Chancellor plans green diesel cut
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by Rob Willock • Government departments are hinting that the Chancellor intends to use tax changes in his March Budget to make ultra-low sulphur (ULS) diesel cheaper than standard diesel.
A Treasury spokesman says the Government has started this process with the lp/lit tax cut which comes into effect tomorrow (15 August). "It cannot dictate the price at the pumps," he adds, "but its intention is to encourage use by ensuring that there is a price differential."
The duty rate on ULS diesel will now be 39.28p/lit, representing a £4 saving on a full 400litre fuel tank. But it comes nowhere near making up for the 4p/lit diesel tax hike in the June budget and the 2p/lit rise last November, which put £24 on the same tank. Diesel duty has more than doubled since 1990, when it was 19.02p/lit.
The tax cut also only goes a little way to closing the gap in retail price between regular diesel and the ULS variety, which costs more to produce.
At 65.4p/lit, Sainsbury's City Diesel, the only major ULS diesel brand on the market, averages l.6p/lit more than its regular diesel. The difference will fall to 0.6p/lit after the tax change.
A spokesman for HM Customs & Excise concedes that there has been little incentive for operators to use the new fuel to date.
"But we think this will make enough of a difference for people to start," he says.
1 Operators using ULS diesel include TDG Williams Distribution, The Lane Group and J Sainsbury (CM 27 February-5 March).