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As I predicted UK marine diesel, more commonly known as red diesel, is going to soar in price this summer. What will happend with the Norwegian prices is totally unknown, but it is an open question of how long Norwegian politicians, in particular Norwegian socialist and devoted environmental politicians, can keep pleasure boaters pollute with 30 percent tax-cut.
£216 per annum
Ancasta, the yacht broking company, have compiled data on the useage of the fuel made by sailors and motorboat users:
The average boat engine has 60 hours use per annum.
An average 38 ft twin engined motorboat runs on full speed at 45 litres per engine, using 90 litres per hour for both engines.
If red diesel is doubled, with VAT, the added cost for an average use (60 hours per year) is £2,601. For a sailboat, it’s nearer £216 per annum.
Ancasta has produced its engine usage figures derived from over 22 years of experience of brokerage. Sales Director Ashley Overton says “We always calculate that if a boat is five years old, it will have 500 or less engine hours. In reality, looking at our records, the figure is nearer 60 hours per annum.”
“Looking at the figures as a worst case,” continues Ashley, “I don’t think anyone is not going to buy or use their dream boat, which could have cost around £150,000, because of an increase of around £2,000 per annum.”
In addition, Ancasta points out that as well as a proposed lengthy transition period before the tax on red diesel is increased, it is not even clear at this stage what level of tax will be imposed. Most of the data issued has been looking at the worst case scenario which effectively doubles the price. Nevertheless, the European Commission has left an option for tax on marine leisure fuel to be increased, but not necessarily doubled.
3 months after the announcement that red diesel prices are likely to double, the UK Government is still grappling with exactly what the European Commission’s ruling means.
The message seems to have been understood that the marine industry is going to need a lengthy transition period to adapt to the price hike, and the British Marine Federation have requested a statement from Revenue and Customs at the London Boat Show (5-14 Jan) to this effect.
But exactly what that price hike will be is what is on most boat owners’ minds.
While the European Commission’s abrupt decision on 6 December technically only imposes an extra 12p per litre (ppl) on the existing price of diesel, bringing the cost up to around 75ppl, there is an increasing feeling that the Government may impose the full 48.35p road duty rates that the marine industry always feared.
£1 per litre
This would see diesel prices rise to more than £1 per litre.
From 1 January 2007, each litre of fuel used for leisure has to carry the minimum rate of EU duty of 21p. Fishermen and other commercial users will continue to use red diesel at its existing tax of 6.44p.
A few months ago Norwegian motorboat-cruisers celebrated a political victory. Somehow they persuaded the Norwegian Minister of Commerce, socialist Kristin Halvorsen, not to raise the price and tax of red-diesel. For practical and bureaucratic reasons Mrs. Halvorsen decided to let the diesel-consumers go on pollut at 30 % discount.
This might prove to be a very short lived victory. The EU are blown in the direction of extinguishing red-diesel and let us all buy normal white diesel, according to Motorboat and Yachting. The end of story is that Red diesel quite soon is likely to double in price in the EU. And I predict that Norway will not be alone subsidising pleasure boat-pollution.
Sorry guys – but my heart does not bleed for the heavy diesel consumers. On the contrary I am happy for the fish, the fresh winds, the marine environment and the Earth.There is no reason I can think of why it should be cheaper to ruin the marine environment than polluting the cities.
According to Motorboat and Yachting this will come;
– as a blow for thousands of owners hoping that the Government would only impose the minimum duty required by the European Commission and create a ‘third level’ of tax specifically for leisure boaters.
Instead, it now looks likely that the worst case scenario will become reality: that the price of waterside diesel will rise to more than £1 per litre.
British Marine Federation chief executive Howard Pridding, who has been working closely with HM Revenue and Customs over the manner of the price increase, spoke to MBY during the London Boat Show.
He has been told that the Government is not keen on the idea of introducing a new level of taxation for leisure boaters.
The Government simply believes such a measure, which would bring the price of red diesel to around 75p per litre, too complicated to be considered seriously.
More likely, Mr Pridding says, is that boaters will have to buy ULSD, or white diesel, as it is sold at the roadside. That would mean red diesel would double in price from around 55p per litre, to more than £1 per litre.
The price increase has been brought about by a European Commission decision in December to refuse to renew a derogation allowing UK leisure boaters the right to use low-duty red diesel.
In the confusion following the announcement, some radio news programmes and Channel 4 television predicted that the EC decision would see red diesel gone by the middle of this year.
Mr Pridding says this is wrong. The new pricing structure would be impossible to introduce before June 2007, and far more likely is that the matter will still not be finalised come 2008.
Officials from HM Revenue and Customs refuse to rule out the loss of red diesel this year, but they give the impression that it is unlikely, according to Mr Pridding.
The BMF chief executive, who has worked tirelessly with the Royal Yachting Association’s Neil Northmore to secure the future of red diesel for the past two years, also shed light on how the bureaucratic process would work.
Firstly, officials will work out a draft proposal for how the new price could be introduced.
Then, the proposal will be put out to public consultation, with private boaters and all across the marine industry invited to comment.
Once the responses have been taken into account and a final measure drawn up, it will be announced in Parliament, probably in a pre-budget report.
Finally, the new law must be passed by the Commons and Lords.
Mr Pridding says the impression he has is that the UK Government will take time to get it right, but he points out that they cannot be seen to be dragging their feet. If the European Commission feel the UK is deliberately stringing the matter out, they can start infraction procedures – something which the UK Government would not allow to happen.