I beg to move amendment 13, page 10, line 24, at end insert—
'(2A) In section 6 (excise duty on hydrocarbon oil) after subsection (1A) (as amended by subsection (2) above), insert—
"(1AA) In every Budget Statement and pre-Budget Statement the Chancellor of the Exchequer must provide a forecast for oil prices and set out anticipated yield from fuel duty and VAT on fuel for that price and for a range of prices up to 50 per cent. above his forecast.
(1AB) The Treasury must, following each such statement, by regulations made by statutory instrument reduce the rates of duty specified in subsection (1A) in direct proportion to the increase in the costs accounted for by VAT.
(1AC) Whenever international oil prices rise above the level estimated by the forecast made in accordance with subsection (1AA), indexed fuel duty increases shall not take effect until the international oil prices return to the forecast level or the forecast price is amended by the next Budget or pre-Budget Statement."'.
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With this it will be convenient to discuss amendment 11, page 10, line 40, at end add
', provided that before this date, the Chancellor has published a report examining the costs and benefits of the introduction of an automatic fuel duty stabiliser whereby the rates set out in HODA 1979 vary inversely in comparison to oil prices.'.
The arguments that I want to present have been reprised over many years. Indeed, I have the Hansards of all the debates going back to 2005 and will refer to some of them. On a number of occasions when I have tried to introduce a similar measure, there have been rather different circumstances, with modest, and sometimes significant, price spiking, the consequence of which we have seen.
In 2005, when I first attempted to introduce a similar measure, I pointed out that the price of a litre of unleaded petrol had risen by 6p over six months, to 86p a litre. By the time that we debated the issue in 2008, the price of fuel had gone up to between £1.10 and £1.30 a litre, and on some of the islands, as well as in the more remote rural areas, it was significantly more. Today the price is relatively stable at about 95p a litre and $50 a barrel. Just for hon. Members' information, in 2008 the price crashed through the $140 a barrel level.
However, there is no certainty that prices will remain relatively low or relatively stable. Indeed, as the world comes out of recession, they might well rise. If India and China regain some of their impetus, there will be increased demand and inflationary pressures. If there is a cold European or north American winter, there will be demand on hydrocarbons and inflationary pressures. There might be supply-side shocks if there is war or terrorism in an oil-producing region, thereby causing the barrel price to rise. If we have natural disasters that take out refining capacity, which has happened before, there might be a significant price rise.
Even without any of those eventualities, which are risks that we can identify, some future prices—for next year's delivery, for instance—are already 40 per cent. higher than those today. Indeed, I have seen delivery costs for 2015 that are more than 40 per cent. higher than those today. My judgment, which reflects comments made in previous debates, is that it is better to try to introduce a mechanism to smooth out price increases when prices are relatively low and we have relative stability than to wait until prices shoot up again. We must take cognisance of the eventualities that we can predict—we know what has happened in the past three or four years—and take action to mitigate identifiable risks, not least because we know the impact of a prices spike on families and businesses, including the haulage sector and other communities.
In our 2005 debate on this subject, when there was a modest increase, the AA was quoted as saying that, because of the 6p increase over the previous six months,
"individual motorists have seen the monthly cost of petrol for a typical privately owned car rise from £87.43 in January to £94.02 in May. In households with two cars this represents a £13.18 hit on family expenditure each month".
That was a modest rise, but it was none the less significant over the piece. In that debate, we also learned that bankruptcies among hauliers were running at twice the average for other industries at that time. We must avoid that in future. Hauliers' average running costs then were 52p a mile and, as was pointed out:
"Competition from hauliers in Europe, driven by lower fuel prices elsewhere, have led to a massive reduction in the percentage share of cross-channel freight delivered and carried by UK hauliers. The industry and, indeed, domestic car users pay some of the highest fuel prices in Europe, driven by some of the highest taxes on fuel in Europe of 69 to 74 per cent."—[ Hansard, 6 July 2005; Vol. 436, c. 361-62.]
We can therefore see the impact that even modest rises have, in terms of additional bankruptcies in the haulage sector.
On the crisis in the haulage sector, does the hon. Gentleman think that the Government's failure to get to grips with the vignette scheme and ensure a level playing field with foreign hauliers was a contributory factor to the challenge facing hauliers?
It was, but that is wide of this issue, as is the cabotage issue, although I might refer to that later. The hon. Gentleman is absolutely right to say that although fuel costs form a massive part—more than a third—of the cost of running a haulage business, other issues can have an impact on a company's competitiveness and ability to stay in business.
Our 2006 debate was held less than a year after the 2005 debate, but by that time the price of fuel at the pump had crashed through the £1 barrier in many parts of Scotland. There had been a 20 to 25 per cent. rise in the cost at the pump and that exacerbated the difficulties faced by families and businesses, and by the haulage sector in particular.
We tabled similar amendments for debate in 2008, at which time the reports were quite frightening. The Sunday Herald reported in April 2008 that, out of the average £37,000 a year that it cost to tank up a typical 44-tonne truck, the Government took £25,000 in tax. The same article confirmed that a 20-vehicle haulage business would have to make £30,000 more simply to meet its increased costs, and that was on top of the £30,000 that it had to find for increased fuel costs in the previous year. Within a few months of that report in April and our debate in July 2008, there was a price rise of more than 14p a litre, and the price of oil was expected to reach $140 a barrel.
We know that that had an impact. When Ramage, a haulage firm, went into administration, its administrator cited the high cost of fuel as a contributory factor. Normal families running a single diesel car were facing additional costs of not £13 a month, which they had dealt with in 2006, but £30 a month. A family running two petrol cars was paying an extra £46 a month, or about £500 a year.
May I pick up the hon. Gentleman's point about hauliers? A number of them have introduced a fuel surcharge and, rather like the airlines, they now add that surcharge to their normal bills. However, the surcharge has not always come down in line with the price of fuel. Has that been drawn to his attention?
It has. The price might not always come down in line with the price of fuel, but I must point out to the hon. Gentleman that many of the surcharges were put in place when the price rises were expected to be modest. They were also capped, and as the cap could not be exceeded, when the price spiked dramatically, hauliers that I know of—I name no names—made a loss.
To bring us right up to date, we have heard about hauliers in difficulty and about bankruptcies. Ramage went bust, as did many others, and fuel costs were cited as a contributory factor. We know from previous debates that hauliers in Campbeltown were selling trucks and laying off drivers. The Freight Transport Association, citing figures released by the Office for National Statistics, tells us that the number of people seeking work as a heavy goods vehicle driver has risen from 3,280 in March 2008 to 15,000 this year. I suspect that that is because of the number of drivers who have been made redundant, rather than because a huge number are training to become hauliers at this very difficult time.
