Blue chips warn fuel tax will boost inflation

THE COUNTRY'S largest blue chip companies are predicting "serious consequences" for inflation if the Government persists with a plan to increase fuel tax every year.

Companies such as Marks & Spencer, ICI and BP are funding a pounds 1m Freight Transport Association (FTA) campaign launched yesterday to persuade the Government to drop the "fuel duty escalator" and to reduce vehicle excise tax.

The association, whose members operate 200,000 lorries accounting for nearly half the British fleet, poured scorn on ministers' assertions that the policy would reduce harmful exhaust emissions.

Increasing costs for British operators simply meant that continental hauliers took their place, many of whom operated vehicles which did not meet UK standards on exhaust emissions and which used "dirty" diesel still available in Europe, said David Green, director-general of the association.

"The idea that major UK companies need to be hit with punitive fuel taxes to encourage them to be efficient and avoid unnecessary lorry journeys is silly and insulting," Mr Green said.

The yearly rises in fuel costs planned by the Government would mean transport costs in Britain by 2002 would be 20 per cent higher than in continental Europe, he argued. "The policy should be scrapped as soon as possible."

The conservative FTA refused to back protests this summer by truckers which caused congestion around the M25 and in central London. However, association officials point out that it is the first time it has become involved in such a high-profile political campaign.

Richard Turner, deputy director-general of the association, said that if the policy continued after 2000 it would cost each vehicle operator a minimum of pounds 800 a year per vehicle and pounds 1,500 a year for the heaviest vehicles. Foreign hauliers were at a significant advantage when competing for work in Britain, having purchased fuel on the Continent for less than half the price of fuel in Britain, he said.

Wincanton Logistics, part of Unigate and one of the largest logistics companies in Britain, said the rise in diesel tax in the March Budget had increased its fuel bill by more than pounds 4m and the subsequent surge in oil prices had added another pounds 3m.

The association's initiative was immediately backed by the Conservatives - the party which introduced the annual fuel price increases. Bernard Jenkin, shadow transport minister, said the Tories now intended to withdraw the yearly rises when they were back in power.