Will Removing the Red Diesel Rebate Seriously Harm the Cold Chain?

There is considerable speculation that the Chancellor, Rishi Sunak, will announce the removal of the red diesel subsidy in his March budget.

In response, the Chief Executive of the Cold Chain Federation, Shane Brennan, points out how damaging it will be to temperature-controlled hauliers.

“Consumers rely on a safe and secure food chain, by removing red diesel from refrigerated vehicles the Chancellor would be imposing devastating, unavoidable, costs on to hard pressed hauliers.”

Why is Red Diesel in the Firing Line?
Red diesel is restricted for use only in certain types of machinery and vehicles, including refrigeration lorries.

Environmental campaigners have been asking the Treasury to remove red diesel’s tax rebate to then encourage investment in low-emission technologies.

There is already strict legislation controlling the use of red diesel, along with the red dye used to colour it to distinguish it from regular diesel.

In 2017, the Treasury launched a call for evidence around the use of red diesel in urban areas, and how the use of this fuel may have changed.

Last year various organisations, including the Campaign for Better Transport and WWF-UK urged the Government to end its subsidy of red diesel.

They see this subsidy as a tax loophole, and one which has negative environmental and economic consequences. One of their areas of focus has been on removing refrigeration vehicles from the tax rebate.

However, as Shane Brennan explains, making this change now would put the cold chain industry under immense extra pressure.

“This proposal could not come at a worse time for a food chain that has been battered by three years of politically-created uncertainty, planning and re-planning for shifting Brexit scenarios.”

How Should Change in the Cold Chain Happen?

The Cold Chain Federation’s argument is that its members need more time to invest in greener technology and develop the emission-free technology that will provide a viable, realistic alternative to its current business model.

“By imposing this sudden shock to operating costs, the government’s action would have exactly the opposite effect, making it even harder for businesses to afford new, cleaner vehicles and equipment.”

In Shane Brennan’s view, by removing the red diesel rebate, the Government would, in fact, be making cleaner technology less likely to happen sooner, and instead keep older vehicles on the road.

“Taking action now to remove the ability to use red diesel from critical industries is not the answer to air quality concerns.”

The Cold Chain Federation has previously discussed proposals with ministers and officials, with the aim of agreeing a comprehensive plan for phasing in environmentally-friendly technologies.

The objective would be to give businesses time to invest in alternatives in a way that would fit in with the natural lifecycles of their refrigerated fleets. This would also allow time for the development of a supportive infrastructure, such as charging points for electric haulage vehicles.

If the Chancellor does decide to remove the red diesel rebate, this casts doubt on the whole plan for phasing in change.

“None of the infrastructure is in place today to support a rapid shift in the industry. Consequently, a change in the status of red diesel feels like a cynical tax grab, which puts the pressure on ordinary businesses that are doing their best to serve different communities and the wider economy.”

Logistics Voices
Author: Shane Brennan
Title: Chief Executive Officer
Organisation: Cold Chain Federation
Sector: Cold Chain

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