We need to take action. We cannot mitigate all the price rises, because they occur for all kinds of reasons, including because of costs of sale and delivery, but we need to militate against the worst rises, particularly when they are driven by the barrel price of oil. I therefore propose, as I have done before, a simple measure that would oblige the Government to lay out their forecasts and to introduce a statutory instrument to reduce the duty when the price rises. The reduction would be the equivalent of the amount of extra VAT that would be gained due to the increased price at the pump. That amount could come from the VAT windfall or the North sea windfall, because it would be directly related to the price of oil.
The hon. Gentleman has hit on a problem and proposed a solution, but will he enlighten us on one point? His proposed new subsection (1AB) states:
"The Treasury must... reduce the rates of duty", but it does not specify the times at which the Treasury must do that. Would it happen every month, every day, or every six months?
I left that open-ended and simply referred to a statutory instrument because I wanted the provision to be practical and workable. It has been argued that the reductions could not be made hourly or daily—or, I concede, perhaps not even weekly. None the less, there must be a mechanism, and the statutory instrument would determine the most appropriate one. It must be responsive without being excessively bureaucratic—it is vital to get the balance right.
Proposed new subsection (1AC) would provide that when the oil price spiked, the normal indexed rises would be automatically cancelled. Decisions on whether to postpone or proceed with an indexed rise should be no longer left to a political whim, but based on the needs of the population, industry, families and the haulage sector.
According to the Federation of Small Businesses, which conducted a poll after the Budget, 80 per cent. of small business men whom it consulted estimated that even the 2p rise in fuel duty would have an adverse impact on their businesses. Its national policy chairman said:
"Small businesses...the engine room of the...economy...have been choked by the Budget...with increases in fuel".
How much worse would it be for business if the price suddenly spiked above the 2p rise?
The chief executive of the Road Haulage Association has said:
"Many of Britain's road hauliers face being priced off the road by foreign competition benefiting from the new open market for haulage but fuelled with diesel hugely cheaper than can be bought in the UK."
"We cannot understand why the Chancellor has turned a deaf ear to our industry's pleas".
The Road Haulage Association in Scotland has said:
"At this challenging time the last thing the haulage industry in Scotland needs is an increase in costs. More so now that the cabotage regulations have been relaxed making it easier for European hauliers with lower costs to compete in the UK domestic market...The case for a regulator is as strong now as it ever was".
We think that amendment 13 represents the right approach and I hope to press it to a Division. As for amendment 11, although the Conservatives have historically resisted its proposals, they changed their minds last year. Their amendment uses different words, but its fundamental objective is the same: not the mitigation of all price rises, but the smoothing out of the spikes. They propose a two-way regulator, whereas mine is open. In other words, they propose reductions in duty when the price rises and increases when it falls. I am relaxed about that, because the purpose is to deliver stability.
The hon. Gentleman refers to a two-way regulator, but although his proposed subsection (1AB) in amendment 13 contains the words "reduce the rates", the amendment does not make any reference to increasing the rate.
I would leave the statutory instrument to decide that. As I have said, if the SI were to opt for a two-way regulator, I would be perfectly content, because this is about stability, not about who wins political points. As I said in last year's debate, when the Conservatives changed their minds, I do not care whether we have a fair fuel stabiliser, a fuel duty regulator or the version proposed by Dr. Ladyman, a former Transport Minister. We need to finalise a deal with families, hauliers and businesses to smooth out price spikes so that we do not experience the shocks to the system that we encountered in 2005, 2006 and 2008.
I think that the hon. Gentleman should deal with the previous intervention in slightly more detail. He seems keen to give the impression that his amendment would benefit motorists and that, by and large, it would lead to them paying less duty. When it is pointed out to him that they might pay more in some circumstances, he is quick to say that all that will be dealt with by a statutory instrument and that we need not consider it at great length now. However, there is a real possibility that if we vote for his amendment, we will be voting for all our constituents to pay more for their fuel than they would otherwise.
I have said four or five times that this is about stability, certainty and smoothing out the unexpected spikes that are so damaging. I know that there are Liberal Democrat Members who have supported that concept in the past. I know that there are others who have more difficulty because of their alleged green policy. If the hon. Gentleman—I say this kindly—wants an excuse not to vote for the amendment, he can have one, but I am putting forward a proposal that is gaining support from other parties. It was massively supported in the real world last year. I hope to press the amendment to a Division. With the greatest respect, I hope that he can see his way to support it, because his constituents would benefit from it.
The Second Deputy Chairman:
[The Division list is published at the end of today's debates.]
It is a pleasure to follow Stewart Hosie, who rightly set out the concerns that exist about wanting to smooth over the oil price spikes that have an impact on our constituents as petrol and diesel prices increase. I say at the outset that Opposition Members support the objective of ensuring that a greater proportion of taxation is raised by environmental taxes, and fuel duty is the key, principal environmental tax that we have in the United Kingdom.
I wonder whether the Conservative party still supports the idea that that increase in money from green taxes should be put into a separately audited family fund, which was the original announcement?
We want to reduce the tax burden on good things and we would pay for that by increasing the tax burden on bad things. We think that the proportional shift needs to be moved on to carbon and pollution. I am sure that the Minister will be delighted to learn that details of our policies will be made clear in due course.
We recognise that fuel duty is an environmental tax, that it is going to play a part in addressing carbon emissions and that it raises a great deal of revenue for the Exchequer. We do not in any way dismiss it, but we also recognise—I think hon. Members on both sides of the Committee do—that there are times when fuel duty causes considerable pain to our constituents. It does hurt.
We have already heard references to particular groups and rural areas. I know that we will be debating this matter at greater length later, but rural areas particularly feel the pain of higher fuel prices. We know that hauliers feel the pain. All of us can recall, especially those who were in the House at the time—I was not—the hauliers protest in 2000.
We have a dispute, but I think it was 2000. We also know that in the summer of 2008 there was a great deal of concern about fuel prices.
In recent years, the Government have lacked a clear framework on how fuel duties should be raised. They continued the fuel escalator that was brought in by my right hon. and learned Friend Mr. Clarke, but that in turn had to be abandoned when it was no longer sustainable. Having stepped on and then off the fuel escalator, there have been times when the Government have announced a fuel duty increase only then to postpone its implementation. At other times, they have introduced unexpected increases, as we see in clause 16 and the announcement to move back on to the fuel escalator with substantial increases in fuel duty both before and after the next general election.
