Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what support the Government is providing to businesses to assist with the costs associated with moving from red diesel to other fuel sources.

The Chancellor confirmed at Spring Budget 2021 that the Government will remove the entitlement to use red diesel for most uses from April 2022, other than for defined agricultural purposes and a limited number of other uses. This will help to ensure fairness between the different users of diesel fuels and that the tax system incentivises the development and adoption of greener alternative technologies.

To support the development of alternatives that affected businesses can switch to, the Government is at least doubling the funding provided for energy innovation through the £1 billion Net Zero Innovation Portfolio. From that portfolio, the Government announced the £40 million Red Diesel Replacement Competition, which will provide grant funding for projects that develop and demonstrate lower carbon, lower cost alternatives to red diesel for the construction, and mining and quarrying sectors.

As announced at Spring Budget 2021, from 1 April 2021 until 31 March 2023, companies can also claim 130% first-year capital allowances on qualifying plant and machinery investments.

In recognition of the unique circumstances that are currently pushing up fuel prices to unprecedented levels, the Government announced at the Spring Statement that it is cutting fuel duty on petrol and diesel by 5 pence per litre for a period of 12 months. This is a significant tax cut that will deliver considerable savings to businesses over the next year, including those that use diesel, and is the first time in over a decade that the main rates of petrol and diesel have been cut.