New Clause 8 — Rural Fuel Discount Scheme

Orders of the Day – in the House of Commons at 6:45 pm on 25th June 2007.

Alert me about debates like this

Votes in this debate

'(1) The Treasury shall by regulations provide for the introduction, by no later than 1st May 2008, of a Rural Fuel Discount Scheme.

(2) The purpose of the Scheme is to provide a rebate on road fuel duty to qualifying persons at qualifying retail outlets.

(3) Qualifying persons under subsection (2) are persons residing in remote rural areas and qualifying retail outlets are outlets located in remote rural areas.

(4) Regulations under subsection (1) may—

(a) specify the amount of the fuel duty rebate;

(b) define "remote rural areas" in such a way that the combined total of the qualifying remote rural areas does not contain more than three per cent. of the total population of the United Kingdom;

(c) specify how the rebate is to be applied, including—

(i) how a person's eligibility for a rebate is to be verified at the point of purchase of road fuel, and

(ii) how any administrative costs are to be defrayed;

(d) provide for it to be an offence for a person fraudulently to claim a rebate to which he is not entitled;

(e) provide for a system of registration of eligible vehicles.'.— [Danny Alexander.]

Brought up, and read the First time.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster 7:00 pm, 25th June 2007

I beg to move, That the clause be read a Second time.

The new clause would reduce the burden of high fuel costs on residents in remote rural areas, such as those in the highlands and islands, including in parts of my constituency and those of other hon. Members. Some hon. Members here were present for a similar debate this time last year, and I welcome the opportunity to return to the subject. I recall that Labour Members chose to vote against the new clause on that occasion, and Conservative Members by and large abstained. I hope to have a little more support this time, although I note—perhaps this is an augury for the future—that the Chancellor of the Exchequer did not vote last time, so perhaps this is an issue on which he wishes to move forward when he becomes Prime Minister in a few days' time. However, as my hon. Friend Sir Robert Smith says from a sedentary position, his track record may suggest that his heart does not warm to this issue.

In bringing forward the new clause, I have tried to address some of the criticisms that were made when the matter was last debated and I have come up with a modest proposal, but one that will make a real difference and help to remedy a real disadvantage. This is a matter that I raised, in writing, with the Chancellor before the last Budget, and I am grateful for the reply that I received from the Financial Secretary, although it was not particularly positive in terms of moving the issue forward.

Photo of John Redwood John Redwood Conservative, Wokingham

Will not second home owners and millionaires be eligible for this within the chosen areas?

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The right hon. Gentleman raises an important question about the definitions, to which I will come, but I should like to outline my argument first and then address his point.

The justification for the new clause is that in those remote areas where a car is most necessary, where public transport is lacking and long distances are the norm, fuel prices are far higher than they are elsewhere. As of yesterday, the average price for a litre of unleaded petrol in the UK was 96.9p. In Aviemore, in my constituency, it was 99.9p. In Stromness, in the constituency of my hon. Friend Mr. Carmichael, it was 102.9p. In Lerwick, in Shetland, it was 105.4p, a difference of 10p compared with the UK average. In Dalwhinnie, in my constituency, the average price was 10l.1p. In Thurso, the average was 102.3p, showing a range of differences in the sorts of areas that might well be caught within the scope of the new clause, of between 3p and 10p a litre.

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

If my hon. Friend were to take a example from small islands, he would find a far greater differential. The usual price differential between the isle of Coll and Glasgow is about 30p a litre.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

My hon. Friend makes an important point about the impact of high fuel prices on island communities.

Two pensioners wrote urging me to point out to the Chancellor that their car was their lifeline and that this proposal does a great deal to take into account the needs of pensioners in remote highland communities.

Not only is the price of fuel important. There is a triple whammy. There are the higher fuel prices, the fact that people in such areas travel much longer distances than in other parts of the country, and the lack of public transport. In many cases, there is either no viable public transport alternative, or a very limited public transport alternative. That all contributes to the fact that in the highlands, fuel costs are a higher proportion of domestic costs than the average across the UK—18 per cent. of disposable income is spent on fuel in the highlands, compared with a UK average of 13 per cent.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

The hon. Gentleman repeatedly refers to the highlands and to Scottish constituencies. Would any English or Welsh constituencies be affected, particularly given his definition of remote rural areas? Was the 3 per cent. figure put in place to include and exclude certain constituencies, and why not 2 or 4 per cent?

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The hon. Gentleman makes an important point. That figure was not put in to limit the measure to particular constituencies, but to make it clear—this was a criticism made from the Opposition Front Bench last year—that there was no particular limit on the scope of the number of people who might be entitled to this rebate. It is important to make it clear that it is not just Scottish constituencies, but areas within constituencies in England and Wales, that would benefit from this scheme. I intend to explain in more detail the definitions that I propose to use.

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

The 3 per cent. figure is interesting, because it solves some of the difficulties that we have had previously with the various definitions of remote, rural and sparsely populated areas. The implication of this is that it is the car owner who is liable to get the discount. Is the hon. Gentleman suggesting that it would be a car owner or a vehicle registered in a particular area, which would include the people who lived in that area? Does he intend that this will extend more widely in the remote areas that meet that 3 per cent. definition to take into consideration tourists who travel in such areas?