The problem with the Government's position is the lack of a framework, which is why we opposed their Budget resolution measures. Essentially, we think that the Government policy on fuel duty is unsustainable in the sense that it is not possible to bring along public support unless the oil price remains low. In a period during which the oil price rises, there is a distinct risk that the strength of public opinion will lead to any Government feeling under great pressure to abandon the fuel escalator. We will then be left once again in a period in which there is no stability or certainty about the direction we are going in.
We share the objective of the hon. Member for Dundee, East of trying to address what we should do when there is a spike in the oil price. Our proposal is the fair fuel stabiliser. The intention of amendment 11 is to ask the Government to review how this policy could be implemented, just as we are doing in consulting on the issue. In essence, what we are looking for is a mechanism whereby when fuel prices go up, the fuel duty will fall, and when fuel prices go down, fuel duty rises. It is not a blinding revelation to state that fuel prices hurt people when they are at their highest, and that is when the political pressure in respect of fuel duty is at its greatest. There are a number of advantages of going down this route.
As the hon. Gentleman well knows, the price of fuel was considerably lower at the time of this year's Budget than at the time of last year's Budget. Therefore, if this fuel stabiliser had been introduced last year, how much higher would the price of fuel at the pumps be now compared with the actual current price?
I will not give precise figures, as we are consulting on this. The principle the hon. Gentleman puts forward is absolutely right, however: when fuel prices fall, the duty will increase. It will not do so to the extent that the actual fuel price will increase; it will just not fall as much. Equally, when fuel prices are rising, there will still be an increase, but not by as much. This is a stabiliser, but it is not an attempt to fix a price—so that it shall be 97p a litre for ever more, for instance. The price will still vary, but we will smooth out the bumps. I think that that is an objective that the hon. Member for Dundee, East has set out. We have also identified it as a laudable objective, and we think that there is a practical way of achieving it.
What the hon. Gentleman is identifying is the fact that fuel duty is a very crude method of sending an environmental message to motorists. Does he think that, in the long run, the best way of smoothing this out and sending that signal to motorists will be to move towards introducing road user pricing, not fuel duty, as a mechanism? That will also deal with the rural and haulage issues, as well as the level playing field issues.
I note the hon. Gentleman's point, but I am focusing today on fuel duty. I think we can address that in the short term. There are various issues to do with road pricing, and it needs to be looked at in more detail. I do not want to go too far down that road—whether it is priced or otherwise. I take on board his point, however.
The hon. Gentleman is talking about smoothing out bumps, which I am always in favour of doing, especially when I am doing my ironing. Will he tell us a bit about where he would set the baseline, because that is important? If one is smoothing out the bumps, one has to have a place where one thinks the price is reasonable, and that is a very difficult area of this entire debate. We all have to remember that we are dealing with a very volatile commodity price.
The Exchequer Secretary makes a good point; one of things that we have asked in our consultation is where and how one sets that baseline. It is possible to find a baseline that recognises where the burden falls on the motorist and what an acceptable level is. That is not an insuperable difficulty.
I agree that it is not insuperable. Once the baseline is identified, the real key is the ability to reset it at regular intervals. One of our suggestions was that at the Budget and the pre-Budget report the ticker could be reset, so that if we found that there was a structural increase, the baseline would be reset, whereas if we found just a cyclical change or a spike, it might not need to be reset. The timing is as important as the baseline figure.
The hon. Gentleman makes a good point. I agree that there needs to be flexibility on the baseline and that it needs to be reviewed regularly, but that in no way undermines the stability that could be brought to fuel prices. The stabiliser has a number of advantages. Leaving aside the big advantage that it protects the public from spikes in oil price, it helps price stability as a whole. Fuel prices can contribute to inflation significantly, so the stabiliser would assist the Monetary Policy Committee of the Bank of England in ensuring that its attempts to target inflation were not affected by volatile international markets.
We have some difference with the Scottish National party on how we would pay for and justify our approach. The hon. Gentleman makes the case in his amendment that the Government benefit from increased VAT when oil prices increase and that that windfall can be used to reduce fuel duty. I am sure that the Exchequer Secretary will make the point—that, in itself, does not make it wrong—that consumers then spend less on other things. With an increase in the VAT revenue obtained from fuel, there tends to be a decrease in revenue from other areas. However, there is a link with North sea oil production and the revenue that comes from it. When oil prices fall there is a shortfall in that duty, but when they rise there is an increase in that duty, as the numbers for the past couple of years show. In 2008-09, the revenue from North sea oil increased by 66 per cent. when oil prices were increasing, whereas the revenue will halve for 2009-10—at least that is the Treasury's estimate—as oil prices fall. That is what happens when fuel prices move in opposite directions. Thus, we believe that over a cycle—over a reasonably long period—this proposal would be revenue neutral, and that we can do things in a more cautious way. The proposal would provide stability to not only personal finances, but the public finances.
The environmental case is that if the price of carbon were stabilised, it would be easier for businesses to plan ahead. Environmental taxes work most effectively when they are kept stable—a point made by the Stern review—and there are no risks of fluctuations in the marginal costs that could increase the total cost of any mitigation policy. As far as our carbon emission target is concerned, it would be beneficial to have a mechanism ensuring that we were not quite so dependent on volatile international oil markets.
Finally, some 20 businesses cover 99 per cent. of fuel sales. They should be able to administer a fuel stabiliser, and we want the Government to investigate whether that would be practical. Consultation would be needed as to how that would work precisely—for example, how frequently it would need to be reset, as the hon. Member for Dundee, East mentioned.
This proposal could be a useful addition to the fuel duty structure—
The hon. Gentleman has not touched on the differential in price in remote areas. How would his stabiliser help those people who are paying 14p, 20p or even 25p more a litre than those in metropolitan centres?
We will turn to the issue of remote areas in the next debate, and I see that the Liberal Democrat Benches are filling up, as they traditionally do at this point in deliberations on the Finance Bill— [ Interruption. ] My hon. Friend Mr. Syms will have to spread out a little.
Is the hon. Gentleman saying that the Liberal Democrat Benches are filling up because this is an issue about which we care? Should we infer from the state of the Conservative Benches that this is an issue about which the Conservatives do not care?
I am very grateful for that intervention and I am sure that my hon. Friend speaks not only for himself, but for the party as a whole.
