham Vidler, chief executive of the CPT, said: “We welcome the chancellor’s decision to freeze fuel duty, which will prevent further increases in costs for bus and coach operators already facing considerable financial pressures.

“However, a freeze alone is not enough to protect the services that millions of people depend on. Rising diesel prices, alongside higher employment and other operating costs, continue to place enormous pressure on operators, threatening the viability of vital routes and services.

“While additional funding for local transport authorities earlier this year was welcome, operators report that too little of this support is reaching the businesses actually delivering services on the ground, with coach operators particularly overlooked. The government must go further to address these pressures, ensuring that funding reaches frontline operators and providing targeted support where it is needed most.”

This was particularly important in light of the minimum wage announcement, he said.

“Bus and coach operators recognise the importance of fair pay and rewarding the skilled staff who keep Britain moving. However, further increases in wage costs will put upward pressure on wages across the board, in an industry where labour already makes up more than half of bus operating costs, and operators are already struggling with higher fuel prices and employment taxes.

“It is essential that these additional costs are reflected in public transport funding, ensuring operators can continue to provide reliable services while paying their staff fairly. Without this, there is a real risk that passengers and communities will ultimately pay the price through reduced services and higher fares.”

Peter Bradley of Coach UK, part of the CPT, added: “The chancellor has missed a vital opportunity to support Britain’s coach industry at a time when many operators are fighting for survival. Businesses have faced a median 46 per cent increase in diesel costs since February, putting school transport, tourism and community services under enormous pressure.

“We have called for a temporary 20p-per-litre rebate, at an estimated cost of around £52 million for a year, to provide immediate relief. This is a relatively modest intervention which could help safeguard thousands of jobs and vital transport links. We urge the government to reconsider before operators are forced to make irreversible decisions about their businesses and services.”

Ben Fletcher, chief executive of business group Logistics UK, said retaining the 5p per litre fuel duty cut was “a wise decision” which would support economy growth, help keep trade moving, and avoid adding to inflationary pressures.

“ We are delighted that the chancellor has listened to Logistics UK’s strong case for maintaining the duty cut at a time of global uncertainty and rising costs for businesses and consumers,” he said.

While welcoming the step to address hauliers’ immediate operating costs, Logistics UK also expressed disappointment at a lack of measures in the Budget to address friction at the UK’s borders and “the wider costs of doing business”.

“If the government is serious about driving growth, improving trade performance must be part of the solution,” said Mr Fletcher.

“Reducing unnecessary friction at the border would support businesses of all sizes, improve international competitiveness and lower costs throughout UK supply chains. Against that backdrop, it is disappointing there was no mention of the Single Trade Window in yesterday’s budget.

“A fully functioning Single Trade Window has the potential to streamline border processes, reduce administrative burdens and make trade easier for UK businesses. At a time when economic growth is the government’s overriding objective, measures that facilitate trade should be moving further up the policy agenda.”

In his speech, the chancellor spoke of the government’s plans to build “cheaper, faster [electricity] grid connections through GB Grid” in order to deliver the “radical change Britain needs on energy”.

Logistics UK said the commitments on reforming the energy sector and delivering faster grid connections promised to boost the logistics sector and wider economy.

Ben Fletcher said: “Current delays to electricity connections are holding back investment in fleet decarbonisation, warehousing, distribution facilities and wider infrastructure projects.

“Faster access to grid capacity will be essential if businesses are to invest with confidence and support the transition to a lower-carbon economy but it is important that the government now matches this ambition with real pace for industrial users.”

Also in the Budget was a commitment by government to publish its response to the consultation on the zero-emission vehicle mandate, which covers vans and cars, by the end of the year.

Logistics UK urged ministers to “create an operational environment that will make electrification commercially viable and achievable for the logistics sector”.

“The logistics sector is committed to decarbonisation, and businesses are already investing significantly in electric vehicles and charging infrastructure, but government policy must reflect operational reality,” said Ben Fletcher.

“The electrification transition needs to start from the ground up to give businesses the confidence and practical means to invest in zero-emission fleets without compromising their competitiveness.”