The MPA was responding to HM Treasury’s consultation on removing the rebate for red diesel. The Chancellor announced the policy in his March Budget, but opened a consultation to assess if some industries ought to retain the rebate alongside agriculture, forestry and others.
Red diesel is used to power off-road vehicles and equipment in a number of industries and is basically the same as standard diesel fuel but with a red dye added to identify illegal usage.
The MPA says there are four key reasons why the mineral products sector should keep the rebate, the most fundamental of which is a lack of alternatives. The association says there are no non-diesel alternatives for the tipper trucks, diggers, and other fixed and mobile equipment used in the industry and will not be for some time. It adds that manufacturers are working to develop the technology but it is a long-term prospect.
The association says that, secondly, April 2022 is also far too soon in the economic recovery. It says the industry will still be in recovery mode from an unprecedented economic crisis, and the extra cost of fuel, at least £100m per year at a conservative estimate, will hit confidence and investment plans, slowing job creation and growth.
The MP's survey of members found that all would pass on the cost to customers, including those in housing and infrastrcucture, 86% in whole or 14% in part. With the Government’s significant ambitions on infrastructure, including HS2, the MPA says a large proportion of this cost will be paid by taxpayers. It adds that for sectors that are traded internationally the cost increase will hamper British companies in competitive markets.
Finally, the MPA says that there will be no environmental benefit because diesel will still be used. It says that, with the impact on confidence in a tough market its members are saying they will probably slow renewal rates of equipment, meaning there would actually be a perverse outcome of slowly reducing efficiency over time.
MPA chief executive Nigel Jackson said the proposal should be shelved until the economy has recovered and alternative technology is available.
He added that the aggregates sector pays a raft of environmental taxes including the Aggregates Levy, Emissions Trading and other carbon costs which add up to hundreds of millions of pounds every year, in addition to increasing regulatory costs.
“I think the proposed removal of the rebate is grossly unfair when other industries, whose environmental impacts are greater, are exempted and some continue to be subsidised by the taxpayer," said Jackson. "We take our responsibilities seriously and think the time has come for fair treatment based on overall environmental performance and cumulative environmental tax burden.
“There currently aren’t any alternatives to red diesel so this proposal will just hit our industry with an extra tax burden, at a time when we are recovering from the sharpest downturn we have ever seen."
