New Clause 4 — Fuel duty (remote areas)

Finance (No. 2) Bill [Ways and Means] – in the House of Commons at 7:45 pm on 4th July 2006.

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'In the Hydrocarbon Oil Duties Act 1979 (c. 5) section 6 (excise duty on hydrocarbon oil) there is inserted after subsection (1A)—

"(1AA) The Treasury may, by order made by statutory instrument, specify lower rates of duty under subsection (1A) in respect of hydrocarbon oil products sold in remote areas.

(1AB) For the purposes of this section 'remote areas' shall be defined in regulations made by the Treasury by statutory instrument.

(1AC) Orders or regulations made under this section shall not come into force unless approved by a resolution of the Commons House of Parliament.".'.— [Danny Alexander.]

Brought up, and read the First time.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

With this it will be convenient to discuss the following:

New clause 6— VAT and hydrocarbon oil duty offset—

'In the Hydrocarbon Oil Duties Act 1979 (c. 5) section 6 (excise duty on hydrocarbon oil) there is inserted after subsection (1A)—

"(1AA) In every Budget Statement the Chancellor of the Exchequer shall provide his forecast for oil prices and set out anticipated yield from fuel duty and VAT on fuel for this price and for a range of prices up to 50 per cent. above his forecast.

(1AB) In his 2006 pre-budget report the Chancellor of the Exchequer shall bring forward a mechanism for—

(a) using additional revenue from VAT on fuel above forecast to offset fuel duty when the oil price rises above his forecast level, and

(b) providing specific fuel duty reductions targeted at fuel sold in sparsely populated areas; and the Chancellor of the Exchequer shall by order define 'sparsely populated areas' for the purposes of this section.

(1AC) Whenever international oil prices rise above the level estimated by the forecast made in accordance with subsection (1AA), indexed fuel duty increases shall be frozen until the international oil prices return to the forecast level.".'.

Amendment No. 123, in clause 13, page 14, line 15, leave out Table A and insert—

CO2 Emissions figure Rate
(1) (2) (3) (4) (5)
Exceeding Not Exceeding Reduced Rate Standard Rate Premium Rate
Households with a postcode in a remote rural area Households with a postcode in a remote rural area Households with a postcode in a remote rural area
g/km g/km £ £ £ £ £ £
100 120 30 15 40 20 50 25
120 150 90 45 100 50 110 55
150 165 115 57.50 125 62.50 135 67.50
165 185 140 70 150 75 160 80
185 - 180 90 190 95 195 97.5

Amendment No. 129, page 14, line 26, leave out Table B and insert—

CO2 Emissions figure Rate
(1) (2) (3) (4) (5)
Exceeding Not Exceeding Reduced Rate Standard Rate Premium Rate
Households with a postcode in a remote rural area Households with a postcode in a remote rural area Households with a postcode in a remote rural area
g/km g/km £ £ £ £ £ £
100 120 30 15 40 20 50 25
120 150 90 45 100 50 110 55
150 165 115 57.50 125 62.50 135 67.50
165 185 140 70 150 75 160 80
185 225 180 90 190 95 195 97.50
225 - 200 200 210 210 215 215

Amendment No. 125, page 15, line 8, at end insert—

'(3A) After paragraph 1B insert—

"1BB For the purposes of paragraph 1B above, 'remote rural area' shall be defined in regulations made by the Treasury by statutory instrument.".'.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

The purpose of the new clause is to enable the Treasury to specify lower rates of duty on fuel to apply in remote rural areas. Hon. Members will know that article 19 of the European Union's energy products directive allows member states to apply for a derogation to allow lower duty rates in specified areas. In October 2004, the French Government, with the support of UK Ministers and Ministers of other member states in the Council of Ministers, did just that, following the example set by the Portuguese and the Greek Governments in previous years.

My argument for applying that measure in the United Kingdom rests on the very serious economic impact that higher fuel prices in rural areas have on areas such as the highlands and islands of Scotland. The truth is that people living in remote areas such as the highlands and islands are victims of a triple whammy. They pay higher fuel prices and have much longer distances to travel, with few or no alternatives to making those journeys by car. Unavoidably, they spend more on transport than others and therefore also contribute more to the Treasury. Motoring costs represent some 18 per cent. of total household expenditure in rural Scotland compared with 13 per cent. across the rest of Scotland.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

The hon. Gentleman mentions some exceptionally distant rural areas and says that motoring is the only option, but that cannot be the case in the islands of Scotland, because ferries will be important as well. Where does he expect the line to be drawn between remote areas that would benefit from his new clause and non-remote areas that would not so benefit?

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

The hon. Gentleman anticipates a later part of my remarks, so if he will allow me I will press on.

Median earnings in the highlands and islands are some 85 per cent. of the UK figure, so the inequitable situation that I described hits an already poorer region very hard. Before coming to the Chamber today, I conducted a random survey of pump prices for a litre of unleaded petrol. In Aviemore in my constituency, where I happen to live, the current price is 99.9p per litre. In Dalwhinnie, a little further south, it is 102p per litre. In Thurso, in the constituency of my hon. Friend John Thurso, it is 102p per litre. In Lerwick, in the constituency of my hon. Friend Mr. Carmichael, it is 106.9p per litre. By comparison, at Asda in Leeds the price is 92.9p, while in Morrison's in Camden in north London, it is 90.9p.

At its broadest, the variation is nearly 20p per litre. In my home town of Aviemore, which is on the A9, one of Scotland's main trunk roads, my constituents would pay some 10p per litre more than constituents of hon. Members in London. For an average-sized small car, that might equate to an extra £4 on a tank of petrol. The final price of a litre of fuel includes VAT, so we have the anomalous situation whereby we are paying more in VAT than elsewhere because the retail price for fuel is higher. In sum, the main beneficiary of higher fuel prices in rural areas such as the highlands and the islands is the Exchequer. The new clause proposes a system to return that rural windfall to some of the areas whence it came.

The high price of road fuel in the highlands and islands has done, and is doing, considerable social and economic damage to some of our most vulnerable rural communities. This is not just about business people with big cars and high mileages; it is about people on low incomes in relatively poorly paying sectors such as tourism, retailing and food processing, of which we have a high share in the highlands and islands. The low population density means that there can be long distances to public services such as hospitals and to places of employment, with no alternative but to use a car.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

My hon. Friend rightly points out that in Lerwick we are paying 106p per litre for our petrol. If he goes out into the country parishes, he will find that it is significantly higher even than that. That encourages people from the country parishes of Shetland to drive into the town to get their petrol, with the result that they then use the town's shops and services, thereby affecting the small and economically fragile shops and services in the smaller outlying parts of already remote areas.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I am grateful to my hon. Friend. The same phenomenon can be seen in constituencies across the highlands and islands. In my constituency, the differential in petrol prices often encourages people to drive to Inverness to use the services there, with an ongoing knock-on effect on rural filling stations, shops and other businesses in rural areas. That is why the new clause says that the line would need to be drawn by Treasury regulations. I am sure that many civil servants in the Treasury are expert enough to draw up an appropriate set of rules. The method used by the Scottish Executive in apportioning their rural filling stations grant scheme might well provide one basis on which such a system could work.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

As a quid pro quo for these proposals, would the hon. Gentleman and his party be prepared to abandon the Barnett formula forthwith?

Photo of John Bercow John Bercow Conservative, Buckingham

The hon. Gentleman should not be sedulously tempted down that narrow path, on a completely unrelated issue, by Rob Marris. I understand the concern about the perceived inequity of differential pricing, but can Danny Alexander tell the House for what proportion of the purchase price per litre in his constituency excise duty accounts?

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I think that it accounts for a very substantial proportion—and what is more, as I was explaining earlier, because of the other factors that lead to the price being higher in rural areas, the Treasury gets a windfall through VAT.

