Threat of new tax on red diesel could damage Cambridgeshire’s rural economy

NEW taxation on red diesel, unveiled by the European Commission yesterday, would devastate the rural economy in counties such as Cambridgeshire.

Draft proposals for a new “carbon tax” involve a levelling of the tax playing-field by no longer allowing a reduced rate of tax for red diesel - used by the likes of farmers.

It could come into force in 2013 with a ten-year adjustment period - and though the UK government has the power of veto, experts believe it is unlikely to wield it in this case because it is reserved for “the big issues.”

Ordinary diesel is currently around 140p a litre including 60p tax and VAT, while red diesel - which produces a relatively high level of carbon which the Commission wants to reduce - is 63p a litre, with around 11p tax.

Stuart Agnew, MEP for the East and UKIP spokesman on agriculture, said: “These proposals will bankrupt many farmers. At a time when we urgently need to grow more food, the EU should not be sacrificing farmers on the anvil of the man-made global warming myth.

“The EU’s over-the-top green agenda is threatening to wipe out not only British agriculture but what is left of the fishing industry, as both are heavily reliant on red diesel. These proposals would make it unaffordable.”

The National Farmers’ Union is vowing to fight the tax.

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NFU head of tax Michael Parker said: “Our immediate concern is the Commission’s recommendations may risk markedly increasing the cost of energy and fuel to agriculture. We already have the highest rates of tax on road fuel in Europe and the duty rate on red diesel has increased nearly fourfold in the past ten years.

“Poorly thought-out regulations will increase costs for farmers and growers, while decreasing the competitiveness of EU agriculture and risking production being exported to other countries. It is important to remember fuel use in agriculture has declined over the past decade as machines have become more efficient and farming practices have adapted.

“As a result, we will look to meet with the UK government and partners in the EU to highlight these issues as well as any others that we identify once we have carefully studied the report in full.”

One combine harvester working for a day can use 800 litres, while a tractor uses 500-600 litres when pulling equipment such as ploughs or seed drills.

The proposal from EU Commissioner for tax Algirda Semeta would tax fuel on the carbon content rather than the amount used, and diesel has around 20pc more carbon than petrol.

Norfolk MP Henry Bellingham hoped the issue could be resolved before it got to the veto stage.

“Red diesel has always had this concession. It’s been around a long time. I have had letters from farmers worried about this,” he said.

Motorists are unlikely to be hit by a rise of the pump price because the UK already has a higher level of diesel tax than the EU minimum, so the cost could be absorbed.

Mr Semeta said: “Our objective is less about introducing a new tax than about restructuring energy taxation so as to meet the EU’s high-priority goals of climate change, energy efficiency and fair competition. Our common goal is a more resource-efficient, greener and more competitive EU economy.”

The directive would see a tax of �17 per tonne of carbon emitted from the fuel and a tax of �8.50 per gigajoule - the measurement of energy - for motor fuel.

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