If the increasing cost of living hasn’t emptied the pockets of Brits, April 2022’s rebated fuel legislation will.
On the 1st of April 2022, HM Revenues and Customs (HMRC) introduced legislative changes to restrict the entitlement to use rebated fuels across the United Kingdom. This was implemented through the 2021 Finance Bill and subsequent secondary legislation.
Initially facing the brunt of this new legislation will be businesses and then it will ultimately pass onto the consumer. With many sectors losing their entitlement to use the most popular fuel, red diesel, which is standard diesel but is dyed red so it can identifiable and taxed at a lower rate.
The following less popular fuels are also impacted by the changes; rebated biodiesel and bioblend, rebated Hydrotreated Vegetable Oil (HVO), kerosene taxed at the rebated diesel rate and fuel substitutes.
The sectors that are no longer able to use rebated fuel include ports, manufacturing, airport operations, waste management, leisure, mining and quarrying, oil, and gas extraction.
Restrictions are applied to those who can still use rebated fuel such as agriculture, horticulture, fish farming, forestry, trains and, marine craft refuelling and operations. The maintenance of amateur sport clubs and golf courses, as well as the powering of travelling fairs will also face restrictions.
Commercial heating will have the full rate of duty added to consumed fuel, with non-commercial heating continuing to receive the rebated rate.
The video below explains the April 2022 rebated fuel legislation changes.
‘A devastating effect’
Speaking to Georgina McCullough, the Office Manager at RGM Construction Ltd (Ballylig Quarry), a firm who lost their entitlement to use red diesel, she remarked “because of the Ukraine crisis, that’s where a lot of diesel comes from, Russia and Ukraine, and with that war going on, it’s not good for us, and with this protocol in Northern Ireland as well it’s a devastating effect for all industries. It’s making a huge difference to our business, because of the price rise we have had to put two fifty a tonne onto the price of stones and an awful lot of people just can’t afford to pay it”.
Removing the entitlement to use red diesel and rebated biodiesel from most sectors in April 2022 was to help aid the 2050 government target to bring the United Kingdom’s greenhouse gas emissions to net zero.
On the HM Revenue and Customs (HMRC) policy paper, it states that at Budget 2020, the government made the decision to remove the entitlement to use red diesel and rebated fuel from most sectors in April 2022 to “help meet its climate change and air quality targets”.
However, Mark Spence, the Managing Director of the Construction Employers Federation (CEF) said on their website, “the removal of the rebate at this time will do nothing to progress the carbon reduction agenda to which we are all committed but will significantly increase the risk of business failure in our sector”.
With businesses now having to pay fuel taxed at the standard rate, the cost of materials has fluctuated to resemble the price increase. When asked how business now compares to before April the 1st, Georgina McCullough of RGM Construction Ltd said, “There was a rush for two weeks at the end of March and then on the 1st of April it all died. You just can’t pay men off, they are not on a string, they have been sitting in their lorries waiting on orders coming”.
Although at the Spring Statement 2022, the Government announced a temporary 12-month cut to duty on petrol and diesel of 5 pence per litre, with a proportionate percentage cut for rates of rebated fuels where practical. This cut will represent savings of around £2.4 billion for businesses in 2022-23.
The video below is the interview with RGM Construction Ltd’s Office Manager, Georgina McCullough.
‘Theft is a massive obstacle’
The legislation changes will alter the day-to-day activities of those employed in and owning businesses within the sectors across the United Kingdom that have lost their entitlement to use red diesel and rebated biofuel.
Speaking to Callum Burnside, the Operations Manager at CM Skips Ltd who have also lost their entitlement to use red diesel, he said, “The Impact of the new legislation will cause a major dilemma for not only us as a business but everyone in the waste management industry. As a business we rely on red diesel to power a range of equipment such as balers, screeners, forklifts, and generators for our day-to-day operations and from April we are going to notice a massive rise in daily operating costs”.
When asked about the other obstacles alongside the financial aspect, Callum Burnside of CM Skips Ltd revealed that, “Theft is a massive obstacle due to the current value of clear diesel and implementing a fuel management system to track the use and dispense of the fuel is how we are preparing to stop theft along with a new secure lockable tank”.
With increased awareness of potential theft across all industries that switched to white diesel, in an interview with Ryan McConkey, a labourer from Northern Ireland, he said “on-site there is more attention being paid to the security measures. All the diesel tanks are locked and there are also keys for the fillers on machinery”.
In response to these concerns, the Home Office have stated that they “do not anticipate these tax reforms leading to fuel theft at scale, but will work closely with policing partners to monitor the situation”.
Despite HM Revenue and Custom’s (HMRC) policy paper that states the red diesel and rebated biodiesel tax changes will “more fairly reflect the harmful impact of the emissions they produce”. The majority (69.7%) of those sampled in a survey do not support the red diesel legislation change. Although this is merely a snapshot of the public’s perspective on the removal of the red diesel rebate. The reasons respondents provided included, “it will cause another up-front financial burden for businesses” and “there are no viable green fuels available to power the size of machines that we use”.
