Chancellor condemned for failing on fuel costs
Chancellor George Osborne has been condemned by the freight and farming sectors for condemning British industry to continued pressure from fuel and operational costs at a time when oil prices remain at a four-year high.
The Chancellor announced in the Budget that fuel duty was not be cut or frozen and that Vehicle Excise Duty (VED) will be frozen for commercial vehicle road hauliers.
However, although the Freight Transport Association (FTA) welcomed the announcement on VED, it pointed out that the Chancellor will still go ahead with plans to increase fuel duty by 3p/litre in August. It said that the Chancellor must reconsider his decision before the proposed increase comes into effect, as it will have wide-ranging implications for the UK industry and consumers.
FTA’s chief economist Simon Chapman said: “The Chancellor has squandered a very real opportunity to support UK industry, jobs and economic recovery, by his Budget policy on fuel duty. Independent research has shown that a cut in diesel duty of 2.5p/litre would have created an additional 175,000 jobs with no loss of revenue to the Exchequer. But, by contrast, the fuel duty increase of 3p/litre, scheduled for August, will increase the average cost of lorry operation by around £1,200 per vehicle per year – all on top of other price rises, which are inevitable as a consequence of the current and anticipated increases in the world price of oil. Higher commercial vehicle operating costs inevitably impact on the price of everything we use or consume, and contribute to inflation and higher consumer prices.
“He has lost an opportunity to benefit every household in the UK and must be persuaded to change his policy.”
The FTA also said that the much heralded Fair Fuel Stabiliser has proved to be a damp squib, which only formalised fuel duty increases above inflation if world oil prices fall below $75 per barrel. It said that the Chancellor should have committed to freezing fuel duty when world oil prices were above $100 per barrel.
Despite the fuel duty disappointment, which will impact rural people in particular, Sean McCann, personal finance specialist at rural insurer NFU Mutual, said that the budget did contain some good news.
He said: “One potential nugget for the countryside is the introduction of enterprise loans for young people. Rural areas are currently starved of employment opportunities and the prospect of loans support for young people starting up their own businesses could well boost rural enterprise and employment.”
He said that lower corporation tax and simpler planning regulations was also good news for farm companies, along with the confirmation of Capital Gains Tax roll-over relief for farmers who buy or sell entitlements under the EU Single Payment Scheme (SPS).
“If the reality matches the promise, the Chancellor’s announcement on simpler planning will help businesses develop, while lower corporation tax is an obvious benefit to business.”
However, the chief economist at IGD, James Walton, said that the changes which could have the greatest impact on the food and grocery sector were not necessarily the headline changes. He highlighted the changing VAT rules, particulary the promised review of ‘VAT anomalies’, which would affect hot food in particular, as well as rising retirement age as two key areas.
He said: “The debate on what should and shouldn’t be zero rated is raging again. It is possible, but unlikely, that some items might have VAT removed in this review. The concern for the food and drink sector is that zero ratings will be gradually chipped away year by year.”
“The state pension age is about to be linked automatically to life expectancy. Private sector employers are likely to follow suit. This could be the one measure in this budget remembered for decades ahead.”
He also said that the higher tax threshold which aimed to support the ‘squeezed middle’ income earners should boost mainstream retailers and brands, particularly if it signals a trend for future budgets, while the stimulus for online shopping will give momentum for online retailers. IGD already predicts that the online market for food and grocery will reach £11.6bn by 2016. The temporary lifting of Sunday trading restrictions for the Olympics, if popular, could lead to the evolution of a 24/7 supply chain.
>Chancellor announces Budget to 'back business'