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The hon. Gentleman makes an important point. The scheme would not apply to tourists. There is a good case for having a more generally available scheme to answer such points, but one of the major arguments against the proposal last year, which the hon. Gentleman supported, was the potential for leakage outside the target population for the measure. The reason for limiting the scope is to try to find a way to deal with the problem of leakage in an effort, I hope not a vain one, to encourage Treasury Ministers to look more favourably on trying to find a way to move this forward.

As I was saying, fuel prices are a higher proportion of costs and average incomes are lower in the highlands—they are only 85 per cent. of the UK average—and that is important in the context of social justice. I am a member of the Scottish Affairs Committee and we recently visited Bonar Bridge in the highlands, and it was made clear that one of the major barriers to work for people on low incomes was the perception that in addition to all the other calculations that would have to be made in terms of being better off in work, there was the cost of travel to work. That also applies to the long distances that many people who live in remote areas have to travel to access public services.

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

While my hon. Friend was visiting Bonar Bridge in my constituency, did he notice that there were no petrol stations there? The nearest one, a mile away in Ardgay, closed because it was not viable. The residents of the area now have the added burden of having to make roughly a 25-mile journey to fill up.

J

I would like to point out to those not familiar with the Sutherland region that there is a 39 mile long 'A' Road between Helmsdale and Melvich that does not have any public transport at all....

Submitted by Jim Brown Continue reading

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

I did indeed notice that. I hope that the scheme that I am proposing would benefit not only the people who live in remote rural areas but the filling stations located in those areas, which provide a vital service to their communities.

The scope of the duty rebate would be limited under European law by the energy products directive. Briefings from the House of Commons Library have made it clear that the directive limits the scope of any rebate to 3.54 euro cents per litre. I use the euro cents definition for the benefit of Mr. Redwood and others. At today's exchange rate, that would equate to 2.4p per litre of unleaded petrol. The proposal would not, therefore, go the whole way towards closing the gap that I have described. Indeed, I might choose on another occasion to argue that the amount allowable for the rebate should be greater, because of the differences in prices that I have described, particularly in island communities. However, that argument should be left until the principle behind the measure that I am proposing has been established. I hope that the House will show its support for that principle by supporting new clause 8.

The scheme would be available to people who live in remote rural areas when they purchase fuel in filling stations located in those areas, thereby protecting those valuable services. There would be a need for the scheme to be administered, perhaps using a simple swipe card system. Hon. Members representing Scottish constituencies will know about the Scottish Executive's air discount scheme, which entitles people living in island communities to discounts on their air fares as they travel back and forth from their homes. It is possible to administer schemes of this nature in a simple, cost-effective way, but administration would none the less be needed, not least to protect against the potential for fraud and leakage that Treasury Ministers were concerned about last year. For the same reason, it would be linked both to the individual and to their registered vehicle. I do not believe that there would be leakage or fraud, but having a simple registration scheme for the individual person and their vehicle would address the concerns previously expressed by Ministers.

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

The hon. Gentleman has referred to both the owner and the vehicle. Will he clarify to which one the rebate would apply? If it would apply to a vehicle that is registered and routinely used in a sparsely populated area, I can appreciate that. If it would apply to an individual who used a number of vehicles in such an area, perhaps for work, I would understand that too, but there needs to be clarity as to whether it is the one or the other.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The new clause is clear on that point. The discount would apply to individuals who had their main residence in such areas, but the vehicles that they wished to use while claiming the discount would also have to be registered.

The right hon. Member for Wokingham made a good point when he asked how we could protect against second home owners taking advantage of the discount. There are already schemes in place in which second homes have to be registered for certain purposes, such as the claiming of council tax discounts. Perhaps that information could be used for these purposes. Equally, it could be a requirement that the home that was registered for the purposes of the discount should be the person's principal private residence for tax purposes. That does not wholly answer the right hon. Gentleman's question, but it would at least partly tackle the issue that he has raised.

International comparisons also exist. France, Greece and Portugal already take advantage of the derogation available under EU law, albeit for slightly different purposes.

Photo of James Duddridge James Duddridge Conservative, Rochford and Southend East

Knowing what a hassle it is to register for the congestion charge and to pay it on various days, I wonder what assessment the hon. Gentleman has made of the administration costs and bureaucracy that would be involved in this process, in terms not only of money but of the hassle for our constituents.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster 7:15 pm, 25th June 2007

I think that this scheme would be a great deal easier to administer than the congestion charge, not least because the eligible registrants would be receiving a benefit rather than paying a cost. That would result in a great deal more enthusiasm for the registration process, which could be made very simple. I gave the example earlier of the air discount scheme, which has a very simple registration process. Adopting something along those lines would ensure that the procedure was neither complicated nor bureaucratic.

I have also, quite fairly, been asked what exactly constitutes a remote rural area. The 3 per cent. figure has been referred to, and the new clause makes it clear that such an area would be defined by regulation. However, I should like to make some suggestions on that point. There are different definitions of remote rural areas in Scotland, compared with England, Wales and Northern Ireland. I would suggest that, in Scotland, areas classified as remote small towns, very remote small towns, remote rural areas and very remote rural areas under the Scottish Executive's urban and rural classification scheme—with which I know Members will be familiar—should be included. In England and Wales, sparse rural small towns, villages and dispersed areas—as defined by the Countryside Agency's rural and urban area classification scheme of 2004—seem broadly similar to the Scottish definitions that I have described.

