Red diesel duty rates under threat

Speaking in advance of next week’s Budget, he said UK farming unions had been assured by successive governments that red diesel exemptions would remain.

He warned that with farm incomes and finances precarious, this is essential.

“Red diesel powers the majority of agricultural vehicles and is crucial for farm businesses and food production. The lower fuel duty recognises this reality. Farmers are facing into a period of massive uncertainty and rising costs. The last thing they need would be any moves by government that would drive up costs,” he said.

Mr Chestnutt said any changes to the tax treatment of fuel under the guise of tackling climate change would be deeply unfair and would leave farmers at a competitive disadvantage to other countries. He said any change would be on top of falling incomes, rising costs, weather problems and constant pressure on farmgate prices.

He continued: “The UK already imposes one of the higher fuel duty rates in the EU. Eliminating the red diesel tax rebate would increase costs by almost 50 pence per litre. This would hit every farmer and every farm business. Unlike those who can reduce fuel costs by buying smaller cars, that is not an option for farm machinery.

“This would be a straight attack on already weak or non-existent profitability. Overnight it would make farmers less competitive against their counterparts in the EU or even the US and Canada, where all governments rebate farm fuel taxes.”

He concluded: “There are no fuel options, other than diesel, on the radar for farm vehicles.”

Meanwhile, NFU president Minette Batters has also highlighted the continued need for a lower rate of fuel duty for red diesel, to allow farming businesses to remain competitive.

She 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 per litre, 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.”

Amid reports that the Chancellor may remove rebated fuel next week in the budget, the National Association of Agricultural Contractors (NAAC) has the following statement:

“Agricultural contractors rely heavily on red diesel to supply essential farming operations to land managers and it is vital that this exemption is retained to maintain food production.

“In times of huge uncertainty, alongside a wet autumn, the industry is already struggling with financial reserves and the removal of the lower fuel duty would be a devastating blow that could push many contracting businesses to fail. By almost doubling fuels costs this would potentially add hundreds of thousands of pounds of input costs each year which is currently unsustainable.

“There is no commercial, alternative ‘green’ fuel to replace diesel in agricultural machinery, removing any choice for the industry to switch fuels.

“Contractors are effectively farmers without land and they are now an integral and essential part of the vast majority of farm businesses,” the statement concluded.