Rebated Fuel Rules: Construction Industry

Debate between Greg Knight and Helen Whately

Wednesday 19th January 2022 Westminster Hall

[Helen Whately]

I heard the hon. Member’s point there. A number of colleagues, including the hon. Member for Upper Bann, talked about there being a cliff edge, and others have asked for a delay. This was first announced back in 2020 and was confirmed in the spring Budget of 2021 to be introduced this coming April, so I would say that there has been a substantial lead time into the introduction of this policy—it is simply not coming as a surprise.

There has been substantial consultation with industry and consideration of the cases that specific sectors have made about the challenges that the shift to paying tax at the same rate as standard diesel might mean for them. The Government have listened to those concerns and made specific exemptions where we can see very material impacts—for instance on the cost of goods and services to households. There is an exemption around some use of red diesel for the purposes of generating energy for those who are off-grid—there is a specific exemption relating to that.

Although the construction sector, and mining and quarrying, which my right hon. Friend the Member for East Yorkshire (Sir Greg Knight) mentioned, argued throughout the consultation process that they should be exempt, their case was simply not compelling against our overall objective to incentivise greener alternatives and greater fuel efficiency and to shift to a position, which can only make sense, where the appropriate level of tax is paid on such a polluting and harmful fuel to reflect the harm that using it causes. However, as I say, we did listen and consult substantially on this proposal; we heard among others from the construction sector and from business representatives in Northern Ireland. We did listen, but we had to make the decision that this is part of an overall direction of travel where we are committed to tackling climate change and the harmful effects of pollution.

[Sir Greg Knight]

I do not think anyone is questioning the Government’s motive. The problem is, in relation to quarrying in particular, that no alternative equipment is available. We cannot pursue quarrying with a battery-powered machine or an electric machine with long cables. There is no alternative to using diesel.

[Helen Whately]

As we have heard from those who are trying to develop alternatives, one of the barriers to developing those alternatives—one of the things that reduces the incentives to do so—is the relatively low cost of red diesel. It is only by addressing the fact that there is such a low tax rate on red diesel that we incentivise the development of alternatives—and we are seeing the development of alternatives.