There seems to be something about the combination of virtuous causes and politics which causes the head and heart to part company. How else can one explain the oddity of the present state of affairs over the government’s tax treatment of diesel?
On the one hand, we have a laudable drive (no pun intended) towards a greener transport policy with the introduction of a new CO2-emissions-based tax regime for company cars. On the other, we have a 3% penal levy on diesel-engined company cars, when modern diesel fuels in general, and super diesel in particular (also known as ultra-low sulphur diesel, or ULSD) have vastly lower emissions than petrol. As the Americans say, “Go figure!” (rough Shakespearian translation, “Is this not passing strange?”)
One organisation that has become extremely exercised over the issue is the Society of Motor Manufacturers and Traders (SMMT). Christopher Macgowan, chief executive of the SMMT, didn’t mince his words at a recent press briefing. “It is just plain wrong to discriminate against diesel given the potential environmental benefits of ULSD fuel, the rapid technological development of low emission diesel engines and the improved fuel efficiency that they offer,” he said.
Macgowan went on to say that the SMMT was not holding a torch for diesel (a dangerous practice, anyway) but rather, that it wanted a level playing field for all fuels, where their respective benefits were made plain enough for consumers to have a free choice. That may be his position, but it is not the position of many fleet managers, just about all of whom are under an obligation to get the best fuel efficiency figures, in terms of miles per gallon, that they can. Diesel wins here hands down. So fleet managers and beyond them, FDs, tend to get irritated when their path to the more mileage efficient fuel is blocked by a seemingly irrational 3% penalty tariff.
Nigel Trotman is Central Services Manager with Whitbread Plc, which has around 1,700 vehicles in its fleet. He puts the point plainly. “If our drivers get more miles per gallon our fuel costs come down. With diesel we can get as much as 60mpg. With petrol it drops to the low thirties and below. I am extremely unhappy with the 3% levy. I was hoping for a bit more sense in the Budget, but all we have to go on is the vague suggestion that when cars meet the Euro 4 emissions standard, the government may consider removing the levy. That is fine, but right now there are no Euro 4 compliant cars,” he says.
It may be worth adding that, according to the SMMT, the UK’s best selling diesel car is the Peugot 406, and it emits 26% less CO2 and is around 50% more fuel efficient than its petrol equivalent. The Land Rover Discovery Series II diesel emits 38% less CO2 than its petrol equivalent, costs less to buy and less to run, yet will end up paying more VED and company car tax.
Trotman is annoyed that the levy, as he sees it, prevents Whitbread from taking action that would benefit the environment. “Diesel is cleaner on the CO2 emission scale and as a company we are keen to do our bit for the environment. The levy does not help here. It pushes us in entirely the wrong direction,” he says. And the muddled regime doesn’t help either.
“Right now, the CO2 emissions benefit-in-kind tax works in favour of diesel, but the 3% levy works against it. We understand that the government is worried about the pollutant effects of particulates in diesel, but this is an out-of-date story,” he says.
Trotman cites a recent Peugot demonstration for civil servants. The manufacturer took its new diesel-engined 607 car, which has a particulate trap, and compared tail-pipe emissions against a petrol driven equivalent. The test was highly scientific. It involved putting a white handkerchief over the tail-pipe. The hanky over the diesel exhaust was scarcely soiled, the one over the petrol exhaust was blackened. So much for diesel particulates. The civil servants were impressed, apparently, but there is no word as to whether any of them belonged to the Treasury.
Euro 4 and the Euro compliance issue merits a short note. As far back as 1988 the EC and the European Automobile Manufacturers Association agreed to a series of milestones aimed at reducing the average fuel consumption of new cars sold in the EU by 25% between 1995 and 2008, with a further target of an additional 35% reduction on the 1995 base average, to be achieved between 2005 and 2010. Euro 4 is the next incarnation of this consumption milestone.
To most people – including, it seems, politicians – the only difference between diesel and petrol is the colour coding at the forecourt pump. This is why DoT and Treasury officials with an eye on the good of the country can’t seem to grasp the concept that all diesels are not identical, and neither are all diesel engines. In fact a diesel engine – any diesel engine – is not particularly fussy about what it runs on, so long as what you give it is combustible. At a pinch you could probably get a few miles down the road out of feeding it coal dust, if you were so minded.
The diesel engine’s inventor, Rudolph Diesel, developed his compression fired internal combustion engine during the 1890s, using 23-to-one compression ratios to heat the air in the engine’s cylinders to the point where it ignited the fuel on contact. Petrol engines use a nine-to-one ratio and require a spark to ignite the fuel. One of the immediate paybacks of a high compression ratio is high energy efficiency; a significant percentage more of the fuel is converted into useful energy in a diesel engine than in its petrol equivalent (30% approximately, by comparison with 20% to 25% of the fuel in a petrol engine).
A second payback is that, if you want to wind up compression ratios, you have to build a heavier, more durable engine. The consequence is that diesel engines, although bigger and bulkier, last much longer – as many as three to four times longer – than petrol engines.
Now comes the point the politicians appear to have missed, namely that the approach to diesel fuels has changed dramatically over time. In the early days of the diesel engine there was no such thing as diesel fuel – or, rather, there were many different things (one of the favourites being a mixture of coal dust and vegetable oil). Over time, the oil companies realised that diesel engines require a mix of light, easily combustible fuel components to get the engine started and warmed up, and heavier, slower burning components to crank up the miles per gallon. Unfortunately, the diesel they came up with produced large quantities of particulate pollutants (mainly soot and other nasties), and so the oil companies developed ULSD, which has been around since at least 1994. Sulphur is used in diesel to improve its flow (its “lubricity”). A ULSD fuel, such as Shell’s Pura Diesel, contains no more than 50 parts per million of sulphur, one-tenth of the sulphur in conventional diesels.
If anything in this account has made sense, it should be clear that any diesel engine can run the new low sulphur “super diesel” any time a driver chooses to fill up with it. There are no modifications necessary. However, it takes four to tango in diesel land. Drivers have to switch to the newer fuels. Manufacturers can improve matters by adding particulate traps to exhausts and by designing engines that turn more fuel into energy and less into tar. Oil companies can do ever smarter things with diesel mixes.
And the politicians, for their part, need to read up on the subject just a touch, instead of wandering around chanting, “Particulates out! Levy in!”
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