Last updated 12:39, Thursday, 24 July 2008

SCOTLAND’S farming union has given a lukewarm reaction to the Chancellor’s announcement that the two pence a litre fuel duty increase proposed for this October will be postponed.

NFUS has called for farmers to receive a full tax rebate on red diesel – as available to the fishing sector – as well as the introduction of a fuel duty regulator

NFU Scotland is clear that this move does not go nearly far enough and that the main way in which the damaging effect of sharply-rising fuel prices can be mitigated is for the government to slash duty rather than continuing to postpone planned increases.

The cost of fuel, a significant constituent of which is tax in the form of VAT and duty, is jeopardising the future sustainability of Scotland’s primary production and transport sectors at the same time as exacerbating food price inflation, which is affecting every household in the country.

Recently, NFUS has called for farmers to receive a full tax rebate on red diesel – as available to the fishing sector – as well as the introduction of a fuel duty regulator to address the unexpected and uncontrollable fluctuations in oil prices.

The Union also supports the uptake of EU legislation, which would allow the Government to reduce fuel duty in more remote areas and recognise the additional fuel costs experienced in these areas.

NFU Scotland vice-president, Stewart Wood, said: “We all know that the most significant cause of recent fuel price rises has been the soaring price of oil on world markets.

“Nevertheless, we are all also aware of the increasing revenue to HM Treasury from fuel and North Sea oil taxation.

“In these unprecedented times the UK government must act to alleviate the fuel tax burden facing the farming and food industry and everyone who lives and works in rural areas.

“If Treasury is to make a meaningful gesture, it must cut fuel tax duty rather than simply postponing planned increases.

“It has it within its gift to alleviate the pressure on every household, particularly rural ones for whom alternative transport is not an option. But simply delaying a two pence a litre duty rise is not enough.

“Despite this week’s inflation figures, there remains a lack of recognition within the UK government of the extent to which the fuel price issue has an impact upon the cost of food production. Food prices are historically low but they are now rising and the cost of fuel is a contributing factor to this trend.

“If the government wanted to provide farmers with a clear steer on its intentions for food production in this country, providing farmers with a full rebate on red diesel would put us on a level playing field with our counterparts in the fishing industry and help to manage the cost of food production.

“A fuel price regulator would also provide a mechanism to address unexpected peaks in oil prices. In addition, using EU legislation to reduce duty in more remote areas would be significant to individuals but come at very little cost to the Exchequer because of the low volumes involved.”