Farming News - Budget : Red diesel tax relief to remain for agriculture

Budget : Red diesel tax relief to remain for agriculture

11 Mar 2020
Frontdesk / Finance


The Chancellor Rishi Sunak has listened to the agricultural industry by retaining red diesel tax relief for the agricultural industry. This means relieved farmers will retain a duty of 11.1p per litre compared with 57.7p for standard diesel.

RABDF Chairman Peter Alvis said: “We are delighted the Government has listened to industry calls to keep the subsidy on red diesel in place for the agricultural sector.

“Although agriculture only accounts for 7% of the total lower rate fuel use in the UK, the knock-on effects would have been felt right throughout the supply chain- including increased costs for consumers.”

Mr Alvis also welcomed the 2p/litre drop in red diesel prices seen at the start of the week. He said: “This week could have painted a very different picture for British dairy farming, but thankfully, the levy coupled with a drop in prices is the best outcome we could have wished for.”

Rebecca Davidson, Rural Affairs Specialist at NFU Mutual said: “Relief is being felt across the farming sector that the Chancellor did not remove the Red Diesel concession for agriculture as such a move would have been a major threat to our farmers. They are already facing a series of complicated and costly challenges to increase food production post-BREXIT while at the same time changing the way they farm and become carbon neutral by 2040.

“Tractors being produced today have sophisticated engines which produce much lower emissions than older models. However, they cost a lot of money - and increasing farmers' costs by reducing the red diesel rebate on duty at the same time as the Basic Payment Scheme being cut would have  limited farmers' ability to invest in new, safer, and more environmentally-friendly equipment.

“We welcome the investment in alternative fuels and hope that funding for innovation will be directed toward Agri-tech to help agriculture achieve environmental goals.”


In other measures 120 million pounds has been made available for flood hit areas. Total investment in flood defences to be doubled to £5.2bn over next five years.

Emma Howard Boyd, Chair of the Environment Agency, said:  "Flooding is an awful experience for people to go through and it is damaging to the economy. People want to be warned and protected, and where that isn’t possible they want to be able to get back to normal quickly.

“Today’s £5.2 billion for flood protection is hugely significant to the resilience of the UK. As the climate emergency increases flood risk, this funding will allow us to invest in infrastructure and nature-based solutions so that otherwise vulnerable communities can both have better protection against flooding and be more resilient when it happens, so that they can continue to thrive”

Chair of the EFRA Select Committee, Neil Parish MP, said:'I’m glad more money has been invested in flooding. It's only right that spending increases in line with more frequent and severe weather. But this is just the first step. Vital questions remain about how funds will be allocated. Through our inquiry, the EFRA Committee will be leaving no stone unturned in assessing whether current arrangements for flood management are fit for purpose. We must learn lessons from this winter's terrible storms, and shape future policies to ensure homes and businesses are protected from flood damage.'


Rebecca Davidson, Rural Affairs Specialist at NFU Mutual, said: “We welcome the Chancellor’s £2m fund to fight fly-tipping, which is a serious threat to the countryside, with farmers too often left to deal with the aftermath of illegal dumping themselves.

“Fly-tipping, like other forms of rural crime, is increasingly being carried out by organised criminal gangs and funding for a digital waste tracking system will help to investigate the increasing problem of waste crime.”


CLA President Mark Bridgeman said; "Rumours that Agricultural Property Relief, Business Property Relief might be scrapped caused significant concern among farmers, and the CLA lobbied the Treasury, DEFRA, MPs and officials intensively as a result. However, the fact we had to make the argument in the first place shows we must continue to fight for family businesses.”


The CLA said:“Technology can help ease some of the biggest challenges we face, not least in feeding the world, mitigating climate change and the loss of biodiversity. Yet Government currently spends far too little on Research and Development in the agri-tech sector. This needs to change.  The Chancellor’s announcement that R&D spend will increase to £22bn is welcome – so long as an appropriate share of it is used to ensure the rural economy reaches its economic and environmental potential.

At present, unincorporated rural businesses do not qualify for R&D tax relief, which puts a break on the development of the rural economy. This needs to change if the Chancellor is serious about ensuring R&D funding can best be distributed across the country to help level up every region and nation of the country.


£5bn will be set aside for 4G investment in rural Britain.

A £640m "nature for climate fund" has been set aside to protect and expand natural habitats, including 30,000 hectares of new trees.

NFU President Minette Batters said "We look forward to seeing more detail on the new £640 million nature for climate fund and what role is seen for farming and food production within this, alongside playing its role for the environment."


Rebecca Davidson, Rural Affairs Specialist at NFU Mutual, said: “For too long there has been a disparity between funding for national and local roads. While we welcome the investment of £2.5bn to fix potholes and resurface roads over five years, we will be looking very carefully at the detail to ensure funding is directed across the rural road network which is essential for rural businesses and gives people in the countryside vital access to schools, healthcare and other services. In short, rural roads are the arteries of the countryside and if they are unusable it will have serious implications for country people.”