Red diesel rebate removal- Cost to construction will drive up house prices

The government is being urged to rethink a removal of the red diesel rebate and ‘step back from the 31 March cliff edge’.

Upper Bann MP Carla Lockhart challenged the Exchequer Secretary to the Treasury, Helen Whately MP, during a Westminster Hall debate yesterday evening.

Ms Lockhart called on the Treasury to postpone the proposal to end the red diesel rebate for use in the construction industry and, instead, adopt a transitional period.

This would allow for the development of alternative fuel sources capable of powering machinery and processes within the construction sector.

Ms Lockhart said: “The latest government insolvency data shows that between August and October 2021, 797 construction firms across the UK went bust - up by more than a fifth compared to the previous three months.

“Yet, despite these businesses failures, the government is intent on pushing the industry over the cliff edge on 1 April with the end of the rebate for red diesel and other biofuels.

“For such a significant change in taxation, the economic climate and context within the industry is key.

“Yet, this change is being pursued at a time when construction companies are under unprecedented pressures, with input cost rises across materials and energy that have not been seen before.”

She continued: “The cost to construction of this policy will be £20m to £25m and this will be passed on to private home builders, driving up house prices which are already beyond the means of many first-time buyers and families, and to public contracts meaning it is more expensive to build new hospitals, new schools, new roads, and new social housing.

“The Chancellor in his budget speech heralded the government as the champions of infrastructure, yet this policy will directly impact the cost and delivery of infrastructure.

“The government argue that this move is to protect the environment and reduce carbon emissions.

“It is a flawed logic, as the technology and alternative fuel sources to power the construction industry is simply not available right now.

“Therefore, the switch will be from red to white diesel, and indeed because some biofuels are also having the rebate withdrawn, companies are telling me they will switch from biofuel to diesel.”

The Upper Bann MP said that, while this is a UK-wide problem, the industry in Northern Ireland faces the “additional challenge” of now being placed at a “competitive disadvantage against industry in the Irish Republic”.

The prospect of smuggling of diesel and mineral products is also increased, she added.

“For local firms who have significant business in the Irish Republic, this is likely to cost them this trade,” Ms Lockhart stated.

“That is deeply unfair, and the government must act to protect these businesses.

“We need the government to rethink this policy and step back from the 31 March cliff edge to the rebate.

“We need a transition period to allow the intense development of alternative fuels and machinery that can be used using such fuels.

“The Treasury still has time to act. I urge it to do so,” she concluded.