Trade Association Calls For Cut In Fuel Tax To Tackle Inflationary Pressures On Delivery Costs

Posted by Liz Seyi on January 19th, 2023

As businesses up and down the UK continue to face ever-greater challenges arising from a combination of escalating costs and soaring inflation, Logistics UK has urged the Chancellor of the Exchequer to take steps to help protect the country’s supply chains.

Specifically, the trade association said the immediate implementation of a 6p-per-litre lowering in fuel duty would help prevent price increases across all industries. 

Warnings about the consequences of a lack of action 

Logistics UK warned that the use of fuel played a central role in the delivery of goods across the UK economy and that if prices remained high, there would be a knock-on impact of heightened costs for both consumers and businesses. 

The association’s policy director, Kate Jennings, explained: “77% of all UK supply chain journeys are by road while others always have a road element to provide first- or last-mile deliveries. With forecourt diesel prices increasing by 34% since the start of the year, the cost of delivering for UK PLC has risen significantly in that period.”

She went on to highlight the narrow margins on which logistics businesses operate, stressing that the ongoing inflation placed an “unsustainable burden” on such firms. 

At present, she said, “the UK’s logistics operators are already paying duty at a rate which is 63.5% higher than the EU average, and with labour costs also rising, the current exceptional cost of fuel is putting unprecedented pressure on the businesses which the country relies upon to keep it supplied with the goods it requires.” 

She added that while a 5p-per-litre cut to duty was given a warm welcome earlier in 2022, the reduction had already been absorbed by the continued rises in running costs for businesses. 

Ms Jennings reasoned: “A further 6p-per-litre duty reduction, implemented immediately, would be good for the cost of living, good for business and economic growth, and good for supply chains.” 

Logistics UK has estimated that a reduction in fuel duty of 6p per litre would bring about an average annual saving of £2,424 per 44-tonne truck. 

Could now be the time to introduce a dynamic taxation mechanism? 

Ms Jennings also put forward the idea of a dynamic system, similar to the one used in Portugal, whereby the rate of duty would be lowered weekly in the event of a rise in VAT revenue on fuel sales. 

In her words: “An increase in the material cost of fuel will still enable the Treasury to achieve tax targets through VAT payments. However, by introducing a dynamic, price-related taxation mechanism, the government can ensure that fuel duty doesn’t add to the inflationary pressures faced by consumers and business.” To take advantage of the services of a skilled and informed chartered tax adviser in Devon or Somerset, please don’t hesitate to contact TS Partners via phone or email today. We can help ensure your business – whatever its sector – overcomes the challenges of the present moment.

 

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Liz Seyi

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Liz Seyi
Joined: August 13th, 2019
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