Rachel Reeves should end the "almost perverse" 15-year freeze on the level of UK fuel duty as it hands truckers a growing cost advantage over more environmentally friendly rail, one of the largest rail freight operators has said.
John Smith, chief executive of GB Railfreight, was speaking as the chancellor prepares for an Autumn Budget that is expected to maintain the freeze, begun by then Conservative chancellor George Osborne in 2011.
Smith, whose company is the sector's second biggest by volume of freight moved, presented fuel duty as one of two critical issues for the industry.
He also expressed worry over whether operators would retain the same rights to use rail tracks after nearly all passenger rail services and the rail network owner are in a single, nationalised organisation.
Smith told the FT the continued freeze in the duty -- which has not been raised since 2010 and was further cut by 5p a litre in 2022 -- conflicted with the government's desire to transfer freight movements from polluting trucks to far cleaner rail.
Higher fuel duty would also provide badly needed extra revenue for the government, he added. Before the freeze, duty used to be raised annually at least in line with inflation.
"It almost seems perverse that a cash generator for government would not be exploited in order to achieve the growth in rail freight that they say they want," Smith said in an interview. "It just seems extremely odd for us."
Smith's views are widely shared in rail freight, which competes with trucks for its main source of traffic, movements of shipping containers.
The industry previously relied on the now nearly disappeared market in moving power station coal, which was almost impossible to move by road in the required quantities.
A report compiled for the rail freight industry this year calculated that rail freight's energy costs rose 12 percentage points in the decade to 2024 while those for road freight fell eight points, largely because of the fuel duty freeze.
Ministers have presented the fuel duty freeze as a way to control living costs for working people, with Reeves vowing in the 2024 October Budget that there would "be no higher taxes at the petrol pumps next year".
But Smith warned that the measure was "making it harder and harder to compete".
On network access, Smith said it was unclear what powers the Office of Rail and Road, the regulator for Britain's railways, would retain under pending legislation to create Great British Railways.
The new public body, due to launch in 2027, will take in both infrastructure owner Network Rail and all franchised passenger rail operations.
With the exception of state-owned Direct Rail Services, all freight operators are private companies and depend on the ORR to protect their rights to run their trains on an increasingly crowded network.
"We have the right to go to the regulator and they have to basically help us manage Network Rail," Smith said. "There has been a considerable amount of uncertainty around how that's going to be legislated for."
Smith said worry about future arrangements was deterring investment in the sector, including by Infracapital, the global infrastructure fund that owns GB Railfreight.
"People are putting their hands in their pockets and saying, 'We'll just wait and see'," he said. "We need -- sooner rather than later -- certainty."
Rail freight operators were further concerned in June when a senior Department for Transport official tried to pressure the ORR to block applications for new services by the tiny number of private, purely commercial passenger operators known as "open-access" operators.
Many rail freight industry executives believe their right to access the network rests on similar legal rights and principles to those for open-access operators.
Smith said his company had written to the transport department expressing concern after the open-access controversy and had received assurances about its future rights.
However, he noted that there were still no details of how a key Network Rail document -- its access and use policy -- would guarantee rail freight companies' rights.
Smith said: "They said, 'Don't worry about it; it'll be fine'. I still don't fully understand how they're planning to enshrine that in the access and use policy."
The Department for Transport said the growth of freight was "at the heart" of its plans to overhaul Great Britain's railways.
"Great British Railways will have a duty and targets to grow the use of freight on our railways, ensuring it continues to thrive for decades to come," it added.