On the basis of those definitions, I estimate that 2.71 per cent. of the UK population would be entitled to claim the proposed discount. I do not have an estimate of the number of filling stations in those areas; that information is not available. The 3 per cent. limit would allow for some variability in the definitions if, for example, it became necessary to ensure that there was absolute consistency between the arrangements in Scotland, England, Wales and Northern Ireland. Those definitions are clearly understood by the agencies that promulgated them, and they are already used by the Government for other purposes.

My assumptions on costs may be challenged but, working on the basis of a discount of 2.4p or 3.54 euro cents for that percentage of the population, if everyone spent all the money that they spend on fuel in rural filling stations and consumed fuel on an equal basis, I estimate that the cost would be about £32 million.

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

The hon. Gentleman has just mentioned people spending money in rural filling stations. The new clause states:

"The purpose of the Scheme is to provide a rebate on road fuel duty to qualifying persons at qualifying retail outlets."

Is it not possible that someone might qualify but choose to buy their petrol in an area that is not considered remote, because that was a sensible thing to do? How would the scheme work in those circumstances?

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The hon. Gentleman makes an important point. The purpose of the scheme is to level the playing field. In my constituency, for example, the city of Inverness would not qualify for the discount under the scheme because petrol prices there are pretty near to the UK average. We are not seeking to implement the scheme in such a way that it would lead to a cut in prices there. Similarly, if the hon. Gentleman drove to London and bought petrol here, that would not qualify. In the case of Inverness, I shall concentrate on persuading Tesco to cut the price of its fuel to the same level that it charges at its store in Elgin, where it has competition from Asda. It has no such competition in Inverness. That would ensure an additional benefit.

The scheme would bring significant benefits to rural areas and address an obvious injustice. In the longer term, a scheme involving road user pricing would bring the combination of benefits and environmental advantages to remote rural areas that the Liberal Democrats are seeking to achieve. In the meantime, however, given that a car is a necessity in those areas, and the amount of car use will not be reduced or increased, it would be wrong to reject the new clause on an environmental basis. We have other ways to promote the use of fuel-efficient vehicles, for example through vehicle excise duty incentives. The scheme is designed to reduce the additional cost burden on people living in the communities that I have described, and I commend it to the House.

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

I want to pay two compliments to Danny Alexander. First, he undoubtedly spoke from the heart on behalf of his constituents. Secondly, in putting the proposal together, his party has made some attempt to listen to some of the criticisms that were ventilated in relation to last year's proposals, which he mentioned, and to which I will return in a moment.

As was apparent, the new clause is the Liberals' latest attempt to find a workable solution to some of the problems that undoubtedly afflict people living in remote rural areas and rural areas generally. As I said in Committee, it is incontestably true that people living in remote rural areas often do not have access to public transport in the way that people in less remote areas do, nor do their circumstances make walking, or even cycling, practical.

The 2003 national travel survey for England—the hon. Gentleman did not make clear how many people in England and Wales would be covered by the proposal, but we will return to that in a moment—showed that half the residents in rural settlements of fewer than 3,000 people lived within a 30-minute walk of a bus stop. According to the expenditure and food survey for 2002-03, households in such areas spent £70.60 on transport, compared with households in rural areas, which spent £45.50 on transport. Of course, there is less congestion in some areas, which can lead to apparently counter-intuitive results—a bus in a remote area may be less environmentally friendly than a car if that bus carries only a few people. In short, people in such areas often need cars, and the hon. Gentleman's remarks about fuel prices in those areas were entirely apposite.

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

To reinforce the hon. Gentleman's bus analysis, not only is a bus with few passengers less environmentally friendly than a car, but a car, because it is used only when a journey is necessary, makes less impact on the environment.

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

I am sure that the hon. Gentleman is correct, and I think that he made that point in the same debate last year.

Last year, the hon. Member for Inverness, Nairn, Badenoch and Strathspey attempted to alleviate such problems by proposing lower rates of fuel duty in remote areas. The Liberals also tabled an amendment to raise band G vehicle excise duty rates in general, but in some areas to cut all bands, for what were then old cars—including band G cars, which are the most polluting—and in other areas to cut all bands except band G, for what were then new cars. As Members who were present for last year's debate will recall, those amendments did not stand up to examination in every detail. In effect, that was acknowledged by the hon. Gentleman when he proposed the new scheme. It is perhaps significant that the Liberals have not retabled the VED cut proposal at all this year; they did retable the lower fuel duty rate proposal, but in Committee, not on Report. It was significant that Julia Goldsworthy said in Committee that she was doing that "to highlight a principle", which suggested to me that she did not have any great confidence in its practicality.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey has proposed, essentially, a coupon scheme, but he described it as a kind of swipe-card scheme. Under the scheme, people who live in remote rural areas and drive eligible vehicles would be entitled to cash in their coupons or swipe their cards at qualified retail outlets for a rebate. That raises several questions.

