Missed Targets and Missed Opportunities on Fuel
17/03/05

NFU Scotland has expressed its concern at the developments on fuel duties in yesterday's Budget. NFUS believes the Chancellor is missing the target on rebated fuel fraud and has missed an opportunity to strengthen the UK's fight against climate change by not extending its financial support for biofuels.

The Chancellor has announced that from 1 September, farmers will face a 20 per cent increase in red diesel duty in order to tackle rebated fuel fraud. Oil fraud was estimated to cost the Exchequer £850 million in 2003. The duty increase on normal road fuels is in line with inflation at 2.5 per cent, however the red diesel duty rise is 23 per cent. NFUS believes that the Chancellor's attempts to reduce fraud are missing the target and efforts should be focussed at greater enforcement of the law instead of higher duty rates.

The duty differential between biofuels and normal fuel remains at 20 pence. NFUS is disappointed that the rebate is not extended. However, the Union has pointed out that to further stimulate the domestic biofuels industry, development assistance is more important than duty cuts.

There was welcome news with the continued commitment of the Government to the Voluntary Initiative (VI), the package of measures designed by industry as an alternative to a pesticides tax. Likewise, the Chancellor in his statement to the House committed to the Government to avoid gold-plating of EU Regulations.

NFUS Vice President Bob Howat said:

"We support any measures from the UK Government to meaningfully tackle red diesel fraud, but increasing the duty won't do that. This simply looks like an attempt to increase revenue. Whilst an increase in the duty may dent fraudsters' profits, it doesn't tackle the problem at its source. To do that, the Treasury needs to devote greater resources to enforcement through increased inspections and dipping of vehicles. A duty rise of over 20 per cent from 1 September simply lumbers legitimate users with a massive increase in their input costs.

"We welcome the words of support for biofuels, but this needs to be matched by appropriate government investment. A greater duty differential would be one step, but greater investment aid is essential. Currently, we are importing biofuels which could be produced here. Grant aid on a par with that elsewhere in Europe would redress this balance.

"The continued support for the VI is very good news. There has been excellent progress on the targets. As the Budget report points out, over 770,000 hectares are now covered by Crop Protection Management Plans, three times the initial target.

"The Chancellor's commitment to avoid gold-plating of EU rules is also timely given the increasing amount of regulation originating in Brussels. Consistent implementation across the EU is crucial to maintaining our competitiveness."