Photo of John Healey John Healey The Financial Secretary to the Treasury

Perhaps I can help the hon. Gentleman. The answer to the question asked by John Bercow is 47.1p per litre.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I am grateful to the Minister for that.

The purpose of the amendment is to propose a relieving measure for rural areas to take account of the fact that petrol prices are much higher, that car use is much more of a necessity, rather than a luxury, and that the distances driven tend to be much longer, so people are making longer essential journeys and spending much more of their income on fuel at higher prices, which is giving a windfall to the Treasury through the VAT system. This is a relieving measure to try to address some of the consequences of that, to which I want briefly to return.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

The hon. Gentleman is being very generous in giving way. He was talking about an anomalous situation before. Is not his proposal somewhat anomalous in light of the Liberal Democrats' proposals to increase green taxes? This seems to be going in completely the opposite direction; it is putting down the price of fuel.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

The hon. Gentleman anticipates my concluding remarks, in which I will address that point directly.

By accepting the amendment the House can signal its determination to relieve the burden of a tax that is undermining rural development and worsening rural poverty. By allowing a derogation to a lower rate of fuel duty for remote areas, appropriately defined, we can adopt an interim measure that will make an immediate difference. It is my view, and that of my colleagues, that in the long term a system of road user charging would allow the fairest distribution of cost and significant benefits to people living in remote areas.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

Clearly, in a remote area using cars is more environmentally friendly—because people use them when they need them—than regularly running lots of empty buses without passengers. Road user pricing would therefore be more environmentally efficient, as the price would reflect the area in which the car was being used.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I am grateful for that intervention. As usual, my hon. Friend makes very wise comments.

Some hon. Members, as we have just heard, may worry about the environmental impact of this change, but in areas where a car is a necessity that is absurd. Of course we need to drive more fuel-efficient cars—that applies as much to people in rural areas as it does to those in urban areas—but taxing rural motorists off the road means wiping rural communities off the map. I say to the House that sustainable rural communities are as important to our environmental objectives as they are to our social and economic objectives, so I hope that the new clause will win support in all parts of the House.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

We welcome with enthusiasm the opportunity once again to debate hydrocarbon oils. Indeed, this debate has a familiar ring, although on this occasion we do not have present Chris Huhne, who during the debate in the Committee of the whole House seemed, as far as I could see, to lead for the Liberal Democrat Front Bench. [Interruption.] Rob Marris says that he did, and I would not quarrel with that assessment for a moment.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I ask the hon. Gentleman's forgiveness, but it seems to me that we are discussing hydrocarbon duties now, and that debate was about vehicle excise duty. There is a difference.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury 8:15 pm, 4th July 2006

The hon. Gentleman plainly has not read the list of amendments in front of him grouped under the heading "Hydrocarbon oil duty and vehicle excise duty". He will see, if he reads it, that amendments Nos. 123, 129 and 125, which are all part of this group, refer to vehicle excise duty. I suggest that next time, he read the selection list before making an intervention. Since the earlier amendments were substantially the same as two of those in the group that we are now considering, I want to refer back to them for a moment.

The first proposed to reduce the rate of VED for the most polluting vehicles registered before 23 March this year and owned by households with a postcode in a remote rural area. The second proposed not to change the rate of VED for the most polluting vehicles registered after 23 March and owned by households with a postcode in a remote rural area. The third proposed to raise the rate of VED for the most polluting vehicles registered after 23 March and owned by households with a postcode in a remote rural area. [Interruption.] Julia Goldsworthy says from a sedentary position that the latter was not selected. I was not claiming that it was selected, although as she has raised the point, one might question the wisdom of tabling an amendment that cannot be debated—but I shall return to that in a moment.

After the debate in the Committee of the whole House, which those of us who were there remember with affection, the Liberal Democrats chose not to press their amendments to the vote, which suggested to the rest of us a certain lack of confidence in them. I shall return to that point later. It is not perhaps a very good sign that three of the amendments in this group cover the same ground as was covered during the debate in the Committee of the whole House.

Our view is straightforward: we acknowledge the seriousness of the transport problems faced by people who live in remote rural areas, to which I shall return later. Indeed, Conservative Members represent the bulk of rural areas—although, I concede, not the bulk of remote rural areas as the Liberal Democrats are defining them. However, we believe that the one-off cost of VED is not the main problem faced by people who live in remote rural areas, and that any fiscal solutions to those problems must be fair, simple to administer and proof against fraud, and above all they must not simply leave a black hole in the Government's accounts.

With the greatest respect to Danny Alexander, who spoke to the new clause, which I shall come to in a moment, it is very hard to see how it can be fair simultaneously to reduce the rate of VED for the most polluting vehicles registered before 23 March this year and owned by households with a postcode in a remote rural area, as amendment No. 123 proposes, and not to change the rate of VED for the most polluting vehicles registered after 23 March and owned by households with a postcode in a remote rural area, as amendment No. 129 proposes, while wishing all the while, apparently—I shall not dwell on this point, even though it is potentially a little embarrassing for the Liberal Democrats—to raise the rate of VED for exactly the same households in exactly the same circumstances, as amendment No. 124 proposes. As I say, I shall not dwell on the amendment that the Liberal Democrats tabled but which we cannot debate. I shall move on.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I cannot resist the invitation from my hon. Friend.

Photo of John Bercow John Bercow Conservative, Buckingham

I am listening to my hon. Friend's exegesis of the different Liberal Democrat amendments with great interest. It does rather call to mind, I put it to my hon. Friend, the famous verdict of the late Harold Macmillan that the Liberals' good ideas are not original and their original ideas are not any good.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

My hon. Friend is never lost for an apt quotation, and I cannot think of a more apt one myself, although he may well be on his feet in a moment to suggest another.

I turn to the tests of simplicity and of fraud. Registering vehicles that belong to households with a postcode in a remote rural area for lower rates of VED is scarcely likely to be simple in practice. As the Financial Secretary pointed out on 3 May, motorists could easily register vehicles in designated remote rural areas and then use them predominantly or exclusively in urban areas, since, as I hope the Liberal Democrats will concede, a car registered in a more rural area can in fact be driven to an urban area.

Then there is the question of cost. Amendment No. 125 invites the Treasury to define "remote rural area" in regulations. New clause 4, which was also tabled by the Liberal Democrats and to which the hon. Member for Inverness, Nairn, Badenoch and Strathspey has just spoken, refers to remote areas and, as he made clear, proposes lower rates of duty.

As Stewart Hosie pointed out in a telling speech on 3 May, there is no agreement on the definition of a remote area. The description offered by the Scottish Executive covers 98 per cent. of Scotland's landmass, and 18.7 per cent. of the population. The hon. Gentleman cited the Randall definition, which is based on sparsity of population and covers 89 per cent. of Scotland's landmass and takes in 29 per cent. of the population. If the Liberal Democrats could offer a definition that commanded consensus they would surely have included it in new clause 4, rather than pass the parcel to the Treasury.

Photo of David Taylor David Taylor Labour, North West Leicestershire

As the hon. Gentleman is struggling to find a definition of remote areas on behalf of the Liberals, may I offer the following definition? A remote area is an area so remote from reality that it elects a Liberal Democrat to represent it in Parliament.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

The hon. Gentleman is trying his best to cap my hon. Friend John Bercow, but I will give him a serious answer. It is significant that the Liberal Democrats have left the definition in the hands of the Treasury. If they had a workable definition they would have included it in the new clause rather than pass the parcel to the Financial Secretary. As new clause 4 and the other Liberal Democrat amendments do not have a definition attached it follows, as night follows day, that they do not have a price attached. I do not know, but I suspect that the cost to the Treasury of a lower rate of duty and lower rates of VED in remote rural areas would be considerable. I am happy to give way to anyone who can tell me what the cost is, and how the Liberal Democrats propose to make up the lost revenue.

