MPA urges chancellor to delay removal of red diesel rebate and reduce energy costs

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red diesel rebate

The Mineral Products Association (MPA) has urged the chancellor to delay the removal of the red diesel rebate and act on infrastructure delivery and energy costs in the spring statement

UK producers of construction and industrial mineral products have called on the chancellor of the exchequer Rishi Sunak to level the playing field with EU competitors by delaying the removal of the red diesel rebate, reducing energy costs and increasing certainty to boost investment ahead of his spring forecast statement (23rd March 2022).

Those belonging to the Mineral Products Association produce 400 million tonnes of materials for UK building and manufacturing each year, and so have a real vested interest in the spring statement. In order to try and influence its outcome, the MPA has written to the chancellor in a last-ditch attempt to delay the removal of the red diesel rebate and call for urgent action on soaring energy costs and transparency on delivery of the Government infrastructure plans.

What is the red diesel rebate and why does the MPA want to delay its removal?

Mineral products companies are expecting to lose their right to use lower-tax red diesel on 1st April but with no viable low-carbon alternative to the heavy machinery the industry uses, removing the rebate will not achieve a reduction in carbon emissions for years. Combined with rising levels of inflation, the MPA has asked for the tax change to be delayed until new alternative equipment becomes available.

Obviously, this appeal comes at a time of global crisis following Russia’s invasion of Ukraine – and this means extremely volatile global energy markets. Prices that were already approaching record highs are rising higher and higher and according to the MPA, the UK’s energy-intensive industries face higher costs than EU competitors because of policy choices made by the UK Government and Ofgem.

Commenting on the red diesel rebate, Robert McIlveen, MPA director of public affairs, added:

“Throughout the consultation on red diesel we made the case that there were no carbon emission savings available until the equipment is in the market at the level of power, range and cost to replace diesel, and when the associated infrastructure needed is available.

“These conditions are nowhere near being met. With inflation, a growing worry now is a dreadful time to increase the costs of essential materials for UK construction and manufacturing supplied by MPA members so we are calling for a delay to the removal of the red diesel rebate.”

The UK energy industries are in a disadvantaged position in comparison to their EU competitors

As a member of the Energy Intensive Users Group, MPA has been calling for action for months to deal with the domestic policies that push UK prices well above those in the EU. Ultimately, this is threatening the competitiveness of producers in the UK. Therefore, the MPA has repeated its request for the chancellor to place the UK industry on a level playing field with its European competitors.

The MPA has an essential role in supplying the lion’s share of raw materials needed for major infrastructure, and so they also reiterated its longstanding call for greater transparency and better delivery of government-backed construction projects.

The letter highlights the link between construction and its supply chain, citing the DfT’s faltering Road Investment Strategy 2 (RIS2) programme as an example. Nothing can be built or made without mineral products, the MPA points out. Furthermore, the closer to home that those materials are sourced the better for the economy and the environment.

Finally, the MPA welcomes the freeze in the Aggregates Levy announced at the Budget in autumn and would like to see this extended beyond 2023.

‘The priority must be the urgent measures to tackle domestic policy drivers of the UK’s high energy costs’

Nigel Jackson, chief executive of MPA, commented:

“The high ambitions the Government has set out for the UK’s infrastructure and housing rely on our members’ ability to supply aggregates, asphalt, cement, concrete and other essential materials.

“You can’t build with thin air – construction needs materials and producing materials requires long-term planning and investment, so our industry needs clarity on what’s in the pipeline for the next 10 or 20 years, not the next 10 months.

“There is a widely recognised maxim ‘if you can’t grow it, you have to dig it’, clearly this is not as recognised by Government given the exemptions and subsidies some other industries enjoy. We also provide high-skill, well-paid jobs in regions most in need of economic growth.

“However, for this year’s Spring Statement, the priority must be the urgent measures to tackle domestic policy drivers of the UK’s high energy costs. The Chancellor has solutions in his power to place UK industry on a level playing field with European competitors and we urge him to act decisively this month.

“Our overriding aim is for our sector to deliver for the UK by having economic conditions that reduce uncertainty and boost confidence to encourage investment for growth.”

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