The decision to increase diesel duty by 1..25 pence per litre will increase industry's costs by 170 million.

During 2005 the independent Burns Inquiry into the effects of fuel taxation and foreign competition found that the costs of road freight transport in the UK are out of step with the rest of Europe. The main cause of this problem is the level of UK diesel duty which, at 47p per litre, is more than double the EU average rate of 22 pence per litre.

In the light of this work, the Chancellor commissioned a joint Government/industry task group to validate the Burns Inquiry data set and work towards a shared understanding of the problems that the haulage industry faces.

The report of the Haulage Industry Task Group is published today. Whilst the Treasury's own officials now concede that the scale of the problem identified by the Burns Inquiry is correct, the Chancellor has chosen to walk away from taking action.

Simon Chapman, FTA's Chief Economist said, “The Chancellor himself is on record as saying that the logistics sector is a vital part of delivering future economic success.

“Yet his decision today suggests he sees the industry as no more than a source of tax revenue that he can plunder with impunity.

”Today's fuel duty increase comes on top of a world oil price that has doubled in the space of two and a half years to $65 per barrel.

“The fall in prices seen since oil peaked at $78 per barrel in August does not fundamentally change the current high and volatile nature of diesel prices - conditions that the Chancellor correctly recognised at the time of the 2006 Budget.

”The increase in duty has nothing to do with reinforcing the UK's efforts to reduce its carbon footprint. If traffic levels were influenced by higher fuel prices we would have seen a brake on traffic growth as world oil prices have soared.

“This has not happened. Instead, overall traffic levels have risen by nearly 1 per cent per year, similar to the medium term growth rate since 1997.

”Last week the Eddington Review suggested that road pricing would form a fundamental ingredient in managing future demand for road space, a measure supported by the Freight Transport Association. However, today's fuel duty increase sets back this cause by at least three years.
“Extra taxes of this type enhance the Government's reputation of helping itself to cash from road users. In the light of today's duty increase, it would not be surprising if road users regard road pricing as simply another tax raising ploy.

”Fiscal measures to reduce carbon emissions should contain both a carrot to incentivise good practice as well as a stick. For the road freight industry, this Pre-Budget Report has been all one-way traffic.”

Following the decision to abandon VED incentives for ultra-low emission lorries, the UK now has lorry VED rates around 500 above EU minimum levels.

The very least the Chancellor should have done was to reduce lorry VED to offset in part the effect on competitiveness of fuel duty rises for trucks.