Budget reaction - Industry vows to continue fight on fuel duty
June 23rd 2010 Industry associations are pressing Chancellor George Osborne to roll back planned fuel duty increases but welcomed some measures in the emergency budget.
The Chancellor ruled out any new rises in fuel duty until 2014, but did not move to rein back measures introduced in the spring which will mean increases of 1p per litre in October and in January next year.
Other measures relating to transport in the budget include the Chancellor asking the Office for Budget Responsibility to undertake an assessment over the summer of the effect of oil price fluctuations on the public finances. Informed by this assessment, the Government will examine options for the design of a fair fuel stabiliser.
The Government is also considering the case for introducing a fuel duty discount in remote rural areas.
Furthermore, the Government will explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty.
In addition, while VAT was increased to 20% from next year, there was support for businesses in terms of reduced corporation tax, which will fall from the current 28% by 1p in the pound a year for four consecutive years until it reaches 24%. Tax for small companies will drop further to 20%.
However, support for investing in equipment will be reduced. From April 2012, the rate of capital allowances on the general pool of plant and machinery will be reduced from 20 per cent to 18 per cent, and the rate of allowance on the special rate pool of plant and machinery will be reduced from 10 per cent to 8 per cent.
Speaking about the already planned fuel duty increases RHA chief executive Geoff Dunning expressed his disappointment.
“It will simply further widen the gap between UK diesel duty and that of our EU competitors, the unfairness of which was acknowledged in the Coalition’s recent programme for Government,” he said.
“We offer our support for the investigation into the feasibility of a fuel duty stabiliser and for the reduction of small business tax to 20 per cent from next year."
“We are concerned about the reduction of the investment allowance for small firms to £25,000 from £50,000 which will have a detrimental impact on small haulage companies.
“The recognition of the importance of capital spending, not least on our international trade routes is welcome but we remain concerned about the future of investment in roads in the short to medium term”, he concluded.
The Freight Transport Association said it would continue to fight the planned rises in fuel duty, adding that the proposed rise of 1p per litre in October would cost commercial vehicle operators £125 million a year.
However, James Hookham, policy director at the FTA said: “We welcome the Chancellor’s recognition of the sensitivity of transport costs to changing fuel prices at a time when the recovery is still fragile and world oil prices volatile.
“We need to use this time to start serious assessment of ways in which taxation of commercial vehicles can be decoupled from private motor cars, possibly through a lorry road user charge for a fuel duty stabiliser.”
Fuel tax policy - the details
The FTA’s chief economist Simon Chapman added: “We are open-minded to the idea of a fuel duty stabiliser. Diesel costs represents a third of the total costs of running a truck and in principle, a measure which tempers the price volatility that we have seen since the beginning of 2008 is welcome.
“However, fundamental questions remain such as the level of the fuel price ceiling at which the stabiliser is activated and the frequency of fuel changes necessary to achieve price stabilisation. As a traded commodity world oil prices regularly move by 10 per cent in a week.
“The Office for Budget Responsibility needs to concentrate on both fluctuations in the US dollar oil price and the Sterling Dollar exchange rate. Any scheme must not impose a new level of bureaucracy on industry.”
The FTA welcomed the proposed consultation on the change to aviation tax but said it would defend UK competitiveness against any measure that undermines air freight services.
UKWA reaction
Roger Williams, chief executive officer of the United Kingdom Warehousing Association welcomed the reduction in the headline rates of corporation tax.
"It will help in attracting international companies to do business in the UK, and by 2014 we will have one of the lowest rates in the G20 (24%)," he said.
“While the increase in the VAT rate came as no surprise, the implementation date of 4 Jan 2011 will allow companies to plan. However, we can expect a significant initial increase in the inflation rate, which may impact on our members in the first quarter of the year. Most Euro countries have increased VAT, and our new rates bring us closer to their rates (Germany 19% and France 19.6%) “
“Overall, I think the budget was perhaps better than we feared for our sector, but it reinforces the fact – if, indeed, it needed reinforcing - that we face several hard years where high professional standards, lean operations, innovation and a lot of hard work will remain at the core of our business models," concluded Williams.
CILT reaction
The Chartered Institute of Logistics & Transport welcomed the Government “re-examining the principle of taxation on fuel in today’s budget”.
The institute in particular welcomed Osborne’s commitment to look at whether a rebate for remote rural areas could work.
CILT chief executive Steve Agg said: “Users of the road network who have no other choice of mode have long suffered the inequity of unfair tax burden. Those living in rural areas as well as the logistics industry in general have always endured disproportionate taxation on transport and I welcome this review.”
The Institute was also pleased to see backdated business rates bills for many businesses in ports will be cancelled. More articles from Handling & Storage Solutions: | 
