EU says no to renewal of derogation on red diesel

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The Treasury Minister, John Healey, confirmed today that the European Commission has rejected the UK Government’s application to renew the UK’s derogation on red diesel for private recreational boaters.

This means that as of 1 January 2007 all diesel used for private boating purposes is likely to be taxable at the same rate as road diesel, effectively doubling the existing price of red diesel price to around £1 per litre. However the EC does leave the UK the option of creating a separate taxation rate for marine leisure fuel, which could see marine leisure diesel costs raised, but not doubled. Whether or not the Government would be interested in such a measure is not known now.

The decision is a huge blow to British based boaters and a direct snub to both the UK government and the boating community, all of whom have lobbied hard to extend the current derogation.

The European Commission’s terse statement rejects the applications submitted by the UK as well as those from Malta and Belgium. The reason given is that the arguments put forward by the UK government have not changed significantly since the last time the derogation was extended in 1996 and that we should have used the intervening time to gradually ramp up fuel taxation.

Boating bodies have reacted swiftly to the news. “This decision is naturally very disappointing. Despite the best efforts of the campaign leaders, RYA and British Marine Federation (BMF), and the efforts of the UK Government, it appears that the Commission was intent on removing the derogation at any cost and has dismissed the consequences to the UK marine industry and the private recreational boater”

The BMF’s executive director Howard Pridding was equally forthright claiming the decision “will have a huge adverse impact on the UK marine industry.”

The one small consolation is that it may take some time for the British government to pass the primary legislation needed to affect the changes and for fuel network itself to adapt. In the meantime it is likely that red diesel will remain available to private boaters beyond the formal cut off date and possibly even into 2008.

See our February issue, published 9 January, for a full report on the news plus analysis and reaction from the industry.