Fuel Duty Freeze Welcomed, But Has the Government Missed a Trick?

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Fuel prices are a major concern in the haulage industry. Managers have to work out how much they’re spending per mile and those costs can seriously rack up. The duty makes up a large proportion of these costs, but it’s also the area the government has the most direct control over. For this reason, the industry watches budget announcements closely – and, when necessary, pressures the government to listen to its concerns.

While recent announcements have given reason to be optimistic, many in the transport sector see opportunities to do a lot more.

An End to the Freeze?

Fuel duty has been frozen at 57.95p per litre since 2011. But in a time of ongoing budget cuts, the Treasury is looking to increase revenue wherever it can. This is likely what led Phillip Hammond, the chancellor, to propose an end to the fixed cost in September 2018, arguing that the freeze has left £46 billion fewer in Treasury coffers.

Unsurprisingly, the haulage industry was not particularly enthused with this policy. Christopher Snelling, head of UK policy at the Freight Transport Agency (FTA), was especially critical. ‘With fuel prices continuing to skyrocket’, he noted, ‘logistics businesses are already tackling very challenging circumstances’. An increase in duty would have constituted an ‘unbearable burden’, he said

Taking Action

Many other groups also took notice. The Road Haulage Association (RHA) partnered with pressure group FairFuelUK to commission a report from the Centre for Economic and Business Research to analyse what economic effects the freeze had really had.

The results were surprising. Rather than the high costs reported by the chancellor, the report found that the freeze had in fact saved £20 billion in consumer spending since 2011, and put billions more back in to the UK economy.

This intervention proved convincing; the chancellor walked back his policy, and Theresa May pledged to extend the freeze for one more year. For Snelling and the FTA this was a no-brainer. In addition to harming transport workers, Snelling said, an increase would have ‘unfairly penalised the very industry which keeps Britain’s factories, retail outlets, schools, hospitals and homes stocked’.

The message is clear: disruption to transport would have widespread negative effects throughout the entire economy.

Pushing for More

But is this enough? Many in the haulage industry think not. RHA chief executive and founding member of FairFuelUK Richard Burnett put it simply. Speaking about the continued fixed costs, he said he was ‘pleased’ that the groups’ intervention had paid off’. But that the overall result was a case of ‘good, but no cigar’. He said that even though the news was welcome, what we really need is a duty cut.

Even with seven years and counting of the hold, the UK still has the highest fuel duty in Europe. In Germany, by contrast, Europe’s most successful economy, duty is cheaper by 15p per litre. Noting this, the RHA has called for an ‘essential users’ rebate, to apply to haulage industry trucks and other crucial vehicles like ambulances.

Meanwhile, many continue to push for lower fuel duty all round. A 10p per litre cut, Snelling claims, would ‘increase economic activity by nearly 1% in just one year’. Even a lower cut of 3p per litre would generate increased economic activity, resulting in higher tax revenues and better economic performance.

It’s hard to deny the logic here. While an increase would have been disastrous, the government seems to have missed a trick by not taking more drastic action.

Norman Dulwich is a Correspondent for Haulage Exchange, the leading online trade network for the road transport industry. Connecting professionals across the UK and Europe through their website, Haulage Exchange provides a valuable service for the haulage industry, matching delivery work with available vehicles. Over 5,400 member companies are networked together through the Exchange to fill empty capacity, get new clients and form long-lasting business relationships.

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