We urge the Government to investigate the fair fuel stabiliser with a view to implementing it. Their approach to fuel duty has been ad hoc and haphazard and there is a lack of certainty about where we will be in future. To some extent, the Government are reacting to fuel prices and pursuing a fuel stabiliser policy almost by default—when fuel prices fall, they are bolder in their increases, but when fuel costs rise they hesitate to raise duty. That is understandable, but we think that such decisions should be made within a proper framework. It would be good for inflation targeting, public finance stability and the environment. I hope to have an opportunity to press amendment 11 to a Division.
Thank you, Sir Michael, for giving me the opportunity to speak on this group of amendments. I echo the concerns expressed about the difficulties faced by motorists and businesses when fuel prices rise and when they are high, as well as about the impact on businesses of other higher commodity prices. It is advantageous to businesses and individuals if budgets can be planned in advance; price volatility makes it harder for any individual or organisation to plan to such a level.
I have sympathy for Mr. Gauke. I know that he instinctively believes in free-market economics, yet he has been overruled by people in his party who have required him to come here and give us a sort of reheated 1970s form of socialism. He made a good attempt to argue for it. He said that the Government arrangements were ad hoc and haphazard, but that is called the free market. He seems to want prices to be determined not by supply and demand but by the wisdom of the shadow Chief Secretary to the Treasury. That is not the intellectual case that the Conservative party has made for the past 30 years.
The Conservatives say—this is essentially the point made by the Scottish National party, too—that oil price variants are potentially problematic, which is why they would introduce a fair fuel stabiliser. However, when food prices vary or are volatile, that can be problematic for consumers or businesses. A huge increase in the price of milk or bread has an impact on the bottom line of a catering business, so I look forward to the Conservatives' fair food stabiliser. What about the effect on businesses when energy prices vary or when gas or electricity prices go up? That will have an impact on nearly all businesses, but it will have a profound impact on those that are particularly energy intensive. When will the Conservatives introduce their fair energy stabiliser? The truth is that they regard those matters as less politically sensitive and, as a result, they do not have stabilisers. That is not because of intellectual coherence, but because they think that it is not electorally expedient.
The distinction is very clear. The majority of the cost of fuel is a duty of tax, but the same does not apply to food or energy. We are not trying to set a price that everyone must sell at or intervening in the contractual relationship between a buyer and a seller with some sort of price policy. We are simply varying that element that is within the Government's control—the duty—depending on what we think individuals and businesses can bear.
In that case, I look forward to the fair alcohol stabiliser that the Conservatives will no doubt introduce in due course when the core ingredients of beer, for example, go up, as commodities do in the market place.
Both the Conservatives and the Scottish nationalists are extremely coy about the downside of their proposals. I noticed that Stewart Hosie said that the purpose of amendment 13 was to smooth spikes in oil prices. What he did not say—I can only infer that this must be the case—was that he would also smooth out the troughs: that is, that he would put prices up. Otherwise, he would not be smoothing out anything at all. There has to be a downside as well as an upside. The Conservative spokesman, using almost exactly the same language, said that his amendment would smooth out the bumps. That is the difference between the SNP and the Conservatives; the Conservatives deal with bumps, not spikes. Presumably, he would also smooth out the dips at the same time.
My hon. Friend Mr. Reid, with characteristic diligence, has done some more research into the effects of Conservative party policy. I must admit that I look forward to the Conservatives distributing leaflets on the issue in my constituency—as Michael Ashcroft put so much money into their endeavours, they must be able to afford to do so. Let me run through the effect of their policy. This is not a party political point—it is central to amendment 11.
According to the average UK fuel prices published on the AA website, at the time of last year's Budget, March 2008, a litre of unleaded petrol cost 106.8p. It cost 118.2p in June, when the House had the opportunity to vote on the Budget proposals. The price rose by 11.4p between the Budget and the vote in the House, which allowed the shadow Chief Secretary to the Treasury to say that the fair fuel stabiliser would cut the cost of petrol by 5p a litre.
However, with his characteristic generosity, my hon. Friend the Member for Argyll and Bute said that he had calculated the saving to the motorist of last summer's Conservative party policy at 5.7p a litre. That seemed very popular, and people asked me why the Liberal Democrats opposed the policy. They said that the rises in prices were extremely unpopular, and that the Conservatives seemed to have reached a brilliant conclusion. They seemed to know better than the market, and to have an electoral advantage in pursuing that option.
Unfortunately—and this is the twist—petrol prices started to fall rather dramatically just as the Conservatives chained themselves to their policy. I am again indebted to the research done by my hon. Friend the Member for Argyll and Bute, who showed that the price of a litre of unleaded petrol had fallen, according to the AA website, to an average of 90.6p by March 2009. A fall of 16.2p since that year's Budget was dramatic enough, but the fall from the peak of the market was close to 30p. That peak roughly coincided with the period when the Tories were championing the fair fuel stabiliser most energetically in this House.
What would be the impact on motoring if amendment 11 were agreed to? I have done a calculation, and I am afraid to say—this will come as a shock to hon. Members across the Committee—that the amendment would impose a crippling rise in duty on every motorist in the country.
The Conservatives may have keen environmental reasons for wanting to increase petrol prices so markedly but, if they do, I do not understand why they should be so coy about them. I hope that the hon. Member for South-West Hertfordshire will tell us why his party is not selling the policy with vigour, because I am about to explain what its impact would be.
As I said, at the time of last year's Budget, a litre of unleaded petrol cost 106.8p, but that had fallen to 90.6p by March 2009. If amendment 11 had been in operation at that time, it would have brought about an 8.1p increase in fuel duty. To be fair, the Government raised fuel duty by 2p in December 2008 and by a further 1.84p in April 2009, so it seems only reasonable to take those rises away from the figure that would otherwise form the basis of the calculation. If a provision equivalent to amendment 11 had been passed last year, motorists would have had to pay an extra 4.5p, approximately, for a litre of unleaded petrol over and above what they in fact have to pay at the pump at present.
That would have been the impact of the Conservative amendment. One could call it smoothing out the bumps, or putting up the price of petrol for motorists across the country. The Scottish National party has a variant on that, and it is perfectly honourable for both parties to take that approach, but they should be explicit about their intentions.
