Proposed red diesel changes could cost farmers 50p/L

Plans to ditch the red diesel rebate expected to appear in the Chancellor’s next Budget could cost working farmers as much as 50p/L.

According to the Financial Times, Chancellor Rishi Sunak intends to use the Budget to “signal the end of a decade of freezes on fuel duty”.

The newspaper reports that the £2.4 billion diesel subsidy for agricultural and construction vehicles is likely to be among the first measures to be scrapped. The plans are understood to be part of Government efforts to encourage drivers to move to electric vehicles.

Tax on red diesel amounts to 11.1p/L compared with 57.7p/L on white diesel.

National Farmers’ Union president Minette Batters said: “Red diesel is the primary fuel to run the majority of agricultural vehicles and is absolutely crucial to farm businesses and maintaining food production.

“The lower fuel duty on red diesel recognises this fact and, with such uncertainty and rising input costs, it is absolutely essential that the red diesel exemption is maintained.

Changes to this duty could see farmers face increases of nearly 50p/L, making us immediately uncompetitive with many countries, including EU member states, the US and Canada, which all provide their agricultural sectors with a lower fuel duty on red diesel.

“Removing this from British farmers would leave them at an immediate competitive disadvantage, coming at a time when farmers are already dealing with ongoing uncertainty over our future trading relationship with the EU and rest of the world.

“While agricultural vehicles have become more efficient, it is impossible for farmers to move away from using red diesel as there are currently no commercially viable alternative fuels.”

‘No time to be adding burden to farmers’

Tenant Farmers’ Association chief executive George Dunn expressed concern that the costs could not be passed through the supply chain and would put extra pressure on farmers.

“UK agriculture faces a period of massive change and upheaval over the next few years as we adjust to new trading, policy and regulatory environments,” he said.

This is no time to be adding to the cost burden of the industry. Primary producers have to survive on an incredibly thin slice of the retail value of their output despite having the lion’s share of the effort in producing it.

“Increased costs simply cannot be passed up the supply chain and it is madness to be considering a hike in diesel costs without considering how farmer returns can adjust.”

‘A case for legislation on farm-gate prices’

Farmers For Action was founded after the fuel strike in 2000, whereby it was assumed that a similar strike could be held on poor farm-gate prices across the UK.

Northern Ireland co-ordinator William Taylor said: “Westminster Governments will come and go, but one thing stays the same – they cannot help themselves tinkering with tax on fuel.”

The group is currently pushing for legislation to be introduced in Northern Ireland to guarantee farmers are paid for produce based on the item’s cost of production.

“…The red diesel tax increase issue must be fought against all the way as otherwise, it will surely come out of farmers’ pockets,” Taylor said.

“If Northern Ireland succeeds with legislation on farm gate prices it would have a ripple effect across these islands and further afield and furthermore would make Westminster think again about increasing tax on red diesel or other farm connected taxes.

“Where legislation on farm gate prices exists, the Government would automatically know that instead of coming out of farmers pockets, any tax increases would instead increase the price of food in the shops.”