That leads me to my main point. The transport problems faced by people in remove rural areas are, as we have heard, formidable. Large vehicles are needed for agricultural and other work—that is not usually the case in urban areas—public transport is often non-existent, and there is far greater reliance on cars than in urban and suburban areas, as the hon. Member for Inverness, Nairn, Badenoch and Strathspey quite fairly pointed out. Our quality of life policy group, chaired by my right hon. Friend Mr. Gummer, is therefore examining those issues as we formulate our policy programme in the run-up to the next election. That is preferable to introducing in the first year of a Parliament a series of hasty and apparently unfinanced tax cuts that show no sign of being properly thought through, and which, alas, open those who propose them to the charge of opportunism.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

I will not detain the House for long. I loved every second of the speech made by Mr. Goodman, but each minute probably lost the Tories about 200 votes in my constituency. Indeed, I shall take great delight in promulgating the views that he has just espoused on behalf of his party so that everyone in the highlands and islands and other remote parts of Scotland can see exactly what the Tories stand for.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Can the hon. Gentleman tell the House how much in lost revenue the amendment would cost the Treasury? [ Interruption. ]

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

My hon. Friend John Thurso says that he can, so I will let him do so. Tellingly, the hon. Member for Wycombe reminded us of why there are no Tory MPs left in the highlands and islands, where they used to represent a broad swathe of constituencies north of the Mull of Kintyre. The hon. Gentleman said that he did not know how much the proposal will cost, but he presumed that it would be a great deal. Why does he hold such a preconception? Why did he not say that he did not know how much the proposal would cost, but that he was prepared to take an objective and fair-minded approach to it?

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

In an objective and fair-minded way, may I simply ask the hon. Gentleman, whose party has tabled the new clause, how much will it cost?

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

I have already told the hon. Gentleman I do not know exactly how much the proposal will cost, and I am unashamed to say so. If my hon. Friend the Member for Caithness, Sutherland and Easter Ross has a figure, no doubt he will favour us with it. The fact is, there is a basic inequity born of market failure. Liberal Democrats are prepared to talk about it, and to offer solutions which, whether or not they are costed, indicate a willingness to address the problem that is remarkably lacking among Conservative Members.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

A solution that does not work is not a solution. We can examine the proposal, but we need information to do so. Danny Alexander, who tabled the new clause, has not provided the information that the House needs to examine the proposal, so it is neither a useful solution nor, indeed, a useful proposal.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

I do not accept that it is something that does not work because, as my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey pointed out, what we are proposing already takes place in a number of European countries, including Greece, Portugal and, most recently—ironically, with the support of UK Ministers—France. The Minister said at the Dispatch Box that since he has been in post, it has been impossible to do such a thing, but it has been done by Portugal, by Greece and, with the support of our own Ministers, by France, so I do not accept that it is beyond the wit of the British civil service. I hold our civil servants in high regard, so if French, Greek and Portuguese civil servants can do such a thing, they can do so, too.

Photo of John Bercow John Bercow Conservative, Buckingham

The hon. Gentleman is extremely adroit in making the best of a bad case. I am relatively non-committal on the issue, and I am genuinely ready to be persuaded, as I am not over-preoccupied with the verdict of shadow Ministers, as the hon. Gentleman has probably noticed over the years. We have been confronted with the cumulative intellectual weight and financial acumen of Julia Goldsworthy and Chris Huhne, yet Mr. Carmichael is unable to vouchsafe to the House the financial cost of the new clause tabled by his hon. Friend Danny Alexander, so I am a little anxious.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

The hon. Gentleman's anxiety always causes me anxiety. Indeed, I took a similar view to those on the Front Bench until I joined my own. Measures beyond number have been introduced in the House, both by the present Government and by Conservative Governments, without an exact financial quantification. We have proposed a principle to deal with a problem that causes serious economic and social hardship. As is often the case in the House, we should allow the details to follow later. Accepting the proposal commits the Government to nothing. It is an enabling measure, rather than a prescriptive one, that gives them the power to deal with the problem. I have lost count of the number of occasions in Committee and on Report when the Government have proposed such enabling measures and said, "Trust us—we'll deal with this later." We are giving a power to the Government, and we are prepared to trust them to do the work and bring the figures to the House at a later stage.

The proposal introduced by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey is necessary. As he has pointed out, people using the cheapest petrol pumps in my constituency pay about 105p per litre. In the remoter parts—the outlying parishes in Orkney and in Shetland, and the outer islands away from the mainland of Orkney and Shetland—the price is much higher than that. When I was first elected in 2001, people in Hoy in Orkney were already paying more than £1 per litre. That causes real financial difficulty.

Many of the people living in those communities are on low and fixed incomes. They do not have public transport running at the bottom of their road every five or 10 minutes. They have to use a private car because they have no option. The Government take in the form of value added tax, quite apart from the fuel duty, hits those people particularly hard because they start from a lower income and pay more.

In the villages and towns in my constituency, petrol is sold from small petrol pumps and shops that do not have the purchasing power of Asda, Tesco and other big suppliers in the towns and cities. That is the root of the problem. The Treasury has come up with all sorts of answers. It has told us that we cannot introduce such a measure because people will drive from areas where they already get cheap petrol to areas such as those represented by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey—my goodness, I wish he had a shorter constituency name—simply to get petrol that they could buy, at best at the same price, and probably cheaper, if they stayed at home. The logic of such objections does not bear rational examination.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine 8:30 pm, 4th July 2006

The converse, which the Treasury does not seem to accept, is that under our proposal, people will stay in the local community and buy their fuel locally without making the extra journey to another area, which will keep the local economy more buoyant and reduce the travel time and the amount of fuel that they consume.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

Indeed. That is the point that I made in an intervention on my hon. Friend the Member for Inverness and all the heathery bits.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

On the figures, new clause 4 is an enabling clause which, if passed, would enable a lower rate to be set for excise duty on fuel. Approaching it from the other end, in terms of forgone tax revenue, how much does the hon. Gentleman think the Treasury should spend on the measure? He could give us that figure and from it one could work out, in terms of the number of litres sold in remote rural areas and so on, what the discount on fuel would be. How much does he think the measure should cost?

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

The hon. Gentleman is inviting me to speculate on any number of ifs, buts and maybes that might start with the cost of oil on the world markets, go to the level of fuel duty, and from there to the rate of value added tax. The answer to him is the same as it was to the hon. Member for Wycombe: it depends on the figures that the Treasury is able to produce at the time.

What we want to hear today from the Financial Secretary is that at last he is prepared to take seriously the fact that there is a problem which causes real hardship to individuals and to businesses in my constituency and in many others represented in the House. Rather than spending all their time and energy producing excuses for not implementing such a measure, let his civil servants recognise the problem, examine it and act, otherwise the situation will never improve and the sustainability of our communities will never be maintained.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The passion with which my hon. Friends have spoken is an indication of how strongly they feel about the issue. We are trying to get recognition of the problem. All our constituents will be disappointed by the responses from those on the Conservative Benches. We are raising the issue again because of the importance that we attach to it. We want to open up a constructive debate and discuss the issue in the context of measures to persuade people who are able to change their behaviour to behave in a more environmentally friendly way, while not penalising those who have no other options. We are disappointed that hon. Members on both sides of the House are trying to close down such a debate.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

When one wants a constructive debate to take place, one starts by providing information. It would not have been difficult for the Liberal Democrats to ask questions, table questions to Ministers, seek the advice of civil servants and ask their research assistants to do some work in the Library to formulate a range of options, as my local authority did when we took control from the Liberal Democrats and introduced a 50p bus fare for every person under the age of 19 on the island to travel anywhere on the island. That was done before we took control. The Liberal Democrats have ample facilities, as have all of us in the House—I can see, Mr. Deputy Speaker, that you want me to shut up—to undertake that work. I wish they had done so, because they would be taken more seriously.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

If the hon. Gentleman has such resources at his fingertips, he could have raised the issue himself. If the communities that my hon. Friends described had access to buses, they would happily provide subsidised fares, but for many of those communities there are no bus services and to provide them would be worse for the environment. An equivalent service to the one in the hon. Gentleman's constituency could not be provided.