To return to last year's debate: is there an accepted definition of a remote rural area? Stewart Hosie famously pointed out last year—in Committee, I think—that there are several definitions. Certainly, were the proposal to be progressed, the 3 per cent. figure would have to be considered closely. Once that problem is settled—I shall assume that it is capable of being settled—there is the question of who should qualify, which the new clause as drafted does not make clear. Is it right, for example, that a multimillionaire with a second home in a remote rural area should be able to get a discount, whereas a widow dependent on benefits in an urban area should not? Once that is settled, there is the question of what vehicles should qualify. If band G vehicles, for example, are not to qualify—on paper, there is a case for them not qualifying—will our multimillionaire driving a band F vehicle get a discount, while, say, a farmer on a lower income driving a band G vehicle does not?

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The hon. Gentleman makes an interesting point. However, in answer to Mr. Redwood, who is no longer in his place, I suggested that a requirement that the remote rural area be the individual's primary residence for tax purposes would, except in the case of the small number of multimillionaires who live permanently in such areas, deal with that.

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

The hon. Gentleman did make that point, but that is not in the proposal that is before us to vote on. He proposes giving the Minister power to define such matters in regulations; I shall return to that point later.

There are further questions. What are the qualifying criteria for retail outlets? How is the identity of the person claiming the rebate to be verified? Should the proposal be met by a commensurate tax rise elsewhere? The debates have already established pretty clearly that the use of the derogation in France has raised fuel rates in some areas, in order to pass on the reduction to others. The hon. Gentleman and his party would have to answer that question. In Committee, the Liberals simply said that they would favour a tax cut. I am simply saying that that is not how the derogation appears to be working in France at present.

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

The hon. Gentleman is right: in France, the derogation is leading to an increase in regional rates. Principally, that is to help defray the costs of responsibilities that used to be carried out by central Government and are now carried out at the regional level, and it is time-limited to three years.

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

I am grateful to the Financial Secretary for that information.

I am not saying that all these questions are incapable of resolution; plainly they are, or at least might be, capable of resolution. None the less, the terms of the new clause, on which the House will presumably be asked to vote, are, like last year's proposals, not a workable solution. I want to explain why.

Photo of David Heath David Heath Shadow Leader of the House of Commons

I am listening carefully to the hon. Gentleman's detailed arguments as to why my hon. Friend's proposal does not work. He has acknowledged that those of us in rural areas, where fuel prices are higher and there is no access to public transport, have a problem. What is his solution to that problem?

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

I am tempted to reply that when we get a workable solution, rather than three unworkable proposals, we will respond with our own; my answer, however, is that I will come to that precise point in a moment, and explain why we might have been able to support the new clause had it been formed in a slightly different way.

A Bill is amendable, but regulations are not. Under the new clause, before the next Finance Bill completes its passage—we must presume that it will not have done so by 1 May—Ministers would introduce the scheme by unamendable regulation. That cannot possibly be right. Were it right to propose such a scheme, surely Members would want to be able to amend the proposal. However, we have not had any proposal that is capable of being amended, only a vague outline proposal.

We would have been pretty sceptical had the Liberals tabled an amendment calling for a report on the swipe-card scheme, but we would have said that the Treasury should publish an assessment. I am not sure why the hon. Member for Inverness, Nairn, Badenoch and Strathspey did not table an amendment calling for a report, because plenty of amendments do. Perhaps he felt that there were already a lot of those. Whatever his reason, he has essentially proposed an outline scheme, which the Minister would be required to rush through before the next Finance Bill is complete and which the House could not amend. On that basis, no one should support it in the Lobby.

Several hon. Members:

rose —

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I am looking for Julia Goldsworthy among a forest of her colleagues. I think that I should give the Liberal Front-Bench spokesman the opportunity to speak first.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury 7:30 pm, 25th June 2007

Mr. Goodman finished slightly more abruptly than I expected him to, Mr. Deputy Speaker.

I welcome the opportunity to discuss the proposal further, not least because it has been interesting to have a little more light cast on the absence of any constructive proposals from the Conservatives. The hon. Gentleman said that the problem could have been resolved had the new clause been phrased slightly differently, but we see no alternative.

Watch this

This video starts around 324 speeches in (move there in text)

Embed this video

Copy and paste this code on your website

Hide

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

In so far as is practicable, can the hon. Lady explain why her vehicle excise duty proposal, about which her hon. Friends spoke so passionately last year, has not been retabled?

Watch this

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

I am sure that you would call me out of order, Mr. Deputy Speaker, if I suddenly disappeared down a side alley to discuss the vehicle excise duty when we are talking about a fuel duty rebate. It might be worth pointing out in passing, however, that proposals similar to those made by the Liberal Democrats have been accepted to increase vehicle excise duty. The principles, therefore, have been adopted.

Watch this

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport, Liberal Democrat Spokesperson (Transport)

If those on the Conservative Front Bench accept that there is a problem but choose not to propose a solution, surely the only conclusion we can draw is that they simply do not care.

Watch this

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

I am afraid that my hon. Friend has drawn a rather depressing, although wholly accurate, conclusion.

