Friday, 17 February 2012

UK road freight sector support vignettes and calls for fuel tax cut

According to HGV UK, the Freight Transport Association (UK) (FTA) has called for the UK Government to cut fuel tax by 5p/l and scrap the proposed August 2012 increase of 3.02p/l.  

The submission takes a fairly simple view that such a cut in taxation would "boost the economy", in part because it would offset market and currency based increases in fuel prices.  Given the UK Government has already twice deferred increases in fuel duty and cut it by 1p in 2011, the FTA obviously sees a chance to get further reductions.

It also supports introduction of a "vignette" for lorries, as proposed in a consultation document already released (and reported on here) so foreign lorries pay to use UK roads, as long as it is matched by a countervailing reduction in Vehicle Excise Duty (equivalent to annual vehicle licensing fees in other jurisdictions).   This is seen as helping to "level the playing field" with foreign lorries that tend to arrive in the UK full of cheaper diesel bought in continental European jurisdictions, and carry out haulage activities in the UK before returning having bought relatively little diesel (and so not paid for the roads).

The support for vignettes is long standing and not new, and shows how the road freight sector can support forms of road pricing as long as they are seen to be fair and compensated for by other tax reductions.  However, the fuel duty issue is more complex.

Fuel duty in the UK is high at £0.5795 per litre (around US$0.91) for diesel, and if matched (with petrol revenue) against government expenditure on roads, it is around three times the total spent.  So an argument can be made that the road transport sector pays it way many times over in terms of infrastructure costs (or expenditure on road infrastructure is the UK is insufficient).   That debate can be had elsewhere.   However, given the UK's Budget Deficit remains at around 10% of GDP (and is not forecast to slip into surplus until around 2016), the scope and likelihood of such a dramatic reduction in fuel duty is slim indeed.

The wider issue of the sustainability of fuel taxation as a way of charging for road use has yet to be seriously considered in the UK context.


  1. Fuel now is really a big problem and fuel is the main cause why transportation company are increasing their transportation price.

  2. Taxes make a lot difference in freight transportation fares and if it get reduced by the government then is beneficial for the transporter.

  3. I agree Raakel the costs of the high fuel are being passed on to the customers. Its the the greatest reduction but I suppose every little helps...