I draw the hon. Gentleman's attention to the comments made to those on his Front Bench in the discussion of minimum pensions income. His Front-Bench team will remind him of why it is not possible to give detailed information. The reason why we refer to Treasury regulations is that there is no UK definition of a remote rural area. There are definitions that apply to England and Wales, but if those were mentioned in the new clauses and amendments, they would not include Scotland. My hon. Friend Danny Alexander is therefore trying to produce enabling measures in order to provoke a debate. Transport costs alone make fuel significantly more expensive in the highlands than in more densely populated parts of the UK. We are trying to respond to problems experienced across the country. All the amendments and new clauses in the group try to deal with those problems in different ways.

One solution would be to more forward more quickly on road user charging, which would be a more flexible way of discouraging car journeys in congested areas, which cause the most pollution, while not penalising those who do not generate congestion and who do not have access to public transport alternatives. If the Minister can tell us that the Government intend to push forward on such a long-term policy, we would welcome it, and we would welcome a time scale.

Costs are much higher in rural areas and there is no immediate solution. The 2003 national travel survey for England showed that half the residents in rural settlements of fewer than 3,000 people lived within 30 minutes' walk of a bus stop. That compares with 95 per cent. of people living in larger urban areas. I am sure that in many parts of the constituency of my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey people will have an even longer walk.

Those rural residents are likely to spend more per week on transport than their urban counterparts. The expenditure and food survey for 2002-03 showed that households in rural areas with a population of fewer than 3,000 spent more than £70 a week on transport, compared with £45.50 for those living in urban areas. Half their expenditure goes in operating costs, a large proportion of which is the cost of fuel.

New clause 4 seeks to lower the rate of duty in remote areas, as defined by the Treasury, and would give the Government the powers to apply for a derogation from the energy products directive, as has recently been successfully undertaken by the French Government. I understand that that was unanimously approved by the EU, as was referred to earlier, which means that it must have had the support of the UK Government. Why does the Minister think that remote and rural areas in the UK do not fulfil the same objective socio-economic conditions as the regions in which the derogation is applied in France?

Because of the lack of transport alternatives, consumers are unable to respond to price incentives. They just have to bear the higher cost, since there will be no cheaper alternative. Hence this proposal is logical and fair, not least because incomes also tend to be lower in more isolated and often more economically deprived constituencies. Although I represent a constituency at the opposite end of the UK to that of my hon. Friend, many of the experiences and difficulties that he has described are familiar to me and my constituents.

The amendments tabled in my name seek to achieve similar ends to the new clause, but I am not proposing that both alternatives should be put forward simultaneously. As I have said, we seek to propose a range of alternatives to highlight the situation and provide the Government with a range of approaches. We know that the alternative proposed by my hon. Friend works because it has been applied in other countries. Unfortunately, because all our amendments have not been selected we will not be able to vote on the whole package that we have proposed, so I hope that my hon. Friend will press his new clause to allow the Treasury at least to consider the issues.

The fundamental reason for providing such a concession in my amendments is to recognise the high cost of travel in rural areas. They allow for the revalorisation of fuel duty to continue. We welcomed that when the Chancellor announced it in the Budget. If that continues, and if it is the Government's intention to increase the share of green taxation as a proportion of the total tax take, it will be those people whose behaviour will not be affected by the increases who will have to bear the costs. Therefore, we seek some way of offsetting those costs for people who cannot change their behaviour.

I draw the Minister's attention to two issues. The first is the extent to which the differential for the new highest band, which the Chancellor announced in the Budget, will impact on behaviour, and how it will encourage more environmentally responsible choices. In his Budget speech, the Chancellor said:

"I want to do more to encourage cleaner fuels and cars. I propose to radically reform vehicle excise duty. I am introducing...a new band of £210 for the small number of new cars that are the most polluting".—[ Hansard, 22 March 2006; Vol. 444, c. 295.]

In a written answer the Financial Secretary gave the number of people who would be persuaded by that amazing new band to change their behaviour. As a result of these proposals, carbon emissions will fall by a fraction—less than 1 per cent. Therefore, our amendments seek to point out the incredibly limited impact that the Government's proposals will have and to present ways in which they might like to achieve a more significant impact on behaviour. In this respect, people in rural areas, as well as in urban areas, will have the opportunity to exercise choice to offset those costs. When they are purchasing a new car they can decide, like people in urban areas, to buy a car with lower emissions. However, they cannot decide how much they pay for their fuel. That is the inequality that we seek to address.

I hope that the Government will at least recognise some of the difficult circumstances that many of my constituents and those of my hon. Friend and others in rural areas across the country face, and I hope that they are prepared to take on board the need to recognise their difficult circumstances. If the Minister does not wish to accept any of our proposals, I would be interested to hear how he plans to ensure that people in rural areas are protected from any further measures that the Government may plan to take in relation to fuel duty and vehicle excise duty that will significantly increase their transport costs despite the fact that ultimately they will have no alternative to the car and hence will have to bear those costs rather than change their behaviour to the benefit of the environment.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I have to say that we are having a somewhat confused debate. The proponents of the motor fuel— [ Interruption. ] I want to offer some clarity to Chris Huhne, which Members of his party have signally failed to do. I will not address any remarks to new clause 6, but I shall speak to new clause 4 and the amendments. Mr. Goodman gave an interesting figure. He will correct me if I am wrong, but I think that he said that 29 per cent. of the population would be in a rural area.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury 8:45 pm, 4th July 2006

It depends— [Laughter.] It depends on which of the two definitions of rural area one accepts. The Liberal Democrats have not been able to tell us which of the two they accept, so when they laughed, they were laughing at themselves.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

It will not surprise the hon. Gentleman to learn that I entirely agree, because I was using the only figure that has been cited in the debate, so far as I am aware.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

The new clause makes it clear that the definition should be subject to Treasury regulations, but in answer to an earlier intervention I mentioned the Scottish Executive's rural petrol stations grant scheme as a model that might be worth considering. The definition used in that scheme would apply to 5.37 per cent. of the population of Scotland. I hope that that point at least manages to inform the hon. Gentleman on one particular possibility that might well be adopted when the Treasury or civil servants come to look at this matter, because I am sure that his party will support the new clause.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am glad that the hon. Gentleman has come up with a figure, but for the moment I shall stick with the figure on which I have based my calculations, as it was the only one before us before that intervention.

There are approximately 20 million private motor cars on United Kingdom roads. I estimate that the average rate of vehicle excise duty is £150 a vehicle, based on clause 13. That would generate vehicle excise duty of approximately £3 billion a year. If we take 29 per cent. of that, that means that the Liberal Democrats are proposing, in round terms, an almost £1 billion giveaway.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

It was made clear that the 29 per cent. figure referred only to Scotland, which represents a small proportion of the total UK. The hon. Gentleman cannot take the total UK car stock and then extrapolate from the Scottish proportion. As we have discussed in previous debates, the Countryside Agency uses a more robust definition of rurality that applies to England and Wales. This point highlights why it is important to give the Treasury the option through regulations to establish a definition that applies to the length of the UK. However, the hon. Gentleman cannot extrapolate in the way that he has.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I apologise to the hon. Gentleman. I thought that his colleagues were moving an amendment to the Bill that would cover the whole of the UK, as provisions on vehicle excise do. Therefore, I based my calculations on the whole of the UK, and at least I have the guts to put forward some figures, which thus far he and his hon. Friends have not done. They are talking about a giveaway of approximately £1 billion, based on the 29 per cent. cited by the hon. Member for Wycombe. If we use the figure of 5.4 per cent., the giveaway is about £150 million—it is difficult for me to do that calculation in my head. They should at least put forward some figures.