In the Committee of the whole House, Rob Marris commented on the need to have carrots and sticks for environmental measures to try to change behaviour. We discussed those issues, including this one, at great length. I am pleased that my hon. Friend Danny Alexander has developed the argument further since we had the opportunity to raise it in Committee a few weeks ago.

In terms of the carrot and the stick, my hon. Friend was trying to make the point that in areas of his constituency—and, for that matter, in areas in my neighbouring constituencies, although I suspect not in mine because it is urban—where there is no alternative to the car, the increase in fuel duty proposed by the Chancellor in the Budget, a measure that the Liberal Democrats welcomed, will not have an impact on people's behaviour because it is impossible for them to change it, as there is no alternative. On that basis, it is sensible for the Government to consider seriously the idea of taking up the derogation from article 19 of the EU energy products directive, as other countries have done, and recognising the difficulties that people in rural areas face.

As my hon. Friend said, those people are facing a triple whammy. They have lower wages than average and no access to public transport, and they pay higher fuel prices at the pump. His solution is not that they should have cheaper fuel, but that they should pay a price comparable with that paid by others. It is important not to underestimate the effect that that triple whammy has not just on those individuals, but on the local economy. If people have to drive elsewhere to get fuel for their car, the chances are that they will spend their money in other places as well. It will undermine their local community and leave people who do not have access to a car with less access to other resources, because—

Watch this

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I am sorry to interrupt the hon. Lady, but her voice fades away if she turns to her colleagues and does not address the Chair. That is most distressing for those who are trying to report our debate.

Watch this

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

I am sorry, Mr. Deputy Speaker.

We have a practical remedy. One reason why we have the differential in fuel prices is market failure. Prices are higher not just because the cost of transporting the fuel is higher, but because there is no competition. It has been argued that the proposal could be abused, but if people have to drive a 25-mile round trip simply to get to their nearest petrol pump, the idea of their doing a 100-mile round trip to get 1p off a litre of fuel is highly unlikely.

We would have welcomed amendments from the Conservatives.

Watch this

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Can the hon. Lady indicate whether she thinks that if the price of fuel went down in rural areas as a result of the new clause, fuel usage would be likely to remain the same or go up, first by existing residents of remote rural areas, and secondly in terms of encouraging commuting by people who currently do not live in those areas but who would go there to get cheaper fuel, and therefore commute longer distances? She talks about local shopping. If fuel becomes cheaper for people in remote rural areas, it strikes me, as someone who represents people who live in an urban constituency, that lower fuel prices would make them more likely to drive a distance for their shopping than to support the local shopping facilities that she and I wish to see.

Watch this

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

Had the hon. Gentleman been in the Chamber when my hon. Friend laid out his argument, perhaps he would have understood that such individuals would not qualify for the scheme set out in the new clause.

Watch this

Photo of David Heath David Heath Shadow Leader of the House of Commons

Some hon. Members who represent urban areas should get out into the country more and see what life is like there. There is not a local shop to go to, because it is closed. There will not be a local garage to go to either, unless we have this proposal or something similar.

Watch this

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

My hon. Friend's comments are self-explanatory.

Listening to the debate, and thinking about the impact that higher fuel prices are having in many rural constituencies, draws my mind back to comments made by the current Chancellor—the Prime Minister of the very near future—on the need for child poverty to be recognised and for action to be taken across Departments to tackle it. Fuel poverty is recognised more widely, and the Government have acted to address that problem. We have raised the specific example of people on low incomes who spend a relatively high proportion of their income on fuel to get around, and to get to their jobs. I am interested to hear how the Treasury thinks that not having proposals to tackle that problem is having an impact on fuel poverty. When the new Prime Minister is in his place, perhaps the Government will need to think again about taking action if they are to hit their poverty targets.

Watch this

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

I have some sympathy with the new clause, not least because I tabled similar amendments in the past few years, in particular in what was new clause 6 on the Floor of the House on 28 June last year. Proposed new subsection (1AB)(b) of that new clause provided for

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

I hope that Danny Alexander recognises that, as John Thurso did not in last year's debate.

The hon. Member for Inverness, Nairn, Badenoch and Strathspey has at least sought to answer some of the legitimate questions posed about similar amendments over the past few years. He has, however, left other questions unanswered, and I shall touch on those in turn. Subsection (2) of new clause 8 says:

"The purpose of the Scheme is to provide a rebate on road fuel duty to qualifying persons at qualifying retail outlets."

At that point, the hon. Gentleman should have mentioned qualifying vehicles.

The hon. Gentleman has tried to use regulations to define remote rural areas. In a sensible attempt to bypass the definitions already in place—which, off the top of my head, I think may cover 95 per cent. of the land mass or 30 per cent. of the people—he has limited the definition to the land mass that contains no more than 3 per cent. of the population. It may be arbitrary and need to be defined a little more, but that approach is sensible.

The hon. Gentleman said that regulations would provide for a system of eligible vehicles. A great deal more work is required to be done on that, especially if we are not simply taking account of the cost of living issues in remote rural and sparsely populated areas, but considering economic development in those areas as well, particularly in relation to a very short seasonal tourist trade. I am not making a special pitch for that tonight, but work should be done on that issue in conjunction with the rest of this area.