‘A great impact on farming in Northern Ireland’
Regardless of your position to support or oppose the removal of the entitlement to use red diesel and rebated biofuel, the financial implications will leave many British residents short on cash.
CM Skips Ltd Operations Manager, Callum Burnside stated in an interview that, “This year we have implemented a price increase of over 8% to account for the increase in clear diesel and once we establish the added cost of using clear diesel, we will do another price increase later in the year once fuel prices hopefully stabilize to account for this”.
From a labourer’s point of view, speaking to Ryan McConkey he said that “due to the legislation change and current factors the fuel costs for machines will go up and therefore, there will be a rise in prices for work done”. This will include any work in the construction industry such as constructing walls to demolishing them or laying pipes and drilling.
However, the sectors that retain their entitlement to use red diesel and rebated biofuels, will also face financial complications, due to them sourcing their goods from businesses that lost their entitlement. The agriculture industry is one that is exceptionally prevalent in Northern Ireland. HM Revenue and Customs (HMRC) guidance allows agricultural vehicles to use rebated fuel for agriculture, horticulture, fish farming or forestry purposes. As well as cutting trees, verges and hedges that border on public roads and handling frost, ice, snow, or flooding. Also including agricultural vehicles used by amateur sports club or on golf courses and driving ranges.
Interviewing Julie Bonnar who works as a farmer on her family farm located outside of Ballymena, she commented that certain businesses losing their entitlement to use rebated fuel has had, “a great financial impact on our farming business as all the goods we purchase in to use in the farm, for example animal feed, fertiliser and building materials have all increased in price due to the new legislation”.
Continuing Miss Bonnar said, “thankfully contractors are still permitted to use red diesel when carrying out seasonal work as they are considered a part of the agricultural industry as well”.
When asked of what the future of farming could look like Julie Bonnar said, “the new legislation will have a great impact on farming in Northern Ireland combined with Brexit and climate change, this will mean that farmers will have to take a different approach to how they operate their businesses”.
However, when questioned about whether eco-friendly vehicles would be a viable alternative to diesel fuelled machinery on their farm, Miss Bonnar stated “no it wouldn’t be economically viable for us to have electric machinery, the biggest reason for this is the fact that the price of electric is increasing, also the fact that electric machinery is more expensive to purchase”.
The audio file below is the interview with farmer Julie Bonnar, who speaks of the impact the red diesel restrictions have had on the agricultural industry:
The HM Revenue and Customs (HMRC) policy paper states that they hope by removing most red diesel entitlements will encourage “users of polluting fuels like diesel to improve the energy efficiency of their vehicles and machinery, invest in cleaner alternatives”.
However, after speaking to businesses who have lost their entitlement to use red diesel alongside Miss Bonnar’s point that these vehicles are expensive to purchase and charge, the switch to energy efficient machines and vehicles may not be straightforward.
In the interview with CM Skips Ltd, Callum Burnside expressed that, “Currently there are electric machines that are new to the market, but the capital cost is quite substantial, and the battery capabilities of most machines won’t last a full day currently along with rising energy costs for charging and running these pieces of kit”.
Speaking to Georgina McCullough of RGM Construction Ltd, she said “Not at the minute as they’ve only started to make electric cars, so lorries haven’t even started that way yet”.
‘People will not even be able to afford to buy food’
In terms of how this legislation change can spiral down to the consumer, it will be those availing of services and materials from businesses that can no longer use rebated fuel, that will feel the pinch.
When asked about the consequences of this legislation change on the everyday consumer, Georgina McCullough, RGM Construction’s Office Manager said, “this devastating effect will extend to all industries, not just ours, not just the construction industry but farming and everything else and because of the derv [white diesel] price going up, food prices will be going up too. A lot of the people will not even be able to afford to buy food”.
These legislation changes could have an impact on the view of these industries as a secure career option. When speaking to Ryan McConkey, he insisted that from a labourer’s point of view, “Regardless of everything, i think it should still be considered as a career option”.
In response to the concerns of impacted parties, HM Treasury spokesperson said,
“Red diesel accounts for nearly 14 million tonnes of carbon dioxide emissions every year. Our reforms mean that many organisations instead now need to use diesel taxed at the same rate as that used by ordinary motorists, helping us to move to net-zero by 2050.”
“We gave businesses a year to prepare for these important long-term reforms but we recognise too that there are unique circumstances currently pushing up fuel prices, which is why we cut fuel duty rates for 12 months at Spring Statement.”
Overall, until industries that are now legally required to use white diesel can secure eco-friendly vehicles and machines to carry out required work for their business, the cost of materials will continue to reflect fuel prices. Therefore, non-commercial consumers will soon feel the financial burden and cutbacks in households across the United Kingdom may be required to take place.
Holly Fleck is an Ulster University Journalism Graduate and current Journalism MA student at Ulster University. She has a passion for Health and Business reporting. Holly has previously hosted UUSU's The Student Show podcast, Ulster University events as well as contributing content to QR's The Scoop and Crosskennan Lane Animal Sanctuary.