Let us look at new clause 4. Mr. Carmichael did not seem to understand the mathematics of what I put forward in my intervention, so I am having to make a speech. New clause 4 would give the Treasury some power, but the hon. Members who support it will not indicate any way in which that power might be exercised, so I will make a suggestion. If they do not like the figures, they can come up with others. That way, at least we will then have some figures before us in this debate.

Page 13 of the Red Book tells us that excise duties in the UK raise £40 billion a year. If half of that comes from vehicles—excise duties come in from other sources, too—the amount is £20 billion. I suspect that I am making a conservative estimate of the proportion of excise duties that come from vehicles, but I will use it. If we take off the figure that I gave earlier as an estimate of the total UK vehicle duty, which was £3.3 billion a year, based on 20 million private vehicles and with an average excise tax disc duty of £150, that leaves us with £16.7 billion coming principally from fuel, and 29 per cent. of that is about £5 billion. New clause 4 does not give us any formula for by how much its supporters wish vehicle excise duty to be cut, but if it were cut by 50 per cent. in rural areas, that would amount to a £2.5 billion giveaway. On the only figures before us—others can put forward their own figures—these amendments would provide for a tax giveaway of getting on for £2.5 billion to £3.5 billion. That is a great deal of money. It is being said, cavalierly, "We cannot put any price on this. We have not looked at the figures and it is all up to the Treasury." That is irresponsible in a debate on the Finance Bill. As ever, the Liberal Democrats are under-prepared. They have not done their homework.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I was talking about some of the difficulties that people in remote rural areas may face when considering their transport options.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Of course there are difficulties for people in remote rural areas. However, if we consider wealth generation in the UK, it comes principally from urban areas, especially London, where we are now situated, and the south-east. I represent a constituency in the west midlands.

A principled position is being put forward about helping people with their travel costs in remote rural areas. I understand that. However, Liberal Democrat Members refuse to set out any figures because they have not done their homework. Julia Goldsworthy—she will correct me if I am wrong—has a reputation for bunking off from this place to go on sports programmes on television, and helicoptering around the United Kingdom. She then comes forward as a proponent of green taxes. In addition, she comes forward with vehicle excise duty proposals in amendments Nos. 124 and 129, which would cut vehicle excise duty and cut also green taxes. It is the most brass neck that I have seen in five years in the Chamber.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

Perhaps the hon. Gentleman is a little jealous that no one has invited him on to such a programme.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Were I to be invited on to such a programme, I would not participate. That is because I do not believe in moonlighting. I gave up my practice as a solicitor—where I made more money than I do in this Chamber—as soon as I was elected.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I am sure that the hon. Gentleman would approve of the worthy cause—the money raised for charity, and the fee that I received from it, was donated to the Cornwall air ambulance, which is funded entirely from charitable donations and provides an essential service—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I think that it would be a good idea if we returned to the new clause that is before the House.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I will do that, Mr. Deputy Speaker.

It just seems to me that helicoptering around the United Kingdom and then proposing green taxes in the proposals that are before us, which go against green taxes, is the height of hypocrisy and brass neck. On that basis, if on no other, I urge Government Members to vote against the proposal if there is a Division.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

I shall speak primarily to new clause 6, but I shall take up some points that arise from new clause 4.

Julia Goldsworthy said that she was delighted to raise these matters again—I am paraphrasing—so as to spark debate. I was intrigued by the use of the word "again". When we discussed a similar amendment last year, the Liberals opposed it. When we discussed these matters generally on the Floor of the House, the Liberals—

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

I think that I can finish the sentence without a strange Liberal "Ah".

To come to the substance of the matter, in Committee on the Floor of the House, the Liberals, understandably because it is their policy, concentrated on vehicle excise duty rather than on fuel duty, an issue that was raised elsewhere.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

The hon. Gentleman knows well that the debate last year arose from a general proposal from the Scottish National party to reduce fuel duty for the entire United Kingdom. That was not something that we could conceivably support if we held any responsible attitude towards the burning of fossil fuels and the impact on climate change.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

I say to the hon. Gentleman with a straight face that the proposals from his party today will not stop the burning of fossil fuels. The cost of doing so would be reduced in rural areas, for very good reason.

Photo of Christopher Huhne Christopher Huhne Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs

The key point, which my hon. Friend Julia Goldsworthy made explicitly, is that the proposal is designed to be part of a package that will, taken in its whole, have a dramatic effect in providing a disincentive to the burning of fossil fuels, and therefore improving our contribution to tackling climate change. If we do not deal with the problems in rural areas, there will be a serious difficulty in using price incentives through fuel duty and through vehicle excise duty to tackle climate change. It is precisely to enable that process to go forward that we have put forward the proposals that are before the House. It is unfortunate, given the arcane rules of the House, that we are not able fully to debate the other parts of the package. However, as we know from—

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I think that the hon. Gentleman should stop at that point.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

If Chris Huhne chooses to get to his feet later, we know what his speech will be about.

Mr. Carmichael, whom I like and admire, mentioned VAT on three or four occasions during his contribution on new clause 4. It is disappointing that new clause 4 does not use VAT gain to offset duty, which is my proposal. That is a sensible way around the problem, not least because a VAT windfall would not have a fiscal impact on the Treasury—it would minimise the gain, while not reducing the Government's expected take.

New clauses 4 and 6 would allow the Treasury to define "sparsely populated rural areas". Mr. Hoban and I have referred to the various definitions, such as the sevenfold model, which can cover up to 90 per cent. of the population and up to 30 per cent. of the land mass. Those definitions are clearly inappropriate, and those outcomes are clearly not what the Liberal Democrats intended. If an offset or a straight reduction in fuel duty were to apply to sparsely populated rural areas, the Treasury should define it in statute.

There has been a great deal of discussion about derogation, which John Thurso has mentioned. We will not vote on new clause 4 tonight, which is disappointing because it may provide a way forward, and I hope that we can build a consensus on the issue.

New clause 6 addresses the ongoing problems caused by high fuel prices. Last year, a similar amendment attracted cross-party support and the support of the Road Haulage Association, and I am delighted to tell the Financial Secretary that the RHA welcomes new clause 6 today—if I hold up the RHA press release to the right camera, someone will take a picture of it. The press release states:

"Last year the Burns inquiry invested much time and effort in highlighting the plight of our industry and although we are still a long way from seeing a solution to the problem, it is encouraging to know that we have the support of the Scottish National Party. We shall now be pushing more strongly than ever to get the same recognition from our own Parliament; in particular the Chancellor of the Exchequer."

Photo of John Healey John Healey The Financial Secretary to the Treasury

The hon. Gentleman may be interested to know that yesterday I met the RHA, the Freight Transport Association and Mr. Robbie Burns, not one of whom mentioned the SNP proposals.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

Perhaps they were overawed by the Financial Secretary. Roger King certainly welcomed our proposals today, and I would be delighted to forward the Financial Secretary a copy of the RHA's press release.

The proposal would result in the introduction of a mechanism so that high oil prices would trigger lower fuel duty—fuel duties and VAT make up about 60 per cent. of the total price of a litre of petrol or diesel. In that case, the Chancellor would provide by statutory instrument that where the price of crude oil rose above the published forecast price, additional revenue from VAT on fuel would be applied to offset some of the rise in duty.

It will come as no surprise that the hon. Members who backed similar amendments last year represented rural and semi-rural constituencies, but it is not only those in rural constituencies in Scotland, Wales, Northern Ireland and parts of England who suffer from high petrol and diesel prices. No nation, no region and no part of the UK is exempt from the problem of rising fuel prices, because every product in every shop is carried on the road by a haulier at some point.