My hon. Friend Stewart Hosie made it clear that the object of the exercise was to get rid of spikes in prices. Does the hon. Gentleman understand how the haulage industry works? The fact that hauliers use long-term fuel contracts that cannot reflect price spikes has caused many companies, especially those in rural areas, to run into difficulties. The hon. Gentleman mentioned food stabilisers, but in Scottish rural areas—such as my constituency or the areas represented by the hon. Members for Argyll and Bute (Mr. Reid) or for West Aberdeenshire and Kincardine (Sir Robert Smith)—everything comes by road because there is no alternative. As a result, fuel price rises feed through to ordinary goods, hitting shops, pubs and every small business in towns and villages throughout our constituencies. Stabilisation will get rid of the massive spikes in fuel prices, and the difficulties associated with them.
I completely accept the hon. Gentleman's point on the haulage industry and the costs added to other goods, but my point is that the stabiliser does not just smooth out the spikes. That is what is so disingenuous about the claims made for amendments 13 and 11. If he had intervened to say, "The measure will smooth out the spikes but, to be honest, we—the SNP—will tell hauliers that, if there is a drop in prices, we will require them to pay more than the market rate," I would understand it. That would be a perfectly noble and fair policy—it might even be revenue neutral. However, the Conservatives and the SNP cannot argue one side of the equation and not the other—well, they can, but not in a way that is intellectually compelling.
For a party such as the Conservatives, who, when they are addressing business audiences, claim that they believe in free market economics, it is not intellectually consistent to say in the House of Commons that free markets are far too "haphazard" and, in fact, Government know best. That is intellectually dishonest. It is honourable to tell the electorate the consequence of policy, and the consequence if the amendments are made today will be that motorists pay more for their driving. By our calculations, they will pay approximately 4.5p per litre more, and that—
We have had a most illuminating debate. I shall add to the questions that have been well put by Mr. Browne about the other side of the Conservative policy, which has not been the subject of press releases or announced with all the fanfare to which the original proposal was treated, when it was calculated that a 5p cut in fuel duty would be the result. I wonder why we do not see similar press releases when, as oil prices fall, the policy would result in increases in duty. I have seen no press release boasting about that, or front-page newspaper coverage of how the Conservatives would put fuel duty up—by 4.5p, if their so-called fuel duty stabiliser is applied to the current oil price.
I have to acknowledge the persistence of Stewart Hosie, who has been raising this matter since long before I arrived on the Treasury team as Exchequer Secretary—and he has the Hansards to prove it. We certainly congratulate him on his persistence. The Conservatives were latecomers to the party—quite late, given that they voted against the hon. Gentleman's amendment to the same effect to last year's Finance Bill. They were converted, perhaps on the road to Damascus, but certainly on the way to Report stage, when the mathematics looked good. They produced their consultation document, but since then, everything has gone terribly quiet. The Conservative consultation closed in December, but no consultation summary has been produced and no further announcements have been made.
Does the Minister agree with my observation that the moral of the story for Opposition parties is that they cannot be governed solely by the need to put out good press releases? They must also come up with intellectually robust policies, which would work in practice and in office.
I could not agree more with the hon. Gentleman. When the press release looked good, it was generalised into a policy, which featured in Report stage of last year's Finance Bill. That was followed by a consultation, but then—funnily—everything went quiet because the oil price started to plummet, which the Conservatives were not expecting. With prices going only in one direction—down—their arithmetic looked rather difficult. It is interesting to note that this year, unlike last year, we have an amendment that asks us to produce the information needed to justify the Opposition's policy. Presumably, the Conservatives' consultation paper has come up with some of this, although we have not been allowed to see the results and we have had no further announcements even on how this policy has evolved, if I may put it that way, in the interim as the oil price continues to plummet.
The fact that the oil price has done something unexpected—something that perhaps could not have been predicted at the height of the spike last year—shows precisely the problem with seeking to take the volatility out of what is, after all, a commodity that is traded in a completely free market and has notorious price fluctuations. They are always very difficult to predict with any degree of certainty. Oil prices can be affected by sudden events—weather events, political instability in a particular area and a whole range of other things. It is very difficult to stabilise something so volatile.
I am grateful to the Minister for her brilliant lecture in free market economics, which I am sure will be beneficial to the Conservative Front-Bench team. Is it not also important to acknowledge that, at the time it happens, it is hard to know whether one is dealing with a spike or a broader trend that may or may not come to represent a spike retrospectively? We keep hearing about spikes, but at the time, one does not know whether it is really a spike or part of a long-term trend.
That is right. I dare say that even Nostradamus could not tell whether a spike was a spike or part of an ongoing upward or downward trend.
That brings us on to important issues about how on earth a baseline could be set and what behavioural effects it would produce. I want to go into some detail here, as these issues keep coming back and many of the practical difficulties with such proposals are skated over by those who make them as if they were really not a problem. I submit that they are.
Before I do so, however, let me say on free market economics that there are very few even socialist theorists who would suggest that commodity prices were somehow controllable—certainly not on the global level—as the Tory Front-Bench team now seems to want to suggest. I particularly enjoyed hearing the observations of the hon. Member for Taunton about the range of stabilisers that might be forthcoming if this particular approach to world commodities were to catch on.
Amendments 11 and 13 are designed to make provision for a new fuel stabiliser or regulator mechanism that would reduce the main fuel duty rate when international oil prices exceed their forecast levels. One has to think about what those forecast levels would actually mean in this context. In amendment 13, the hon. Member for Dundee, East seeks to establish a system directly, while in amendment 11, the Conservative Opposition have suddenly become much more coy than they were last year: they ask us only to prepare a report, rather than having the courage of their convictions in the consultation paper and actually tabling a specific amendment to the Finance Bill. We have not seen such an amendment, so I detect a retreat from the direct implementation of their fuel duty stabiliser policy as it was announced last year. It has now become a meek request for us to prepare a report rather than being a direct amendment to the Finance Bill.
Both the amendments argue that such a mechanism would stabilise fuel prices at the pump by offsetting the impact of oil price fluctuations, but the mechanism is based on the incorrect premise that the Government receive a revenue windfall from high crude oil prices, which can be used to make up the difference in Exchequer revenues as fuel duty revenues fall. In fact, such a mechanism would destabilise the public finances—the opposite of the intended effect—by producing wild swings in duty rates, and pose significant administrative problems to both the Government and fuel producers.
How can the Government determining to spend some of the revenue yield have any impact whatever on fuel producers? The argument is wholly spurious. The proposals have no bearing on fuel producers whatever.
First, I will deal with the point about the so-called windfalls, which do not exist. Secondly, the hon. Gentleman's mechanism is about VAT, but the other mechanisms under discussion are, as far as we can tell, about the income we purportedly get from North sea oil when prices rise.
