Dismay as bulk fuel buyers are excluded from 5p duty rebate scheme

Businesses and public bodies which buy their fuel in bulk have been excluded from the long-awaited 5p duty derogation scheme which is officially to be introduced in Shetland and other rural areas from 1st March.

The decision to leave out haulage, bus and taxi firms – effectively any organisation that does not buy fuel from a forecourt – leaves them at a disadvantage compared with private drivers who will receive some small recompense as prices rise once again due to the dispute between the West and Iran over access to the Straits of Hormuz.

Even Shetland Islands Council, which spent more than £4 million on fuel in 2010/11 to keep its huge fleet of vehicles and ferries running, has been affected by the development.

The exclusion has been highlighted by bus operator Douglas Halcrow, of J&DS Halcrow in Cunningsburgh.

He contacted isles MP Alistair Carmichael after discovering by chance his firm would not qualify for the rebate scheme while ordering fuel for his fleet of three buses, which the company uses to operate school runs.

Not qualifying for the reduction, he said, could cost his business an extra £1,500 a year.

The business, which employes three people full-time, already spends around £30,000 on fuel annually.

“I have been seeking clarification from [the] government regarding the fuel duty derogation, and they now have confirmed that it only applies to petrol stations. We along with many island businesses buy and store fuel bulk for our own use.

“This government decision means that we are unable to benefit from the rebate. Taken across the whole islands this will result in a loss of many thousands of pounds each year to business and the public.”

He added: “I was ordering fuel one day and was asking the boy at Scottish Fuels how the rebate would work for businesses and he said he thought it didn’t work for them, so I got on to Alistair Carmichael.

“We’re not a massive business but we’ll probably spend on an average year £25,000 to £30,000 on fuel. At the moment we have three bus contracts running school kids and we have old lorries that we use to do work of our own, doing peat deliveries.

“We are by no means a big operator, but by not getting it, it’s probably £1,400 to £1,500 a year that it would have been worth to us, if it was available.

“I’m frustrated by the whole thing because with government schemes they get it so complicated. You don’t see a lot of businesses filling up lorries at the local pumps.

“I think the fuel rebate scheme should include all fuel that’s being sold by distributors. Why put a rebate on half the fuel that’s coming out of Scottish Fuels’ door?  

“You could argue we could buy it at the pump but we’re based in Cunningsburgh, and we would have to go to Lerwick or Dunrossness to fill. It’s okay if you’ve got a vehicle that’s passing by, but if you’ve got to make a special trip it’s 10 miles out.

“It’s how the government operate. They make something so simple so complicated.”

Chairman of the Shetland branch of the Federation of Small Businesses Jimmy Smith said companies that bought fuel in bulk still received a discount for purchasing larger quantities. But he said the higher prices charged here meant business customers in Shetland were still paying “over the odds” compared with bulk buyers down south.

“From a small business’s point of view, I’m really pretty disappointed, because a lot of the firms up here bulk buy.”

Chairman of the council’s transport body ZetTrans Allan Wishart said excluding businesses such as haulage firms from the rebate would be to the detriment of the isles.

“If bulk buyers aren’t included in the scheme I would be very much opposed to that, because the whole cost of living in Shetland is mainly related to transport.  

“Everything we use is imported and delivered in the islands. If the derogation is not applied to haulage firms, for instance, it will have a knock-on effect on consumers prices in Shetland.”

The problem of acquiring fuel is something councillors are due to consider next week.

Tuesday’s meeting of the services committee will hear the bulk purchase of fuel at the SIC does not attract the level of discounts in the same way other supplies, such as furniture, can. The council is awaiting feedback on the outcome of a procurement exercise carried out last year for the supply of liquid fuel to all Scottish bodies.

The decision will determine future options for fuel supplies to the council.

Mr Carmichael said he was disappointed bulk buyers had been left out. He hoped the policy could be changed in time for the derogation scheme’s official introduction next month.

“As things stand I got a letter from the Treasury saying that the scheme, as it is set up, is for retailers to deliver any fuel duty rebate.

“That’s not going to work for hauliers who are buying in bulk. I’m due to speak to Treasury ministers in the next couple of days to see if we can make the scheme work for hauliers because it is important it should do so.

“The cost of fuel is one of the biggest issues facing local hauliers, and these are costs that then have to be passed on to local consumers inevitably. To not find a way of including them in the scheme would be, I think, a mistake and I am hopeful I will be able to work with Treasury officials and ministers to find a way to sort it for them.

“It is important to remember that this is a pilot scheme. It is completely new, and the whole point of having a pilot scheme is to have these issues like this thrown up and hopefully, then, to address them.

“It’s not something that has come down in tablets of stone. It’s a scheme officials are working on, and working out as they go through, so I am hoping there will be sufficient flexibility built into the system.”