Red Diesel – Why the Government Budget Means Goods for the End Consumer Will Become More Expensive

At the Budget 2020, the government announced that it was removing the entitlement to use red diesel from most sectors, except for agriculture (as well as horticulture, forestry and fish farming), rail and non commercial heating, from the 1st of April 2022.

As a haulier, we have been severely affected by this, as using the rebated (red) diesel meant much lower running costs for our refrigerated trailer units. Red diesel and white diesel are exactly the same product, except for red diesel containing a red coloured dye to denote it’s lower duty rate which was 11.14 pence per litre, as opposed to regular white diesel which has a duty rate of 57.95 pence per litre at the time of writing (May 2022).

The Government says these measures are being brought in to tackle UK air quality and follows consultation in 2020, despite opposition from the Road Haulage Association (RHA) and various sectors and means a 420% taxation increase. There is a 69% difference generally in the differing price of the actual diesel (gas oil) types, but the government maintains that this will persuade the sectors to come up with cleaner alternatives.

The RHA, which stresses that the withdrawal of the red diesel rebate will cost small hauliers and business more than £1.4bn, says “we are making the move due to the crippling cost pressures that hauliers are experiencing as we emerge from the pandemic and one year on from the UK’s departure from the EU.”

Rod McKenzie, director of policy and public affairs at the RHA said: “UK hauliers have done a heroic job in keeping the economy running during the Covid crisis.”

“Punishing them with a red diesel hike tax is damaging to their business and we urgently call on the government to reconsider this move.”

“Small Hauliers operating on thin margins simply cannot cope with the added pressure of the loss of the red-diesel rebated fuel in April which would add over 1% in running costs for a lorry,” says the RHA.

The cost of operating a 44-tonne truck have increased by nearly 17% in the past year. As the global price of oil and demand for fuels increases, the UK has near record diesel prices, compounded by an 18% increase in driver wages, adds the RHA.

Despite severe financial challenges, hauliers across the country have remained focused on delivering a resilient supply chain. Government must now support them as they grapple with rising energy prices and high inflation.