There has been a lot of banter in the Chamber about some of the proposals. I do not intend to make a lengthy speech, because it would be unfair on those hon. Members who have stayed in the Chamber and because the arguments have been rehearsed on many occasions. I hope that the Financial Secretary begins to take on board the serious manner in which we are tackling the grave concerns of the road haulage industry and especially the serious problems in sparsely populated rural areas. In some rural areas in my constituency, there are no filling stations between major towns and the nearest city. As one moves into the countryside, more and more independent stations find that they simply cannot continue.

I am unlikely to push new clause 6 to a vote. The parliamentary arithmetic would make that an unprofitable exercise. As I have done previously, I ask the Financial Secretary to take on board from the Road Haulage Association and the industry generally—the big companies and the small traders— the pain that has been suffered, the inflationary pressure building underneath because of high costs being driven up by haulage, and the problems of remote and rural Scotland and all sparsely populated rural areas in the UK. I ask him to make some positive noises in response to the debate so that we can look forward to a tempering of the high and spiking prices, which many of us experience in our constituencies.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross 9:00 pm, 4th July 2006

I shall shortly consider cost and I hope to be able to provide some detail to hon. Members who have asked questions. I say that now so that they do not try to intervene before I reach that point in my remarks.

First, I shall comment briefly on new clause 6, about which Stewart Hosie spoke. When I first read it, I had some sympathy with it but I soon decided that it was superficial sympathy. There are two fundamental problems with new clause 6 and the answer that he tried to provide.

First, the major disadvantage that my constituents and those of some of my hon. Friends suffer is the huge differential in price for diesel and petrol, which can range, depending on the cycle, from 6p or 7p at its most benign through an average of approximately 9p in the five years that I have been tracking the price to close to 14p in May 2003, which was the worst example. The problem is, as the hon. Member for Dundee, East admitted when I intervened on him in Committee, that his proposed system locks in the inequality. The price nationally would be held but the inequality would remain.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

It is true that the amendment that I tabled in Committee contained no specific proposal to alleviate rural prices. However, I specifically took on board the hon. Gentleman's comments in proposed new section (1AB)(b) to the Hydrocarbon Oil Duties Act 1979 in new clause 6. That new paragraph refers to

"providing specific fuel duty reductions targeted at fuel sold in sparsely populated areas".

I therefore hope that he will reconsider his previous sentence.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I am grateful for the intervention but it does not answer the question.

The second problem, which is fundamental, is that, if new clause 6 were accepted, the price of oil would be capped and there would be no opportunity to try to amend behaviour, as my colleagues wish, through taxes that give an incentive to those who have the opportunity to use alternatives in the form of public transport.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

Members of another party made that point in a previous debate. The point of using the windfall VAT to offset some of the duty rise is precisely that it does not impact on planned environmental increases. With the greatest respect, the hon. Gentleman has missed that point, too.

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I am grateful to the hon. Gentleman for that explanation, but that is not how I read his clause, and I do not think that that is the effect that most observers and commentators envisage. However, I started by having some sympathy for his proposal, and he and I clearly share a desire to do the right thing. I suggest that his objective of getting rid of the inequality suffered by our constituents who live in remote areas would best be achieved by supporting new clause 4.

The problem is that we have become trapped by the wrong details and we are asking the wrong questions. The best approach would be to start by identifying the objective of the exercise. That objective is not to try to find a definition that fits; it is to identify the relatively small number of parts of the United Kingdom in which fuel is at such a premium that residents suffer great inequity. Let us look at that problem and design a scheme that addresses only that problem. All our discussions about whether to adopt formula X, Y or Z are irrelevant. New clause 4 would permit the Treasury to undertake the necessary work to address the problem. A number of schemes might fit the purpose, but the starting point should be to ask what we are seeking to achieve, and then to design the appropriate scheme.

I now want to address the question of cost. In January 2000, the Highland Council and Highlands and Islands Enterprise commissioned EKOS Ltd to produce a report on the scale of the problem. It stated:

"The total additional expenditures per annum on motoring by Highlands and Islands households, due to higher motoring costs as a whole, are approximately £88 million. This equates to approaching 3 per cent. of the region's Gross Domestic Product. Of this, £17.8 million per annum is attributable to higher fuel prices, of which approximately £2.7 million is in the form of additional VAT paid because of the higher fuel prices in the region."

If we wished to get rid of the premium—at an average of 9p—we could simply apply the 9p to those figures, and the cost to the highlands and islands would be no more than £3.5 million, allowing for inflation since 2000. That is a long way short of the £2 billion or £3 billion that has been suggested. In seeking to achieve our objective in the highlands, the Treasury would therefore have to bear the phenomenal cost of only about £3.5 million. If I extrapolate that calculation across similar areas using similar definitions, I estimate that the total cost for the United Kingdom would be no more than £20 million. But even if I am out by 100 per cent., and the total would be nearer to £40 million, that would still be a very small sum to achieve that objective. Furthermore, if the expenditure of £17.8 million that I have just described were diverted into general expenditure, we could create 592 full-time equivalent jobs in the highlands.

Another part of the equation that we need to consider is to be found in that same helpful report. It estimates that the average income in the highland area is much lower than in the rest of Scotland, and that prices are higher. Consequently, highland residents have 76p to spend on goods and services for every £1 that the average Scottish resident has. In other words, the average highland resident is about 24 per cent. worse off than those who live in the rest of Scotland. On top of that, they have to pay between 10 and 20 per cent. more for their fuel. That is the genuine burden under which my constituents and those of my hon. Friends labour. Hon. Members may not have visited the areas to which I am referring. I extend an open invitation to all of them to do so at any time. I can do that, because my constituency is so far away that I know very few will take advantage of the invitation. Nevertheless, they will all be welcome.

For many miles in those parts of my constituency there is no public transport of any kind. Where there is transport, it consists of a bus that travels in one direction on one day and travels back on the following day. That is not really a viable option. A car, or a private vehicle of some sort, is therefore an absolute necessity, particularly in much of rural Sutherland but also in many parts of Caithness. A real burden—real inequity—is suffered by people with the lowest incomes in the United Kingdom, and I think that reducing that burden is a worthwhile objective for us as legislators.

I commend new clause 4. It does not seek to impose regulation; it merely seeks to give the Treasury power to do so. When I last raised the issue, during a Westminster Hall debate in 2003, I argued for a derogation. That was because I had always been told by the Treasury that it could not take this action. The Treasury's case was holed below the waterline when the French went and did it with the acquiescence and support of our Ministers. We need no longer ask "Can we do this or not?" We now know that we can, and the question has become "Why do the Government not do it?"

I am delighted to support the new clause. It gives the Treasury exactly the powers to deliver exactly the right solution at a very small cost to the taxpayer.

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland)

New clause 4 is an enabling clause, which gives the Treasury power to specify lower rates of duty on fuel sold in remote rural areas. Accepting the new clause would allow discussions to begin; we could then decide exactly where lines should be drawn, and what the differentials should be. I urge the House to accept the new clause. It does not commit the Government to anything and it would not reduce the Treasury's revenue, but it would allow a debate to start.

The sad fact is that fuel is sold in remote rural areas at a much higher price than in urban areas. People living in areas where there is no public transport alternative must pay far more for their fuel than those living in areas where there is such an alternative. Let me give some examples from my constituency to show how large the differentials can be. The difference between the cost of fuel on the islands of Mull and Islay and in, say, Glasgow is usually between 15p and 20p per litre. In the case of smaller islands such as Coll and Colonsay, the difference is about 30p per litre. That demonstrates the massive extra amount that people living on the islands must pay for their fuel. The additional cost has a damaging effect on the economies of those islands: not only does it have an impact on people's daily lives, but it discourages people from starting or continuing to run businesses.