May I read to the hon. Lady paragraph C.46 from the Red Book? It says:
"The surge in oil prices up to mid-2008 is reflected in North Sea revenues of £12.9 billion in 2008-09, up 66 per cent on the previous year."
The next paragraph states:
"North Sea revenues are expected to almost halve in 2009-10."
To use her expression, that is wildly fluctuating, but it is fluctuating in the opposite direction to fuel duties. We argue that the two can be balanced out.
I will explain why that is not the case, and why the proposal will produce perverse results. When oil prices rise, the premise is that the Government receive a windfall from either increased North sea tax revenues or greater revenues from VAT on fuel. As I argued last year, however, that is not the case. Although high oil prices might push up revenues from North sea oil taxes, there is no automatic link, as the significant increase in costs for oil companies that accompanied the last price spike showed. The impact of high oil prices on the wider economy means that the increase in North sea revenue is offset by falling revenues elsewhere for the Government. Lower GDP growth and higher energy costs reduce the yield from income and corporation taxes, while higher fuel prices lead to lower fuel consumption and lower revenues from fuel duty. For example, in 2008-09, when oil prices reached record highs in the summer, fuel duty receipts were £300 million below their 2007-08 level. In that sense, there is no windfall. [Interruption.] It is easy for Opposition parties to spend windfalls, but they do not exist as net windfalls for Government revenues, as I have just demonstrated.
Turning to VAT and the alleged windfalls that form the basis of the Scottish National party's regulator mechanism, high fuel prices at the pump do not produce an overall increase in VAT receipts. When consumers have to pay more for fuel, they tend to buy less of other goods, thereby paying less VAT elsewhere. To prove that, in 2008-09, when crude oil prices and fuel prices reached record levels, total VAT receipts were almost £2 billion below their 2007-08 levels. Again, Opposition parties are trying to spend windfalls that do not exist in net form for Government receipts. They are trying to attach automatic mechanisms that would oblige us to spend windfalls that we do not have. Such distortionary effects on public spending would do great damage and achieve the opposite of stability—volatility, with large, sudden holes in public finances, which could be avoided without such mechanisms.
As well as that fundamental objection to the principle of the fuel duty regulator, there are also serious practical problems with its implementation. Under the proposed Scottish National party mechanism, the Chancellor would produce at each Budget an oil price forecast for the coming year, which would act as what is described as a baseline price. Fuel duty rates would be reduced when oil prices rose above that baseline, and would rise when oil prices fell below it. We should take a bit of time to focus on how important the baseline—and the amount at which it was set—would be. It would have a real effect on tax duties, yet it would be very subjective.
I am fascinated by the process by which the Minister thinks that the baseline would be arrived at. Is it something about which Lord Hattersley, or other people with expertise in Government intervention from the 1970s, would be able to advise the Conservative party?
I suspect that Gazprom, or some of the more centralised old Soviet planners, might be able to take a view on the correct baseline for oil. I must confess that I do not know how one could set that baseline, other than very subjectively. What would be a fair baseline price? The process of determining the baseline would be likely to be highly arbitrary, and therefore open to frequent challenge. The Government would have a constant incentive to set the baseline higher, and motorists and other organisations would call for it to be lower, because that would have an effect on whether prices went up or down.
Last summer, the Opposition appeared to suggest that the Budget forecast should be used as a baseline, but as is well known, oil prices can be volatile and difficult to predict. I suspect that if the Conservative party had predicted oil prices, and had known what was to come, it would not have released its press release and developed its so-called fuel duty stabiliser. It is certainly indisputable that in recent years, forecasts of the price of oil have been subject to wide margins of error. In Budget 2008, the average of independent forecasts, which is what we use for the Red Book, was just below $84 a barrel, yet within four months of last year's Budget, oil prices had reached a record peak of just over $146 a barrel. Another four months later, by the time of the 2008 pre-Budget report, oil prices had fallen by more than 60 per cent. to below $50 a barrel. After further fluctuations in the first few months of this year, on Budget day 2009, the Brent crude price closed at $49.81 a barrel.
According to information from the Conservatives outlining the policy for their so-called stabiliser mechanism, a $6 per barrel shift in the crude oil price would result in a 1p per litre adjustment to the fuel duty rate, yet as my right hon. Friend the Chief Secretary pointed out on the subject last year—she is here, listening to the debate with great interest—crude oil prices frequently moved by more than $6 a barrel in a single day. In the past year, the oil price moved by more than $12 a barrel on five occasions in the course of a week.
Instead of a change being triggered by a $6 difference in the oil price, one could, I suppose, adjust fuel duty at certain set points throughout the year, as the Conservatives originally suggested, but there would then be a significant risk of a market distortion. If the crude oil price were to be regularly compared against the baseline price, it could offer oil traders incentives to bid up the oil price before each assessment date, in the hope of artificially engineering a lower fuel duty rate. Gaming takes place when there are such things to predict and bet against, as I am sure Mr. Gauke knows.
Speculation that the duty rate was about to change as the assessment date approached could encourage forestalling activity to avoid duty, producing yet further instability. Overall, frequently changing the rate could impose significant additional administrative burdens on fuel producers.
I am interested in this point, because amendment 11 asks the Chancellor to undertake research. As the Minister rightly said, the report from the official Opposition has been suppressed, and it is now the task of the Treasury to try to undertake that research. Can she give me an assessment of the cost of undertaking that research, and tell me what the administrative burdens will be on retailers, specifically petrol retailers, who might find it impractical if the price is adjusted every single day as a consequence of the stabiliser? Such retailers may also find that the system has a detrimental impact on employment.
Depending on how the so-called stabiliser was applied, those would clearly be important issues. I look forward to seeing the results of the Opposition's consultation, where they will no doubt set out these issues out in great detail so that we can make an even more detailed judgment of their policy.
Fuel prices do not immediately alter following adjustments in the oil price. If fuel duty were altered on a monthly or bi-monthly basis, it would be highly unlikely to result in a constant fuel price, as oil prices often rise and fall at very short notice. If the stabiliser were to alter on a six-monthly basis, it might not respond to oil spikes at all.
For example, imagine that in 2008 the Budget oil price forecast of $84 a barrel had been used as a baseline, but the fuel duty rate was adjusted only every six months, on
Even that is an optimistic reading of what the Opposition have proposed. A close reading of pages 3 and 4 of their consultation document, which they put out last July, suggests that their so-called stabiliser might be based on fuel prices rather than oil prices, which is another odd way of doing it. If we were to interpret the Opposition's proposal in this way, today's average petrol price figures quoted from the same source as they used, PetrolPrices.com, would mean that the fuel duty stabiliser would put an immediate 5.5p on the price of unleaded fuel. If such a mechanism were introduced in the future, there would be potential for significant gaps in the public finance forecast.
