Treasury quashes rumours of red diesel tax hike

The Treasury has dismissed growing concerns about a potential increase in tax on red diesel used by farmers, reassuring agricultural businesses that no such change will be made in the upcoming Spring Statement.

In response to recent rumours that the government could impose additional fuel duties on red diesel, the Treasury told Farmers Weekly it was not planning any changes to the current tax regime.

Red diesel is currently taxed at a reduced rate of 11.14p/litre, significantly lower than the standard rate of 57.95p/litre for white diesel. The reduced rate has long been a vital support measure for farming, helping to keep food production costs down.

See also: Red diesel falls below 70p/litre as crude oil markets dip

James Goodson, a Nottinghamshire-based farmer and agricultural business consultant, expressed concern ahead of the Spring Statement on social media, warning that any increase to red diesel duty would be “an unmitigated disaster” for the farming sector.

Merseyside arable farmer Olly Harrison also voiced his worries, stressing that imposing road fuel duties on diesel used in fields could make essential crops such as wheat and barley financially unviable to grow in the UK. “Our daily bread would be under threat massively if we couldn’t afford to grow it anymore,” Mr Harrison warned.

However, speaking to The Sun on Sunday, chancellor Rachel Reeves promised there would be no new tax increases in her Spring Statement on Wednesday 26 March.

“This is not a Budget. We’re not going to be doing tax raising,” Ms Reeves confirmed.

 She also noted the government’s focus on reducing waste within the state, rather than increasing taxes on workers or businesses, as was done in the previous October Budget.

‘Anti-farming’ policies

The reassurance from the Treasury will come as a relief to many within the agricultural sector, where farmers are already grappling with the implications of Labour’s proposed inheritance tax changes, which could further threaten the financial viability of family-run farms.

Impending increases in employer National Insurance contributions from April 1, severe cuts to Basic Payments, and the suspension of the Sustainable Farming Incentive (SFI) scheme to new applicants in England are just a few of the additional government policies affecting farmers.

The ongoing uncertainty surrounding these tax changes has raised alarms over food security, with many fearing that rising costs could drive up food prices and reduce local production, leaving the UK more reliant on imports.