MPA makes 'last ditch attempt' to delay red diesel reform

09/03/2022
Dominic Browne

UK producers of construction and industrial mineral products have called on chancellor Rishi Sunak to delay the end of the red diesel rebate.

Ahead of the Spring forecast statement (23rd March 2022), the Mineral Products Association (MPA) has written to the chancellor in what they described as 'a last-ditch attempt to delay in the removal of the red diesel rebate'.

The Government's plans to remove the tax rebate on the red fuel used by construction businesses in their plant and machinery from 1 April are expected to cost industry up to £500m a year and each SME construction firm between £250,000 and £600,000.

MPA members argued that with 'no low-carbon alternatives to the heavy machinery the industry uses, removing the rebate will achieve no reduction in carbon emissions for years to come'.

Given the high levels of inflation, MPA has asked for the tax change to be delayed until new alternative equipment becomes available.

The move comes as senior figures in the highways sector raised fears about their three-year funding settlement, which froze maintenance cash at a time of significant inflation - thought to run to almost 20% in the roads sector.

The MPA also called on the Treasury for urgent action on soaring energy costs, made worse by the volatility in global energy markets following Russia’s invasion of Ukraine, and transparency on delivery of the Government’s infrastructure plans.

According to the MPA, the UK’s energy intensive industries face higher costs than EU competitors because of policy choices made by the UK Government and Ofgem.

As a member of the Energy Intensive Users Group, MPA has repeated its request for the chancellor to place UK industry on a level playing field with its European competitors.

It also called for more certainty of infrastructure investment, highlighting what it called the 'faltering' second Road Investment Strategy at National Highways.

The MPA did reiterate its welcome for the freeze in the Aggregates Levy announced at the Budget in Autumn and called for this to be extended beyond 2023.

Nigel Jackson, chief executive of MPA, said: 'Construction needs materials and producing materials requires long-term planning and investment, so our industry needs clarity on what’s in the pipeline for the next 10 or 20 years, not the next 10 months.

'For this year's Spring Statement, the priority must be the urgent measures to tackle domestic policy drivers of the UK’s high energy costs.

'The Chancellor has solutions in his power to place UK industry on a level playing field with European competitors and we urge him to act decisively this month.'

Robert McIlveen, MPA director of public affairs, added: 'Throughout the consultation on red diesel we made the case that there were no carbon emission savings available until the equipment is in the market at the level of power, range and cost to replace diesel, and when the associated infrastructure needed is available.

'These conditions are nowhere near being met. With inflation a growing worry, now is a dreadful time to increase the costs of essential materials for UK construction and manufacturing supplied by MPA members so we are calling for a delay to the removal of the red diesel rebate.'

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