It is clear that these proposals are populist. They would not work in practice, they achieve the opposite of what they claim on the tin, and they do not achieve stability at all. They achieve unreliability and great volatility. I therefore hope that the House will vote against them.
The Minister has spoken for some time. In her usual generous way, she explained the Government's position carefully. At the beginning she spoke about persistence. That is correct. We recognised that there is a problem. She also criticised the concept, and at one point spoke about trying to manipulate commodity prices. The price of oil, the commodity, may drive the policy, but there is no attempt at all to manipulate the commodity price. The amendment is designed to smooth out the price at the pump as a consequence of movements in commodity prices.
The Minister also spoke about VAT. We have not spoken of a VAT windfall. We have spoken of a value equivalent to the increase in VAT, which would be generated by an increase in the price at the pump. That is a perfectly reasonable measure to use.
Mr. Browne, who speaks for the Liberals, made a number of spurious claims. He ignored the ability to reset the baseline, which was vital. He chose a starting point for his example which, if not random, was certainly chosen to—
I recognise that, as the Minister said, the price cannot be fully stabilised. The argument is that it is simply smoothed out. The Government's other argument was that it would be difficult to determine whether a change was a spike or a structural change in the price. The whole point about setting regular dates when the measure would be revisited—and about allowing for that flexibility—is to ensure that we identify whether there is a real spike, an upward trend or a systemic or structural change to the price.
We need to do something about the issue and take action. I have heard the criticisms and arguments from the Exchequer Secretary and her hon. Friends, because she, too, has been persistent for many years. However, in the absence of a Government alternative or, even, any recognition of the real difficulties for families, businesses and hauliers, I beg leave to press my amendment to a Division.
I beg to move amendment 5, page 10, line 39, at end insert—
'(8A) After section 14F insert the following—
"14G Remote rural fuel discount scheme
(1) The Treasury shall by regulations provide for the introduction, by no later than
(2) The purpose of the scheme is to provide a rebate on road fuel duty at qualifying retail outlets in qualifying areas to reduce the premium paid for fuel in such areas over the national average.
(3) Qualifying retail outlets under subsection (2) are outlets located in qualifying areas meeting any criteria as defined under subsection (4).
(4) Qualifying areas are remote rural areas as may be defined by regulations under subsection (1).
(5) Regulations under subsection (1) may—
(a) specify the amount of the fuel duty rebate;
(b) define 'remote rural areas';
(c) define qualifying retail outlets, including any restriction;
(d) specify how the rebate is to be applied, including—
(i) authorising HMRC to define procedures and conduct audits, and
(ii) how any administrative costs are to be defrayed;
(e) provide for it to be an offence for a person fraudulently to supply or sell rebated fuel other than as proscribed by these regulations;
(f) provide for a system of registration of eligible retail outlets; and
I am delighted to move amendment 5, which stands in my name and that of several of my hon. Friends. Hon. Members will notice that this amendment is similar to amendments that have been tabled by hon. Friends on the Liberal Democrat Benches in previous years, and I make no apology for returning to the subject this year. The aim of the amendment is to tackle the continuing unfairness of the fuel premium that drivers have to pay in remote rural areas. This serious problem has a severe impact on the economy of those areas on the mainland and on all our islands.
The hon. Gentleman will be aware that, in constituencies such as mine and his own, we pay more tax per litre of fuel than in any other part of the United Kingdom. That anomaly should not continue, and a fuel duty regulator is urgently needed by our island communities so that our taxes can be fair, equal and level across the country.
The hon. Gentleman is absolutely right to say that his constituents and mine pay more tax on our fuel than people in the rest of the country. The way to tackle that is through the proposal in our amendment for a rural fuel discount.
People who live in remote rural areas suffer a triple whammy on their fuel. First, by necessity, they have to travel long distances. Secondly, the price of fuel is higher than in urban areas. Thirdly, there is a complete lack of public transport. The premium that people in remote areas have to pay for their fuel varies. I will give some examples that compare the prices in my own constituency with those charged in Glasgow. Close to the eastern boundary of my constituency, which is closer to Glasgow, the price tends to be 1p or 2p a litre higher than it is in the city. Moving to the furthest part of the mainland from Glasgow, the price differential around Campbeltown, down at the tip of the Kintyre peninsula, was 6p a litre more than in Glasgow the last time I checked. The price tends to be even higher at some of the small filling stations in the more rural parts of the mainland.
On the islands, the price differential in Rothesay on the Isle of Bute was 5p a litre when I checked recently. That is bad enough, but the price differential becomes far larger on the Atlantic islands. On the larger islands such as Mull and Islay, the price of fuel is usually about 15p a litre higher than in Glasgow, and as much as 30p higher on smaller islands such as Coll and Colonsay. That price differential, which has to be paid by local people going about their ordinary daily lives and by local businesses, makes daily life and running a business much more difficult in those areas.
I am grateful to the hon. Gentleman for giving way again; he is most kind. When I first raised this issue with the Treasury three years ago, I was told that if a fuel duty regulator such as that proposed in the amendment was brought in for the islands, people would travel from places such as Glasgow to buy fuel in Stornoway, Benbecula or Barra. That was clearly nonsense, and the hon. Gentleman's proposal represents at least a step towards the kind of parity that is sadly lacking at the moment, as we can see from his figures.
The hon. Gentleman is absolutely right. The Treasury has certainly used that argument in relation to the mainland, although even Treasury Ministers have not tried to argue that that would be the case for the islands. I will describe later how that supposed pitfall can be overcome on the mainland. Clearly, no one would pay the extortionate fares charged by Caledonian MacBrayne to go to the islands in my constituency.
The hon. Gentleman is tempting me, but he knows perfectly well that the Scottish Government treat my constituency much less fairly than his. However, I shall return to the subject of the debate before you intervene, Sir Michael.
In remote areas, the car is an essential, not a luxury. Let us consider the purpose of the high fuel duty. One argument that the Government put forward is that it is designed to encourage people to change their behaviour and to use public transport instead of their cars. However, that fails completely in remote rural areas because of the complete lack of public transport alternatives. No environmental purpose would be served by local councils in remote areas subsidising more buses, because they would be running with only one or two passengers, and a couple of passengers on a bus are clearly a great deal less environmentally friendly than people using a car.
