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The road haulage industry is struggling to stay afloat as fuel costs continue to soar, but so far the government has refused to throw the drowning man a lifeline. However, the Freight Transport Association (FTA) has presented the Chancellor with a detailed study by PricewaterhouseCoopers (PwC) that sets out four options for the government to reduce the fuel duty paid by HGV operators.

• A  rebate at the average EU rate of 25p/lit. This would be self-regulated by VAT returns, effectively costing the government £648m per year.
• The introduction of 'blue diesel' for HGVs, taxed at the average EU rate. Exchequer costs would outweigh the benefits by at least 5:1.
• A rebate based on the distance travelled instead of the fuel used for vehicles over 38t.
• A fuel tank fill restriction for hauliers entering the UK.

The government has not yet responded to the proposals, but a Treasury spokesman comments: "The government understands that businesses and families are feeling the pressure from high fuel prices, and therefore the Budget postponed the 2p/lit increase in fuel duty until October."

Britain's rate of duty is among the highest in Europe- in fact at 50p/lit, it is double the EU average. The effect of this is highlighted by a National Economic Research Associates (NERA) report into cabotage.  The showed that in February 2008, travelling from Dover to Livingston, West Lothian, completing three jobs and returning to Dover would cost a UK haulier more than £3,250 but would cost a Hungarian company purchasing fuel on the Continent just under £2,750.

For the government, perhaps the most desirable of PwC's four options - but the least likely to be adopted - is the imposition of a tank fill regulation for hauliers entering the UK. This would limit to just 100 litres the amount of diesel that trucks entering the country could have in their tanks. However James Hookham, director of policy for the FTA, is quick to point out that "it would be seen as a barrier of trade", and therefore would be against EU law. There are also questions over the efficiency of such a system Steve Best, transport clerk for the Heritage International Transport, suggests that hauliers could find ways to work around the scheme.

After considering all the options, Best returns to an idea that has received consistent support from British hauliers: "My suggestion would be to put a vignette on foreign hauliers." While most Western European countries charge tolls for using their motorways, the UK does not. Best adds: "I just think the government is too soft to impose anything on foreign import they're just not letting on what they are frightened of."

Indeed the government has so far argued that a vignette would be complicated and not cost-effective. The most practical option, according to the FTA, is for hauliers to receive a rebate based on the distance travelled in the UK. Although the paperwork and the analysis of tacho records necessary to achieve this may be time-consuming, Hookham insists that it is perfectly feasible: "What we need to do is satisfy ourselves that we've a got a system that can work without too much admin."

PwC estimates that this would cost the Treasury £648m per year - the same as introducing a rebate based on the average EU rate of duty - but Hookham points out it would probably lead to improved profitability and therefore increased corporation or income tax take. So the government could benefit from any reduction in fuel duty for HGVs, rather than lose out as it fears.