The remote communities in the highlands and islands have suffered years of population decline, which shows no sign of stopping. The high fuel prices are part of the problem: as I have said, they discourage people from opening and running businesses that create the jobs that will allow young people to remain in those remote communities. Encouraging people to stay in the remoter parts of Britain benefits the whole country. Every time the Government propose the building of tens of thousands of new houses in the south-east, Members of Parliament from that part of the country object. They should ask why market forces are pushing people towards it. The answer is that the cost of living in remote areas is becoming so great that the jobs are not there. Sustaining viable economic communities in remote parts of the country is beneficial to the country as a whole.

There is an environmental justification for high fuel taxes: that they encourage people to use public transport alternatives. That environmental justification, however, does not exist in remote areas where there are no buses, and where it would be environmentally nonsensical for councils to subsidise bus services because buses would run with only one passenger on board. There is simply no environmental argument in favour of high fuel taxes in rural areas.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

It would be helpful if the hon. Gentleman clarified which communities would benefit from his proposal. The definition appears to be based on there being no public transport. The area around Inverness, for example, has a good public bus service extending a good few miles around the town, so it would not be an obvious beneficiary.

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland) 9:15 pm, 4th July 2006

Clearly, Inverness would not be a beneficiary. When my hon. Friend Danny Alexander made the proposal, he was talking about Nairn, Badenoch and Strathspey rather than about Inverness.

Road pricing is, I believe, the long-term solution to the problem. We can fix charges for using roads in different parts of the country. For example, my constituents on the Isle of Mull have justifiable cause for complaint when they pay the same tax on fuel and pay more tax to the Treasury because of the higher rate of VAT. They pay more tax in order to drive on potholed single-track roads. It is scandalous that they have to pay more to travel on those roads than others pay to travel on well maintained motorways. Although road pricing is the long-term solution, new clause 4 provides the answer during the interim period before road pricing is introduced.

The Office of Fair Trading and other organisations, councils, enterprise companies and so forth have carried out investigations to find out why fuel prices are so high in remote areas. The general reason that always emerges is low turnover. It is argued that Tesco and Asda sometimes sell fuel at a loss in order to encourage people into their supermarkets to buy bars of chocolate and milk at inflated prices, but a small shop or filling station in a remote village or on an island does not have that option. There is a low turnover, but the fixed costs are the same, so the high prices result from that. The only way of bringing prices down is by reducing the element of taxation, which explains why we are proposing new clause 4 today.

As we have heard from other Members, EU countries such as Greece, Portugal and France have introduced a similar measure and have obviously found a way of making it work. I see absolutely no reason why it cannot be made to work in Britain as well. If we accepted the new clause, it would allow the Treasury to do some analysis and some arithmetic, to publish consultation documents and to provide impact analysis, which would allow us to decide exactly where the lines on the map should be drawn. I would certainly include all the Scottish islands.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Before the hon. Gentleman sits down, I would like to say that it would have been much better if the Liberal Democrat speeches had been delivered in reverse order— [Interruption.] Well, we would have been so much better informed at an earlier stage of the debate. Does the hon. Gentleman agree that many island residents find it difficult to justify paying national rates of vehicle excise duty when their cars never go on to the mainland?

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland)

The hon. Gentleman makes a very good point. Islanders have to pay vehicle excise duty, fuel tax and VAT. Indeed, if my constituents want to take their cars to the mainland, they have to pay a high fare to Caledonian MacBrayne, so the hon. Gentleman has made a valid point.

To sum up, I urge the Government to accept new clause 4, which would allow studies and further analysis to be carried out. The Government could later table the orders on which we could vote, allowing the burden of fuel duty on remote and island communities to be lowered. I would certainly include all the Scottish islands in the definition of a remote area. More detailed study has to be done in order to establish exactly where to draw the line on the mainland. Urgent action is required. We have had centuries of population decline, and unless drastic steps are taken I am afraid that that will continue.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I was not expecting to speak in this debate, but I was once again inspired by Rob Marris. I put it on record that I have tremendous sympathy for people who live in rural areas. In fact, I live in a semi-rural constituency. Many of my constituents, and especially those in the more rural areas, are feeling the effects of high energy costs. However, I have a problem with how rural areas are defined, as opposed to urban areas. The hon. Gentleman asked why poor people in rural areas should benefit more than poor people in urban areas.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

If the hon. Gentleman will sit down, I shall make my point clear. I understand the problems faced by people in remote areas. I know that life there can be more expensive, but the same is true even in my semi-rural area. For example, people who live 15 miles away from the centre of Braintree have to pay higher fuel prices, for some strange reason. In those circumstances, how do we define remote? Various definitions have been offered in the debate so far. People in Caithness, Sutherland and Easter Ross are said to live in a remote area, and the hon. Member for Argyll and Brute—Bute, rather—said that people on the islands inhabit an even more remote area. However, people living in central London might regard Bromley and Chislehurst as remote.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

It is even more remote for the Liberal Democrats now. We will never be able to define what is remote and what is not. Who will play Solomon in respect of that very difficult question?

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

Why does the hon. Gentleman think that the UK is so feeble in its inability to understand the problems of remote rural areas, when Greece, Portugal and France understand them perfectly well?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

People define what they perceive as remote in their own way. The Liberal Democrats are not approaching the matter in the right way.

I turn now to the question of cost. Liberal Democrat Front-Bench Members told us that they had no idea of how much their proposal would cost. What a surprise—but then John Thurso came to the rescue and got his calculator out. He said that the cost could be £3 million or £10 million or £20 million. Are there any higher bids? Once again, the Liberal Democrats have not thought out the costs of their proposals at all.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Will the hon. Gentleman concede that new clause is purely an enabling provision and so has no cost implications? Given that that is so, why does he think that the Government should choose to reject it?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Call me a simple soul, but new clause 4 does imply a cost. I shall not rehearse the arguments offered by hon. Members on the Liberal Democrat Front Bench, but I am sure that they will back me up when I say that their proposal does represent a cost to the Exchequer.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Is the hon. Gentleman going to get his calculator out again?

Photo of John Thurso John Thurso Liberal Democrat, Caithness, Sutherland and Easter Ross

I have no idea how to work a calculator. I was quoting from a report. The figure of £3.5 million that I gave pertained to the highlands, and was a maximum. For the benefit of the House, I extrapolated what that might be as a maximum for the UK. If the hon. Gentleman reads Hansard, he will find that what he said about my remarks is wrong.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I should be surprised to find that what I said is wrong. Unless the hon. Gentleman produces a definition of what is remote, I do not know how he can come up with a figure of £20 million in his analysis.

I turn now to new clause 6, which would require the Chancellor to forecast oil prices. I cannot pretend that the right hon. Gentleman has any greater forecasting powers than Mystic Meg, and there is no evidence that his skills in that respect have been especially good in the past. It is ludicrous to expect the Chancellor to provide a forecast of oil prices. We should all be multimillionaires by now, especially the right hon. Gentleman, if we could actually forecast the price of oil over the next 12 months.

If the Lib Dems want to show their true green credentials, they should be figuring out a way to tax carbon emissions. How can one do that? I do not want to digress from the new clauses, but focusing on carbon emissions and charges on them, perhaps through vehicle excise duty—although not the modest premium added by the Chancellor—and seriously charging Chelsea tractors that emit huge amounts of carbon would have been a far more sensible way forward.

Photo of John Healey John Healey The Financial Secretary to the Treasury

We have had a lengthy debate on these proposals: nine speeches and four interventions. Clearly, the Chamber is not full of German and Italian football fans, but for those who have a passing interest, the score is still 0-0 after 65 minutes. However, I am told that it is an excellent game.

