A proposed 23% increase in fuel duty, which equates an additional 12p per litre of petrol or diesel at the pumps, hidden in the content of Office of Budgetary Responsibility’s (OBR) Report on Fiscal Responsibility, would be a body blow to the logistics industry if introduced, according to the business group which represents the sector.
David Wells OBE, Chief Executive of Logistics UK, which represents 20,000 members from all sectors of the industry, is alarmed that a proposal of such significance was not discussed in the Chancellor’s fiscal statement made in the House of Commons earlier, and is concerned about the potential impact of its introduction:
“Logistics is at the heart of all economic activity in this country, and relies on fuel to facilitate its work, whatever the mode of transport used. Bulk diesel prices have increased by 30% since January. With businesses already under financial pressure, and operating on very narrow margins, a duty hike of this magnitude would have significant impacts, for operating costs and, ultimately, on inflation.
“Although outlined in the Spring financial statement, the fact that the detail of this policy was hidden in the body of the OBR Report and not announced by the Chancellor in the House earlier indicates that the government was hoping to avoid scrutiny on the topic. We are seeking urgent clarification as to whether the duty rise will be implemented as planned, as a rise of this magnitude would have a detrimental effect on the UK’s economy, stifling activity and placing unnecessary pressure on a sector deemed ‘essential’ only a year ago.”
The proposed rise in fuel duty would equate to an additional £4,850 for the cost of running a 44t truck, according to Logistics UK’s calculations, bringing fuel duty costs to a total of £26,246 per vehicle, before the cost of fuel itself. Logistics UK estimates that a small haulage firm with seven HGVs (98% of logistics businesses are SMEs) would have £34,000 pa added to annual operating costs if the duty rise were to be introduced after March 2023.
However, speaking to the BBC on Friday morning, Chancellor Jeremy Hunt said a decision on the fuel duty increase had not been made: “Let me clear that up, that is not government policy,” he said.
“We will make a decision on that at the next budget in the spring. That was just an assumption that the OBR made – they’re an independent organisation, they make assumptions and we have made no decision on that at all.”
Fleet management and leasing firm Holman said any increase of that magnitude was unprecedented: “Fleets cannot operate or plan with such a huge potential cost hanging over them,” said Holman UK MD Nick Caller.
“An extra 12p per litre of duty on top of already exorbitant fuel bills would, undoubtedly have a major impact on all UK businesses and indeed risk the sustainability of a number of those that rely heavily on fuel to operate.”
Following the Chancellor’s statement, Conservative transport select committee MP Greg Smith asked him if he would look at the inflationary impact of fuel duty and see if it could be reduced, due to the impact on the haulage and logistics sector.
Hunt replied: “I assure my honourable friend that I will absolutely do that.
“We have a little time, and I know that fuel duty is an important issue to him and many other colleagues.”