October 26, 2020

Food industry calls on Chancellor to delay red diesel ban on Covid-weakened supply chain

Food industry representatives have come together to urge HM Treasury to delay its proposed ban on the use of red diesel by food delivery vehicles until 2025.

In its March 2020 Budget, Government announced that from April 2022 it will remove the entitlement to use red diesel for a range of current uses including the refrigeration systems necessary to keep food safe and secure on the move.

Collectively food manufacturers, hauliers, wholesalers, and retailers operate more than 40,000 temperature-controlled vehicles transporting chilled and frozen food across the UK. These vehicles are crucial to a safe and resilient food supply chain, and to tackling climate change by minimising food waste.

The proposed change would impose at least £100m of unavoidable costs on to the bottom-line of logistics, retail, and food manufacturing businesses.

The Cold Chain Federation, British Frozen Food Federation, and Federation of Wholesale Distributors have written to the Chancellor urging him to reconsider a tax hike that will cause further economic distress to a Covid weakened supply chain.

They also argue that, whilst progress is being made in rolling out alternative technologies, there is still not a viable alternative to diesel-powered refrigeration for a large proportion of the food transportation relied on to supply manufacturers, retailers and restaurants across the UK.

They argue that a later implementation date, coupled with a roadmap that directs funding available for green innovations into supporting businesses to fast track the testing and adoption of new technologies would achieve the environmental objectives and support industry at a critical time.

Cold Chain Federation Chief Executive, Shane Brennan, said: “We support the ambition for a diesel-free future for all road transportation, and cold chain hauliers have shown their willingness to move away from diesel especially in smaller vehicle categories. However, there are not yet robust alternatives to diesel power for all types of food transport, and so imposing this tax change too early will have a punitive economic impact on low margin businesses that are reeling from the effects of Covid 19.”

British Frozen Food Federation, Chief Executive Richard Harrow, said: “The frozen food industry has stepped up to keep the nation fed through Covid-19. For many parts of the industry this has been done despite major losses of revenue arising from the closure of food service outlets across the UK. Given that Ministers have been persuaded to exempt farmers from these diesel tax hikes we cannot accept their justification to impose the burden on the businesses that move food from farm to fork.”

Federation of Wholesale Distributors Chief Executive, James Bielby, said: “Businesses that are struggling to stay alive through the worst economic crisis in their history, need support to invest and change their fleet, not punitive taxes. We believe that a longer transition to the new tax supported by investment incentives presents a real opportunity to turn another nightmare into a major opportunity.”

Representatives of the food industry met with HM Treasury to discuss its members’ concerns in early September 2020. The Federations continue to work with government on developing a comprehensive joint-plan for reducing harmful emissions from refrigerated vehicles, all of which was cast into major doubt by the Budget announcement in March.