The hon. Members for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) and for Dundee, East (Stewart Hosie) introduced their new clauses in measured tones, but that did not disguise the flaws in their arguments. The hon. Member for Inverness, Nairn, Badenoch and Strathspey, who moved new clause 4, laid great stress on the price of fuel for those living in rural areas in his constituency, but it is important to remember that the costs of fuel and vehicle excise duty are just two of the many factors that contribute to the costs of motoring and the cost of living.

The cost of living varies from region to region across the country. The hon. Gentleman may like to consult the recent regional comparisons of the retail prices index published by the Office for National Statistics. The RPI for Scotland is 5.5 per cent. lower than the UK average, while the RPI for London is 9.7 per cent. above the UK average. The price of a pint of beer in London is significantly higher than elsewhere in the country, but we do not make tax adjustments to compensate for that.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

Surely the hon. Gentleman accepts that the RPI is not uniform across Scotland as a whole. There are variations in significant price indicators in different parts of the country. It is much lower in places such as Glasgow and Edinburgh than in the remote rural areas that we have been discussing tonight.

Photo of John Healey John Healey The Financial Secretary to the Treasury

My point is that the cost of living and its components vary. Where the cost of a particular commodity is high, we do not necessarily compensate by making the sort of tax adjustments that the hon. Gentleman and his hon. Friends are advocating.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

As the Minister knows from my earlier remarks, the reason for our proposals is that in rural areas, especially where there is no access to public transport, getting around by car is a necessity, not a choice. It is not a consumer choice in the way that going for a pint of beer in a London pub might be; it is essential for the future economic viability of rural communities. That is why there is a special case to be made.

Photo of John Healey John Healey The Financial Secretary to the Treasury

The Government recognise that, which is why we introduced the special rural transport fund to support the pressures and needs of rural transport. The hon. Gentleman may be interested in the fact that spending per head on transport in Scotland is 29 per cent. higher than in the rest of the UK.

My hon. Friend Rob Marris raised a couple of important points, one of which links to the point that I made just now and which he tempted me to make when he intervened. He said that, if the principle of uniform tax rates were changed, allocations for public expenditure would, inevitably, have to be reviewed, too. When that point was put to the hon. Member for Inverness, Nairn, Badenoch and Strathspey he said no, point blank. On that question, the Liberals want to have their cake and eat it.

The second major flaw in the proposal is that it is in conflict with the environmental objectives that we can pursue through vehicle excise duty and fuel duty. Clearly, the importance of environmental objectives applies equally to those who live in rural areas. If we follow the logic of the Liberal proposal, the cost of going green is not borne equally by everyone but borne in particular by those who do not happen to live in rural areas. Our policy on fuel duty is well established. The duty rates should rise each year at least in line with inflation, as we seek both to meet our targets to fund essential public services and our obligations to tackle climate change.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury 9:30 pm, 4th July 2006

If the Financial Secretary's view is so strong on national fuel duty rates, why did the Government support the derogation for France?

Photo of John Healey John Healey The Financial Secretary to the Treasury

Let me correct the hon. Lady. She will be well aware that the UK's policy is not to interfere in the fiscal decisions of other member states. We therefore did not support the French, but we did not oppose them, when they made their proposal for reduced regional rates. I hope that that helps the hon. Lady.

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport

The Financial Secretary has told me in the past that what France has done could not be done. Does he now accept that he was wrong?

Photo of John Healey John Healey The Financial Secretary to the Treasury

Let me correct the hon. Gentleman. France has not yet done this. The proposal is due to be introduced in 2007. In fact, what the French are proposing—it would be interesting to find out whether the Liberals will propose it as well—is a real increase in fuel duties that could be offset in certain regions at that point.

The policy that we have established on fuel duty must take account of all the relevant economic, social and environmental factors, but, of course, it is important that fuel prices are no higher than they need to be. On prices, it is important that we are clear about what is driving the level and volatility of our fuel prices. Road fuel duty is lower in real terms now, at 47.1p per litre, than in 1999, when it was 47.21p per litre. That is the equivalent of a fall in the price of road fuel of 7p per litre. So the high and volatile prices are a problem not of fuel duty, but of the international market and international prices. The best way to deal with international prices is not by imposing the complex mechanisms that are proposed in new clauses 4 or 6, but by the efforts that we are making to support the efforts of producing countries and consuming countries to increase the stability of the oil market and to improve its functioning.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

The Financial Secretary says that he is trying to solve the problem by improving stability in the production of oil and gas. Therefore, will he ensure that the Treasury does not cause any fears to investors about the production of oil and gas in the UK? If we lecture all the other producing nations to maximise their production, we must maximise our production as well.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I would take the hon. Gentleman's intervention more seriously if he had been present during the debates on the Bill about the changes that have been made to the regime and its possible impact on investment and exploitation. In short, the mechanisms proposed in new clauses 4 and 6 would introduce significant complexity but do little to bring greater stability to the UK market.

I thought that we had been through the issue raised by the hon. Member for Dundee, East in previous debates. Mr. Goodman is nodding his assent. In fact, we have been through that issue. New clause 6 is based on the central, important misconception that high fuel prices lead to an overall increase in VAT receipts—what the hon. Member for Dundee, East describes as a windfall in VAT—but that is not necessarily the case. When people have to spend more on one commodity, they tend to spend less on others, so the overall amount of VAT receipts usually remains unchanged.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury)

The Financial Secretary knows that we are talking about the VAT on petrol, not the rest of the VAT take, and there was no criticism or argument when we used the example last year that a 6p rise, from 80p to 86p, would have led to a 1.2p reduction or offset in the additional VAT collected. Those figures seemed to be widely recognised last year, and I hope that he will agree that the offset model would at least work and not have a fiscal impact on the forecast yield to the Treasury.

Photo of John Healey John Healey The Financial Secretary to the Treasury

No. The hon. Gentleman's problem is this: if people are spending more because the price of fuel, including the VAT element, is higher, they will tend to spend less on other commodities on which VAT is also charged. The overall yield for VAT is usually unchanged. There is no windfall VAT gain through higher fuel prices.

UK vehicle excise duty and fuel duty rates are set at the current rates for very good reasons: first, to raise revenue to fund essential services and secondly, to help to achieve our environmental objectives and obligations. Those reasons apply equally to rural areas. We are seeing the worst of the Liberal Democrats—they are facing two ways at once. Their leader promises to hit people with an £8 billion rise in environmental tax. That is on top of the £12 billion that he needs to raise through increases in other taxes. They are suggesting a top rate of VED that is 10 times the current rate. Then, in this debate, they are advocating a cut in VED for certain special areas in which they have a special interest.

Apart from lacking a convincing intellectual or principled case for the amendments, introducing a separate rate of VED for remote rural areas would also create obvious problems with fraud and administration. A moment's reflection would bring hon. Members to realise that. Clearly motorists could register vehicles in the designated remote areas while using the vehicles exclusively or largely in urban areas. Of course, that is going to be a problem. In Committee of the whole House, Julia Goldsworthy quoted the Countryside Agency. If she looks at its figures in other respects, she will see that, in sparsely populated areas, about one in 10 houses are second homes or holiday homes. Inevitably, we would have that problem.

The amendments and new clauses are undesirable, unwelcome and unworkable. If new clause 4 is pressed to a vote, I urge my hon. Friends to oppose it.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I shall not detain the House for long. We have had an interesting debate. The points that have been made by my hon. Friends make a sound case for pressing the new clause to a vote. From my point of view, the various attempts to pronounce the name of my constituency were the most interesting aspect of the remarks made from the Labour and Conservative Benches. I will award marks out of 10 later. The arguments against the measure do not hold water, so I would like to press the new clause to a vote.

Question put, That the clause be read a Second time:—

The House divided: Ayes 60, Noes 297.

Division number 275

See full list of votes (From The Public Whip)

Question accordingly negatived.