The hon. Gentleman did not define the primary residence qualification, which would have been useful in defining who and what was eligible, but work could be done on that. He did say that the regulation would look at how administrative costs would be defrayed. The difficulty is that that would cover only the administrative costs of a system that might be cumbersome and slightly bureaucratic—although it would not necessarily be so. There is no attempt to specify how the real cost of the reduction might be funded, as we did previously with the VAT offset.

Having said all that, I would not normally support an amendment with so many weaknesses, but the hon. Gentleman said that he would seek a derogation and he hoped that the principle of what he was proposing—that the high costs faced by those living in sparsely populated areas should be defrayed—would be accepted. With that heavy caveat on the record, we would be prepared to support the new clause, should he push it to a vote.

More importantly, Mr. Goodman said that he believed that some of the issues were resolvable. In previous debates, the Financial Secretary has expressed some sympathy for people who live in remote and rural areas and suffer from what are, in some cases, 10, 15 and 20 per cent. increases in the cost of a litre of fuel compared with the average price in the nearest modest county town or city. With the good will that exists, and the persistence shown by many hon. Members on this issue, I hope that a solution to the problem might be found for a subsequent Budget or Finance Bill. I look forward to hearing what the Financial Secretary has to say on this .

Watch this

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

I rise to support my hon. Friend Danny Alexander and to congratulate him on having taken on board the criticisms that have been made in the past and coming up with a workable and sensible scheme. If I had a criticism of it, it would be that it shows too much restraint and not enough generosity, but I would rather have some crumbs than none at all, so I am happy to support him. If there is an element of "Groundhog Day" about this debate, I make no apology for entering the fray again. As a great Scottish king once said, if at first you do not succeed, try, try and try again. My hon. Friend is certainly doing his best.

The issue is simple. As I drove down the A9 this morning, in Brora, petrol was 102.9p a litre, so it is at a premium compared with the figures that my hon. Friend gave for Inverness, Edinburgh and London. That is a regular occurrence. Over the years that I have spoken about this issue, I have looked at the premium on many occasions and it ranges from a minimum of 6p up to a maximum in my constituency of 12p. The reason is straightforward—it has been investigated repeatedly by the relevant competition authorities—and it is because there are too few vehicles crossing the forecourt to provide sufficient cash income to cover the fixed costs of running that forecourt. Therefore, the extra price is necessary. My hon. Friend spoke of the triple whammy, and I will not labour that point, but I will point out some of the facts about the location of petrol stations.

If one is at the western end of the north coast at Durness and one drives for an hour or so to Tongue, which is about halfway across, there are no petrol stations in between. It is some 50 miles, but much of the road is single track and it is mostly empty and straight, so one drives at an average 50 to 55 mph. Between Tongue and Thurso there are two petrol stations, one in Caithness, near Thurso, and one that is about halfway. If one goes south from Durness to Kinlochbervie, which is the best part of two hours to drive, there is one filling station on the main road at Scourie. The residents of those areas therefore have to drive up to 20 miles and back just to fill up. Part of the problem is that rural filling stations have closed because they have been unable to keep going for the commercial reasons that I have mentioned.

We all accept that in the 21st century transport in such areas is not a luxury but a necessity. If one wishes to access a hospital from the north of Sutherland, one has a 200-mile plus round trip, with no public transport that can get one there. The NHS Highlands is good about providing taxis for those who cannot access private cars, but the vast bulk of people have to use a private car. Many services that people throughout the country take for granted as readily accessible are, as a matter of course in the far north, a 20, 30, 40 or 50 mile journey.

My hon. Friend's scheme of a 2.4p rebate, based on the tight criteria he has drawn and using the experience of the Scottish Executive's air discount scheme, which applies to Caithness and most of Sutherland as well as the islands, is a good one. He has given the figures for the cost to the Exchequer, but he has worked them out on the basis that 100 per cent. of those eligible will take up the scheme. As we know from questions asked in the Treasury Committee, the take-up rates of almost every benefit offered are 50 per cent. or lower. It is therefore highly unlikely that that cost would be the effective cost. I have one small suggestion that might help, which is to devolve the issue to the Scottish Government and let them pay for it out of the block grant. That would remove the cost from the Treasury entirely and please Stewart Hosie.

The burden carried by my constituents is very real and I have sought to bring it before the House on several occasions, as have my hon. Friends who represent similar constituencies. It is a genuinely practical scheme, which would allow Ministers to put something in place that would alleviate that burden without giving any advantage. I was heartened to hear Mr. Goodman, speaking for the Unionists, talk about his agreement with the principle, which is a great step forward from last year. I only hope that the occupants of the Treasury Bench will have undergone a Damascene conversion from their somewhat uncaring attitude and that we may look forward to some encouragement at least from the Financial Secretary.

Watch this

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland) 7:45 pm, 25th June 2007

We all know that fuel that is sold in remote areas is sold at a much higher price than in urban areas. The purpose of new clause 8 is to achieve a level playing field to work against the triple whammy of higher fuel prices, no public transport alternatives and the need to drive longer distances. I shall give some examples from my constituency that will show how large the differentials can be. On the large islands of Mull and Islay, a litre of unleaded is usually some 15p to 20p more than in Glasgow. On the smaller islands, the differential is much greater. On Coll and Colonsay, it is usually some 30p a litre extra.

