Scrap the new green tax on construction

Scrap the new green tax on construction

21st July 2022 | Hudson Contract

Hudson Contract is urging the government to reverse the scrapping of the red diesel rebate, which is hammering construction firms with extra costs at a time of rampant inflation.

The government removed the entitlement to use red diesel from all uses – bar home heating, agriculture, rail, fish farming and golf courses – in April to meet climate change and air quality targets. The Exchequer expects the measure to raise a whopping £4.85 billion over the next three financial years, according to official costings.

The government has singled out the construction and infrastructure building sectors and claims use of the gas oil is responsible for the production of nearly 14 million tonnes of carbon dioxide a year.

Ian Anfield, managing director of Hudson Contract, said: “The government keeps talking about construction being the foundation of the economy, but how can firms dig the foundations of the economy if they can’t fill their machines with fuel?

“It’s not just groundworks contractors which are having to pay the extra price. All construction firms which use diesel are affected. Construction is one of the most productive parts of the economy, and has outperformed in the face of covid, labour and material shortages, and badly-designed tax legislation like IR35 and the VAT domestic reverse charge. However with inflation starting to bite, the timing of this latest tax blow could not be worse.”

Hudson Contract client Thomas Contracting, a groundworks contractor and one of the UK’s largest plant hire groups, said without viable alternatives to diesel-fuelled plant, the industry is having to pass the cost onto customers.

Director Lowri Thomas said: “When you go onto a site and start doing the muck shift you’ve got three massive dump trucks there, you’ve got a dozer, you’ve got a couple of excavators – you would need a huge amount of electricity to power them, and charge them, and that infrastructure from the substation is not there to bring in that power.”

She said construction is 10-20 years away from going electric and would have to continue using diesel – and paying the price – while there are no alternatives. Thomas Contracting, which is headquartered in Holywell, Flintshire and has plant hire sites across England and Wales, is investing in electric fleet and plant, but at the moment only small machines can run on electricity for short amounts of time.

Ian Anfield added: “If the government really wants to save fuel to save the planet, rather than clobbering the construction industry with another tax, there are plenty of other things it can do.

“The government should force utility firms to carry out repairs around the clock to reduce traffic jams in built-up areas. The cost of road opening licenses should be calculated based on traffic disruption – it would force utility firms to plan and pay for 24-hour working and a more efficient use of contractors.

“The government could also make better provisions for getting motorways moving such as more crossover points and having the resources ready to implement contraflows following incidents. The M62 full of cars sitting on tick over for 10 miles will use a lot more fuel than a JCB that’s got to be used because there are no alternatives. If the government is serious about the country using less fuel, it needs to look beyond slapping yet another tax on construction.

“These measures and many others could save millions of tonnes of carbon and would be popular with motorists who are fed up with constant delays and disruptions to their road journeys and they would improve productivity too.”

Earlier this year, industry groups including the National Federation of Builders lobbied the Chancellor to defer the removal of the rebate by 12 months, warning it would lead to a 190 per cent increase in the cost of diesel and a rise in fuel theft. The switch to cleaner alternative machinery has been hampered by global semiconductor shortages, they added.

Tags: HMRC
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