Construction industry calls for tax reduction on green fuels

The UK Government has been urged to accelerate the transition away from red diesel by supporting the construction industry’s commitment to genuinely lower carbon fuels and to go further in its efforts to tackle the current shortage of HGV drivers.

Construction industry calls for tax reduction on green fuels

From April 2022, construction companies will no longer be able to take advantage of the rebate on red diesel for off road plant.

With limited alternatives available this hike will not reduce carbon emissions as companies shift to normal ‘white’ diesel but will be an additional burden on already struggling construction firms, hampering their ability to deliver the infrastructure we need.

A Civil Engineering Contractors Association (CECA) member survey found that the new rules will cost each SME construction firm between £250,000 and £600,000 per year with nearly half of the businesses worried about their ability to continue trading.

Lower carbon alternative fuels are available, including some hydrogenated vegetable oil (HVO), but from April 2022 will also be taxed at full rate, acting as a barrier to uptake as a lower carbon alternative.

CECA director of external affairs, Marie-Claude Hemming, said: “While the Government has legislated to remove the tax rebate on construction’s red diesel use, it has also removed any incentive for greener fuels.

“This policy increases tax revenues but no longer provides the option to choose lower carbon alternatives in the first instance.

“CECA believes that in order to meet environmental goals, genuinely lower carbon fuels should be exempt from the same tax levels as standard fuels.

“Our members recognise their responsibility to protect the environment for future generations. We are keen to work with Government and fuel suppliers to ensure that genuinely lower carbon fuels are used across the whole of the construction industry, helping us build and maintain the modern and reliable infrastructure we need.”

The National Federation of Builders (NFB) has welcomed the government’s announcement to issue temporary visas for foreign HGV drivers for 3 months but warned it is nowhere near enough to tackle the current shortages and urging ministers to go further.

Product and material prices in construction have sky-rocketed for NFB members and the industry alike, with the materials price index running at a 20% increase in July 2021 based on the year before.

While the reasons for that inflation are multi-faceted, a contributing factor is the shortages in HGV drivers, reducing supply and driving up the costs of transport. In response to the worsening situation, which has culminated in panic-buying of fuel over the weekend, the government has announced it will issue up to 5,000 short-term HGV visas until Christmas eve.

However, trade associations in other sectors have warned that this is nowhere near enough to meet demand. The British Retail Consortium has said that the supermarket sector requires at least 15,000 drivers and the Road Hauliers Association (RHA) stated that the current shortage of people stands at around 100,000.

Head of policy at the National Federation of Builders, James Butcher, said: “The government has long championed the benefits that an independent immigration system can bring. Now is the time to realise that flexibility and react to labour market needs by issuing many more short-term visas for the drivers we need. The announcement of just 5,000 visas will sadly go nowhere near tackling our current woes and will continue to impact the construction sector in terms of both availability and prices of materials.

To solve the shortages in the long term, the government must also work collaboratively with the hauliers to ensure that the barriers to entry into the domestic industry are removed. It must also help to incentivise schemes such as upfront funding of training in return for contractual commitment of service which could be rolled out on a national basis and co-ordinated by a national strategy.”

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