Plant sector laments plans to abolish red diesel subsidy

THE Construction Plant-hire Association (CPA) has expressed its disappointment at UK Chancellor Rishi Sunak’s Budget announcement regarding the abolition of tax relief on red diesel.

The trade body has argued that an end to the red diesel rebate will have ‘significant financial implications’ for the construction sector as it will mean that users of diesel-powered construction plant machinery will pay an extra 47 pence on every litre of diesel used.

Kevin Minton, chief executive of the CPA said, “We are very disappointed that the Chancellor has chosen to abolish the tax relief on red diesel. This sends out totally the wrong message to the construction industry – just at the point when the Chancellor announces an increase in infrastructure spending.

“Abolishing the tax relief on red diesel will undermine the Government’s own plans, add unnecessary cost to projects and create doubt for many plant hire companies already operating in a highly competitive industry. Whilst this will not come into effect for another two years, we urge the Chancellor to engage now with the industry to understand how the subsidy is used and the efforts the plant-hire industry is making in adopting cleaner, greener engines and new technologies.

“At a time when business investment remains weak, this move will undermine the construction sector at the point when it is meant to be upskilling, investing in new technology and planning for the future.”

Rob Oliver, CEO of the Construction Equipment Association (CEA), said the Budget had both “good and bad” aspects for the construction industry, welcoming the announcement that small businesses will receive short term relief on sick pay obligations and business interruption loans in the wake of coronavirus concerns.

Mr Oliver also backed the £27 billion of investment announced in the country’s strategic roads network. “In his closing remarks, the Chancellor recognised that there was more work to do on the national infrastructure strategy,” Mr Oliver said. “As recently witnessed over the legal block to the Heathrow expansion, the Government refused to support a key infrastructure project.The full promised investment could get delayed or watered down by planning or court constraints unless government really commits.”

Referring to the abolition of the red diesel tax subsidy, Mr Oliver added, “The Chancellor was entirely selective with his statistics in suggesting that off-road red diesel users were responsible for 10% of air pollutants. Ironically, motor vehicles, as the much bigger polluters, will face no tax hike and drivers will continue to pay about 10% less for their fuel compared to the start of the year.

“The CEA is justifiably proud that its members have reduced harmful engine emissions by over 90%, which coupled with improved fuel consumption is a ‘green’ success. Government has promised to consult on the application of this tax change and the CEA looks forward to being part of this process, particularly in support of plant hire companies and contractors who will be alongside us in delivering the promised infrastructure revolution.”