NFB urges Chancellor to restore construction's red diesel rebate at 28 October Budget

The National Federation of Builders (NFB) has called on Chancellor John Healey to use the 28 October Budget to reinstate the construction industry's entitlement to red diesel, pointing to a US executive order on dyed fuel signed on 5 October.

Richard Beresford, chief executive of the NFB, said the Chancellor should look at what is happening in the US and do something similar. "This 2022 Conservative government policy is a tax on growth and needs reversing," he said.

The federation said the removal of construction's and haulage's access to red diesel added about 73p to the price of every litre of fuel, and that recent disruption to international supplies, including damage to refineries in the Middle East and Russia and restrictions on Chinese fuel exports, had made costs worse for UK industries that rely on diesel-powered machinery.

Beresford said the NFB had warned the previous government that removing the rebate would increase fuel theft, hit rural projects without access to electricity and expose the industry to price volatility and higher plant hire costs.

"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," he said.

The US order

The NFB said President Donald Trump's order temporarily permits red-dyed diesel to be bought and used on US public highways, and described it as running for 90 days.

The White House order itself, dated 5 October 2026, does not give a number of days. It directs that the Internal Revenue Service will not impose penalties under the dyed-fuel provisions of the US tax code when dyed diesel is sold for use or used on the highway, and frames the measure as deferral of federal tax and penalty relief rather than a repeal. Its stated justification is that restricted global diesel supply has driven up prices and that farmers and truckers have been hit especially hard; it does not mention construction.

The NFB cited American Automobile Association figures for the US national average diesel price.

Date	US average diesel price ($ per gallon)
Before the Iran war	3.76
22 September 2026 (record)	6.53
5 October 2026	6.32

Background to the UK policy

The NFB describes the rebate removal as a 2022 Conservative government policy. According to the HM Revenue & Customs and HM Treasury policy paper on GOV.UK, the government announced the change at Budget 2020 as a climate change and air quality measure, and it took effect in April 2022. The paper said red diesel users were responsible for nearly 14 million tonnes of carbon dioxide a year.

From April 2022, entitlement was restricted to listed qualifying purposes, including agriculture, horticulture, fish farming and forestry, rail, non-commercial heating, sports clubs and golf courses, marine craft and travelling fairs.

The Treasury's impact note scored the removal of relief for sectors other than rail, home heating and agriculture as raising about £1.4bn a year from 2022-23, according to Table 2.2 of Budget 2021, with exemptions costing £80m to £110m a year.

The NFB said the previous government expected the policy to speed up low and zero carbon plant innovation, but that the technology, particularly at scale, remains in its infancy.

What happens next

The government has already acted on fuel duty this year. HMRC said that on 20 May 2026 it extended the 5p a litre fuel duty cut to 31 December 2026 and introduced an additional temporary 3.7p a litre cut in the rebated rate for red diesel from 15 June to 31 December 2026, in response to elevated fuel prices arising from the Iran war.

The legislative default is for rates to return to their previous trajectory from 1 January 2027, with the government to confirm final rates at Budget 2026.

HM Treasury confirmed in a letter to the Treasury Select Committee, published on 31 July 2026, that the Budget will be held on 28 October 2026. Healey was appointed Chancellor of the Exchequer on 20 July 2026.