Red Diesel

(asked on 30th October 2020) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what discussions he has had with the Secretary of State for Business, Energy and Industrial Strategy on the effect on the zero-emission technology industry of the red diesel taxation reform Budget announcement made in March 2020.


Answered by
Kemi Badenoch Portrait
Kemi Badenoch
Minister of State (Foreign, Commonwealth and Development Office) (jointly with Department for Levelling Up, Housing and Communities)
This question was answered on 4th November 2020

The Chancellor announced at Budget 2020 that the Government will remove the entitlement to use red diesel from April 2022, except in agriculture, fish farming, rail and for non-commercial heating (including domestic heating). This change will ensure that most businesses using diesel in the UK pay the standard fuel duty rate on diesel, which more fairly reflects the harmful impact of the emissions they produce.

These reforms are also designed to ensure that the tax system incentivises users of diesel to improve the energy efficiency of their vehicles and machinery, invest in cleaner alternatives or use less fuel. The Government has previously received feedback from developers of alternative fuels and technologies that they view the low cost of running a diesel engine with red diesel as a barrier to entry for greener alternatives.

To support the development of alternative energy sources that businesses can switch to, the Chancellor committed at Budget 2020 to at least doubling the size of the Department for Business, Energy and Industrial Strategy’s £500 million Energy Innovation Programme.

Recognising that this will be a significant change for some businesses, the Chancellor set out at Budget that businesses will have until April 2022 to prepare before any changes take effect. The Government launched a consultation in July on these tax changes and this has now closed. The Government will announce next steps in due course.

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