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The Freight Transport Association (FTA) is the body that, amongst other things, seeks to represent haulage companies’ interests in government circles. In the run up to the March 2016 budget, the Association has been particularly active in presenting its views on the detrimental effects of excessive fuel duty for both the haulage industry and the wider economy. Although not strictly an issue restricted to the time of the budget, this campaign has nevertheless gained momentum and considerable coverage as the Chancellor considers his options. The Argument There is nothing new in the debate about the extent to which taxation benefits society overall versus its detrimental effects on business and the wider economy. Although on one hand society must recover tax in order to pay for things such as infrastructure development, social benefits and education, it must be acknowledged that higher taxation damages economic performance. The argument though is always about ‘how much’. The tax businesses and individuals in society can afford to contribute without it affecting them or the wider economy too negatively. Therefore, there’s no concern that tax revenues will start to fall. The FTA has made clear though that it believes fuel duty should be cut in order to help not only individual haulage companies but also the much wider economy. The Logic The logic here is that fuel duty has a knock-on effect all the way down the economic chain - ultimately reaching the final consumer. The tax being paid on fuel by haulage companies must be included in their pricing, pushing up the cost of the individual components of the end-to-end economic supply chain. The FTA is arguing that reducing the tax would reduce the cost of goods to consumers, meaning they would have more money available as disposable income. That latter point is usually regarded as fundamental for healthy economic growth. A Problem Unfortunately, the mathematics are equally clear that at the moment the United Kingdom’s government is continuing to spend far more than it can afford. This is what is leading to the much talked about ‘national deficit’ - and what most unbiased economists would agree to be the equally unacceptable high government borrowing. Any significant cut in fuel duty is therefore going to leave a hole in government income projections and inevitably lead to yet more borrowing. Even if a knock-on effect on borrowing could be avoided, the reduction in income arising from a lower fuel duty would need to be made up by increasing taxes elsewhere, or even by applying more stringent government spending cutback programmes. Predictions At the time of writing, the budget detail has yet to be announced but haulage companies are likely to be disappointed at the outcome – given their demands for a cut in fuel duty. The chancellor is widely perceived to have little room to manoeuvre, in spite of the relatively good state of the UK economy when compared to other major economies at the present time. Perhaps the best thing most haulage companies can realistically hope for is for fuel duty to be frozen yet again. Norman Dulwich is a Correspondent for Haulage Exchange, the leading online trade network for the road transport industry. Connecting professionals across the UK and Europe through their website, Haulage Exchange provides services for matching haulage companies with jobs in road transport and haulage work. Over 4,000 transport exchange businesses are networked together through their website, trading jobs and capacity in a safe 'wholesale' environment.
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