Chancellor should reinstate red diesel rebate for construction
On 5 October 2026, President Donald Trump signed an executive order temporarily permitting red-dyed diesel to be purchased and used on public highways for a period of 90 days.
The decision follows a substantial increase in US diesel costs. According to figures from the American Automobile Association (AAA), the national average rose from $3.76 per gallon before the Iran war to a record $6.53 on 22 September 2026. The average stood at $6.32 per gallon on 5 October.
Richard Beresford, chief executive of the National Federation of Builders (NFB), said: “chancellor Heeley should look at what is happening in the US and use his budget to do something similar by reintroducing the construction industries access to red diesel. This 2022 Conservative government policy is a tax on growth and needs reversing.’’
Red diesel is chemically the same as conventional diesel but dyed so that it can be distinguished from the higher rate of white diesel tax. To reduce the carbon emissions within the construction and haulage sectors, the Conservative government removed these sectors’ access to red diesel, adding around 73p more the price of every litre of the fuel.
The Conservative government believed that their strategy would see low and zero carbon plant machinery innovation grow quickly but unfortunately this technology, particularly at scale, remains in its technological infancy.
Recent disruption to international fuel supplies, including damage to refineries in the Middle East and Russia and restrictions on Chinese fuel exports have exacerbated the fuel cost challenge for UK industries reliant on diesel-powered machinery.
Beresford continued: “We warned the Conservative government that their flawed decision and reasoning to remove the red diesel rebate would see fuel theft increase, disproportionately impact rural projects without access to electricity and expose industry to fuel price volatility and higher costs when hiring plant machinery. They dismissed our concerns.
Four years on we have record high fuel theft and construction is now paying more than 300% more for diesel while spending considerable amounts of money to secure fuel on site or absorbing the costs of theft. To cap it all off, despite millions of taxpayer pounds going on grants for zero carbon innovation, zero carbon plant machinery remains as rare as hen’s teeth.”