Whether the UK is in a state of hopeful renewal or cost of living crisis very much depends on who you ask, we seem to be living in contradictory times. Similarly, as we head toward the Budget, the Chancellor is faced with a range of options, but arguably having to try and solve a range of countervailing problems at the same time. What should John Healey do for the good of transport and logistics, and what do other sector stakeholders have to say about it?
Change agenda v business as usual
The government’s radical devolution agenda looks to rewire, reindustrialise and revitalise a post-GFC, post-Brexit, post-Covid nation, but meanwhile external shocks and factors outside the immediate UK control are in need of urgent attention.
Year-on-year fuel costs have risen 23%, and research from Lambert Smith Hampton has found typical logistics firms have seen a 44% rise in operating costs since the pandemic. More than 2,000 haulage firms have gone into administration between 2021 and 2025, and the Road Haulage Association is both trying to provide assistance to members as well as lobbying for change.
It is thought the Chancellor will extend the existing 5p per litre duty cut introduced in 2022, which is due to end on 31 December, and there have been calls (for example, by Sir Ed Davey) for an additional 10p duty cut. However, each 5p reduction costs the Exchequer circa £2.4 billion a year at a time when the PSBR is on the rise and gilt yields are at levels not seen for 30 years. Put plainly, it’s hard to be generous when the cupboards are bare, even if the commercial haulage fleet is still 98.8% diesel powered (although EV accounts for 11% of new vans).
Another possible partial remedy suggested by the Liberal Democrats is for temporary, reviewable relief for commercial road freight, buses and coaches, and to target additional help at smaller operators that cannot readily pass fuel surcharges through contracts.
Real world problems
Fuel is not the only sector pain point. Add to that rising utility bills, high business rates, cost push inflation, geopolitical shocks, skills and labour shortages, supply chain difficulties and a rapidly changing regulatory and political environment and it’s no surprise that sector voices have desired greater certainty.
Logistics UK recently presented their priorities to the Treasury, looking to create a more viable and stable fiscal environment, especially during a time of potentially seismic political change. Looking for measures to control costs and encourage investment and growth, they are not only in favour of Duty freezes, but also Business Rates reform and T&L to be included in BICS, the government’s new manufacturing energy tariff exemption scheme.
Applying ‘Burnhamism’ to haulage
A feature of Andy Burnham’s public transport strategies (pre and post becoming Prime Minister) has been to cap bus fares, on the basis that access is central to the delivery of connectivity, devolution and ‘good growth’. Arguably, if fiscal headroom allows, the same logic ‘could’ be applied to freight, part of the commitment to recognise the sector as an essential part of economic infrastructure.
There could be a longer-term partial solution in giving regional leaders the power to offer multi-year settlements to transport companies within their jurisdiction, but with significant aspects of the devolution agenda currently subject to judicial review and myriad demands on localised budgets this would be more of a hope than an expectation.
Costing the Chancellor’s choices
According to Logistics UK, raising the Business Rate multiplier on large warehouses (RV >= than £500,000) would raise an extra £270 million over the next three years, which seems a relatively small sum in order to avoid incurring the ire of a key sub-sector. However, there is a fiscal price to pay for every concession - Iceland CEO and ex-government advisor Richard Walker said the Prime Minister “had acted like Father Christmas so far” and that British businesses aren't a “piggy bank” to be raided. Such are the delicate acts of multiple plate spinning required, especially in the run-up to Budget Day.
Here’s a summary of other possible policy options, alongside estimated costing (per annum unless stated):
Measure | Estimated cost |
Continue the existing 5p fuel-duty cut for everyone for a further year | £2.4 to £3.5 billion |
Phase the 5p increase more slowly, for example 1p each year over five years | £1.5 to £2.5 billion |
Replace the universal cut with an Essential User Rebate for HGVs, coaches and qualifying vans | £500 to £900 million |
Extend the £1 HGV Vehicle Excise Duty rate for another 12 months | £200 to £400 million |
Freeze the HGV Road User Levy for 2027/28 | £30 to £75 million |
Add a dedicated grid-connection fund to the Depot Charging Scheme | £300 to £500 million over three years |
Increase the Zero Emission Truck Grant for SMEs | £150 to £300 million over three years |
Introduce a time-limited low-carbon fuel duty rebate | £150 to £350 million |
Restore the proposed reduction in the third Road Investment Strategy | £428 million |
Freight-focused local road maintenance fund | £250 million |
Secure lorry parking and driver facilities programme | £100m over three years (£52.5 million already secured) |
Logistics skills and apprenticeship package | £100m to £200m over three years |
Restart or accelerate the Single Trade Window and border digitisation | initial £50 to £150 million |
Regional Freight and Logistics Devolution Fund | £500m over three years |
Rail freight growth and modal-shift package | £200m to £400m over three years |
Planning and regulatory acceleration package | £25m to £50m over three years |
As you can see there are myriad potential demands – all of which seem equally worthy of support in order to reconfigure the network after years of relative paucity of investment, but even saying yes to a selection of these choices adds up to a multi-billion pound package, and that’s a time when increasing government borrowing could be a very hazardous occupation.
Time will tell what John Healey - ably advised by Keir Mather – will decide, but one thing is certain. The proposed transformation of UK T&L infrastructure will not come cheap, and maybe it’s a question of no pain, no gain in terms of investing for a better-connected tomorrow.