The additional cost works its way through the whole economy. We all know that the price of fuel adds to the price of all other goods. High fuel prices make it more difficult to run and sustain a business in those remote areas. The remote communities in the highlands and islands have suffered years of population decline, which unfortunately shows no sign of stopping. High fuel prices are clearly part of the problem, as they discourage people from starting up the businesses that would create the jobs that would allow young people to stay.

The environmental justification for high fuel taxes is that they can be used to encourage people to change behaviour, but that does not apply in remote rural areas with no public transport alternative. It would make no sense for councils in such areas to subsidise bus services, because most of the time the buses would run empty, or with only one or two passengers. There is no alternative to car travel in such areas, and no environmental argument in favour of higher fuel taxes there.

Cutting the price of fuel by a few pence a litre would not encourage more people to drive more. People do not drive dozens of miles along twisting, single-track roads just because they enjoy it; they make such journeys because they have to. The car is not a luxury; it is an essential.

Watch this

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I think that I understand what the hon. Gentleman is saying about car usage. I realise that the elasticity of demand for fuel is not great in remote areas, but one would normally expect usage to increase if the price went down. However, if he is saying that that is not the case, is he also saying, conversely, that it is not Liberal Democrat policy to raise car fuel duty across the board, in line with the party's green tax commitment, to discourage usage? The hon. Gentleman does not think that a higher price would do that, just as he does not think that a lower price would encourage usage.

Watch this

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

In the vast bulk of the country, putting up the price of fuel would encourage people to use more environmentally friendly alternatives, but that argument does not apply in remote rural areas where there is no alternative.

Watch this

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport, Liberal Democrat Spokesperson (Transport)

I have explored this very question with one of the local filling station owners in a village near my own in Orkney. He has told me that when the price of petrol falls, as it does from time to time in response to reductions in the wholesale price, he sees absolutely no change in demand. Does my hon. Friend agree that we may be able to use that evidence to offer some reassurance to Rob Marris?

Watch this

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

I thank my hon. Friend. His intervention is very helpful to the argument and demonstrates the point that I am making.

New clause 8 would help reduce the burden on people living in remote rural areas. It restricts the definition of such areas so that the combined total of qualifying areas would not cover more than 3 per cent. of the UK's total population. Therefore, its cost to the Treasury would be very small. The maximum differentiation of duties allowed under the EU energy products directive is 3.54 eurocents per litre for unleaded petrol. At current exchange rates, that amounts to 2.4p a litre, or roughly 5 per cent. of the duty. For diesel fuel, the maximum differentiation is 2.3 eurocents, or 1.56p.

I would like the Government to negotiate in Europe for a higher differential, but 2.4p is the maximum currently allowed. As my hon. Friend Danny Alexander explained, reducing fuel duty by that amount for dwellers in remote rural areas would cost the Treasury about £32 million a year. I think that the Treasury can well afford that sum, and the new clause would mean that extra money would be available for people in remote rural areas. If it were spent in those areas, it would go a long way towards regenerating the rural economy.

I and my hon. Friends raise this matter every year, because it is a severe problem in our constituencies. The members of the Conservative Front-Bench team have accepted that a problem exists, but they do not appear to have a solution. I hope that the Government will accept today that there is a problem and, even if they feel that they cannot accept this new clause, come up with a solution of their own. In terms of fairness and social justice, such a solution would be of great benefit to rural areas.

Watch this

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

It is the Report stage of the Finance Bill, so it comes as no surprise to hear the Liberals plead for special tax breaks for motorists in rural areas—and especially in Scottish rural areas. We on this side of the House have quite enjoyed the bickering between the two main Opposition parties, as we have the fact that the consensus between the Scottish nationalists and the Liberals about this new clause shows that coalition politics is clearly breaking out.

Watch this

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

In all honesty, should not the Financial Secretary thank the Liberals for proposing that he have the power to bring forward, within a year, regulations that they would not be able to amend?

Watch this

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

I do not know about thanking the Liberals, but I should thank the hon. Gentleman for his detailed demolition of some of the most obvious practicability problems, as he called them, with the new clause.

I express again the sympathy that I have expressed before for some of the problems caused by higher pump prices in rural areas than elsewhere in the country. However, they are high not because of tax rates but because of high distribution costs and the typically low-volume throughput of rural petrol stations. The problem is not one of market failure, as Julia Goldsworthy contended, but of low market demand. That is at the root of the problem, and I have not heard a strong enough case to justify using tax to interfere with, and in some way direct, the commercial process of price setting.

Other, more environmentally friendly ways exist to help people facing additional costs. We have debated on other occasions the Scottish Executive's rural transport fund, which has helped more than 150 rural community transport schemes since 1998. Moreover, the Commission for Rural Communities has found that Government policies on transport in rural areas have made a significant difference in the fight against disadvantage there.

There are problems with how to define "rural" or "remote rural" areas, with whether eligibility should depend on the registration of the vehicle or on the driver's residency, and with the fact that the cost of fuel is part of the overall cost of living. In fact, housing is more expensive in many urban areas than it is in most rural areas but, leaving all that aside, we must be really clear about what the new clause would not achieve.

The new clause would not guarantee any reduction in the prices that people pay for their petrol or diesel at the pumps. That is because it would be impossible to guarantee that a fuel supplier who would benefit from any duty reduction under the proposed arrangements would pass it on to his customers—especially in areas with little competition, such as those that the Liberal Democrats are concerned about.

Watch this

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport, Liberal Democrat Spokesperson (Transport)

I am intrigued by the way that the Financial Secretary compared the cost of fuel in rural areas with the cost of housing in urban areas. Is there a hint, underlying that thesis, that the Chancellor of the Exchequer, who represents Kirkcaldy and Cowdenbeath, was wrong yesterday to suggest that there should be an increase in the availability of social housing in urban areas?

Watch this

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

No, my right hon. Friend was absolutely right to do so. A renewed Labour Government will deal with the real concerns about the availability and affordability of housing, but my point was that the cost of fuel is part of the overall cost of living. Prices for some of the commodities that people need and use happen to be lower in rural areas than they are in urban areas.

Watch this

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

Does the hon. Member for Inverness, Nairn and the rest of his constituency wish to intervene?

Watch this

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury 8:00 pm, 25th June 2007

In some areas of my constituency and the neighbouring constituency average house prices are 30 times average income, so the hon. Gentleman may be wrong to say that rural areas have lower housing costs.

Watch this

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

I shall move on.

It is important to be clear about what would not be guaranteed under the proposals and about their practical impact. Trying to implement such proposals would involve complex and expensive changes to the tax system. Danny Alexander knows that the duty point for hydrocarbon oils is either when the oil is imported into the UK or when it leaves a refinery. At present there is no mechanism—as would be required under his proposals—to account for duty where the fuel is used. Moving the point at which the duty becomes payable down the consumer chain would mean that instead of hundreds of companies being liable to pay fuel duty, thousands would have to pay it. Such an exercise would self-evidently be complex, expensive and burdensome.

This is the Report stage of the Finance Bill, so this is the Liberal proposal to benefit motorists, but I am afraid that this is me from the Treasury Bench saying that the case has not been made in principle or in practice. If the hon. Gentleman wants to push the new clause to a vote, I urge my hon. Friends to resist it.

Watch this

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

I am grateful for the contributions that have been made in the debate. We have heard some positive remarks from the Liberal Democrat Benches and a grudgingly positive remark from Stewart Hosie.

The hon. Gentleman referred to the costs of the proposal. My estimate of £32 million is not a spending commitment, because we would seek to ensure that those funds were provided through the rest of the fuel duty system, which would result in only a minuscule change overall in a system that currently yields £23 billion. Only a tiny adjustment would be necessary to make the rebate financially possible.

The contribution of Mr. Goodman was astonishing. He expressed sympathy for the plight of rural people, but did not propose to lift a finger to do anything about it.

Watch this

Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Transport, Liberal Democrat Spokesperson (Transport)

Does my hon. Friend agree that the true magnificence of the Conservatives' position becomes apparent when one considers their view about a national road user pricing scheme, which in the long term is the obvious way to reduce the costs of motoring in remote and rural areas? The Conservatives are not even promising us jam tomorrow.

Watch this

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

Will the hon. Gentleman state for the record that he would be happy for the Financial Secretary to come to the House next year with a scheme whose regulations the hon. Gentleman and his colleagues will not have an opportunity to amend?

Watch this

Photo of Danny Alexander Danny Alexander Shadow Secretary of State (Cabinet Office) and Shadow Chancellor of the Duchy of Lancaster

The hon. Gentleman hangs his argument on that constitutional point, but on several occasions, in relation to different measures, he has proposed amendments allowing regulations, to which the same point would apply. It is a characteristic of legislation that primary legislation makes things clear at one level, while regulations do so at another, which is entirely appropriate in this case and would be a pathetic reason not to vote for this important new clause. The Conservatives' position is characteristic of their approach to the highlands and islands over the years.

The Minister referred to the impact of the new clause on the market. It has been demonstrated, not least by the comments of my hon. Friends, that the market operates quite differently in the areas we have been talking about. The provision will not obstruct the more general operation of the fuel market across the country; it will deliver a small but important and significant rebate to hard-pressed communities.

The Minister misunderstood the proposal in one respect. He said that there was no way to ensure that the benefit was actually passed on. However, ensuring that the discount was available only to qualifying persons at qualifying filling stations would mean that on presenting their swipe card the eligible person would receive a discount on the advertised price at the filling station, which would undoubtedly be selling petrol to other individuals at that advertised price. There would clearly be a difference, from which the qualifying person would gain. The Minister may have misunderstood that important point.

I was sorry to hear that the Minister could not understand how the proposal could be made to work, especially as our proposal is a great deal simpler than the extensive administration of the tax credit system over which his Department presides—although I would not use that as an example. The scheme is simple and modest, and would deliver real benefits to the people of remote rural areas. For that reason I shall press the new clause to a Division.

Watch this

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

The House divided: Ayes 55, Noes 268.

Watch this

Division number 150 Orders of the Day — New Clause 8 — Rural Fuel Discount Scheme

Aye: 55 MPs

No: 268 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Watch this

Question accordingly negatived.

Watch this