Is my hon. Friend aware that Royal Mail, in its pre-privatisation mode, has slashed post bus services in many of our constituencies? As a result, there are now no post buses, and no bus services of any kind, on the north coast of Scotland.
To add insult to injury, as well as paying a higher price for their fuel, people pay more to the Exchequer in tax because the higher price means that VAT is higher as well. A basic principle of taxation is that it should be equitable, but it is clearly not equitable for an area to pay more VAT than is paid in other parts of the country. What makes the position even more perverse is that fuel costs are lower in areas with public transport alternatives than in areas with none.
My hon. Friend is making a strong case. As he has pointed out, a key element of the problem is that it is harder to run businesses and other services in some rural areas. Although some may view such areas as prosperous, wages are often very low, and the economy is under threat for all sorts of other reasons.
I am not sure whether my hon. Friend has been reading my speech over my shoulder, but I was about to make that very point. In the highlands and islands, incomes are much lower than in the rest of the country, but the Treasury is asking people there to spend far more on fuel and to pay more tax on it. Fuel represents a greater share of disposable income in the highlands and islands in the first place.
The purpose of amendment 5 is to identify a workable solution to the problem: reducing the premium that people are paying for their fuel in remote rural areas. On previous occasions, the Chancellor and other Treasury Ministers, including the Exchequer Secretary, have expressed sympathy and a desire to look at the evidence. As a result, my hon. Friend John Thurso produced a paper, a copy of which I have with me. My hon. Friend circulated the paper, sending it to, among others, the Chancellor, and the amendment is based on it.
Scottish national statistics include what is described as the eightfold urban-rural classification, which is shown on a map in my hon. Friend's paper along with the definitions. I understand that similar definitions exist in other parts of the United Kingdom. The Treasury could use various classifications depending on exactly where it wanted to target the scheme, but in Scotland I should prefer it to include all the islands as well as two of the mainland classifications: very remote rural areas with a population of under 3,000 and more than a 60-minute travel time to a settlement with a population of over 10,000, and very remote small towns with a population of between 3,000 and 10,000 and more than a 60-minute travel time to a settlement with a population of over 10,000. Other definitions could be used, however, and the amendment allows the Treasury to define the area to be covered by the scheme in regulations.
So it is perfectly possible to define the area to be covered by the scheme, but we also need—and the amendment provides for—a simple method of passing the tax rebate through the system. To do that, we need only designate the retail filling stations. Different filling stations would be eligible for different levels of discount depending on where they were situated. Obviously, a far higher discount would apply on islands than on remote parts of the mainland.
All motorists using those filling stations would benefit, whether they be locals, tourists or people visiting on business. The scheme works for all of them. If we agree that retail petrol stations are to be designated, all that will then be required is a robust system with an audit trail to ensure that the rebate is passed to the consumer and is accounted for in a way that ensures that there is no fraud. My hon. Friend's paper uses the VAT system to ensure that. There are details in the paper. I will not go through them all today but that paper has been made available to the Treasury and was circulated to any hon. Member who was interested. The paper provides for a robust audit to ensure that the rebate arrives at the pump and benefits the motorist at the pump.
In previous discussions the major criticism that Treasury Ministers have always made of the scheme is on the issue of cross-border exploitation. They expressed the fear that motorists might cross a border to get cheaper fuel, but those who know the geography of remote rural areas—
As my hon. Friend says, The Daily Telegraph clearly does not. That perhaps indicates that people based in London often do not understand the daily problems of life in the highlands and islands of Scotland.
The fear has been expressed that someone might cross a border to get cheaper fuel.
I think that the point about borders needs to be nailed down. In my case, if someone is to cross the border to get to Shetland, it is going to require a 12-hour ride on a ferry from Aberdeen, and the petrol would probably still be more expensive than in Aberdeen. How many people does my hon. Friend think are likely to cross that border?
The answer is zero. No one is going to take the ferry from Aberdeen to Orkney or Shetland to benefit from cheaper fuel. The same would clearly apply to any ferry journey. Even with the cheap ferry fares to the Western isles that people can pay now, it would not make sense for anyone to travel there for that reason, and certainly not in the case of the extortionate ferry fares that the Scottish Government charge to my constituency.
If the amendment were passed, at least the tourists who travelled to that area would face the same costs as they would if they chose to be a tourist elsewhere in the country. It would be fairer for the economy of the area in developing its potential as a tourist destination.
My hon. Friend makes an important point. At the moment, tourists are often put off returning to remote rural areas. When they get there, often they express outrage at the cost of fuel and say that they will not come back, despite the beautiful scenery. As for the islands, there is no argument that the scheme could be defrauded.
The hon. Gentleman is making a good point. Does he accept that one of the problems for those of us who represent rural areas is that petrol companies already offer a highly differentiated system of charging to individual garages or petrol stations. I would want some assurance that those petrol companies would operate with total transparency, so that we then knew what they expected motorists to pay. In my area I have one garage, which just happens to be within the area of Cheltenham, that is able to offer fuel at a much lower cost than that charged by every other local garage, and that cannot be fair.
The hon. Gentleman is right and I thank him for that intervention. The paper that my hon. Friend the Member for Caithness, Sutherland and Easter Ross has written goes into such charging in detail and makes it clear that there must be a detailed audit trail to make sure that the discount is passed on to the motorist at the pump.
As for the mainland, attempts to commit fraud there would be similarly impractical. The important point about our scheme is that the fuel discount would be set at such a level to reduce the extra costs that motorists are paying at the pump compared with urban areas, but it would not eliminate them entirely. Therefore, the price of fuel would still be slightly higher in remote parts of the mainland than in urban areas but the current obscenely large differentials would cease to exist. As a result, there would be no point in a motorist travelling a long distance—from Glasgow up into the highlands, for instance—to buy fuel, because it would still cost them more in the highlands than in Glasgow. However, those travelling to remote areas would benefit in any case, and tourists would be more likely to return rather than being put off from doing so by the current high fuel prices.
In the amendment, proposed new subsection (5)(g) provides for the Treasury, after it has agreed to the scheme, to devolve it and permit the Scottish Government, Welsh Assembly Government and Northern Ireland Executive to operate it in their own jurisdictions.
This workable scheme tackles a genuine and serious problem—remote rural areas suffer from high fuel prices, and have no public transport alternatives. It is clearly ridiculous and unfair that people in those areas pay more tax on their fuel than people in urban areas. The amendment would right an obvious wrong, and I urge the House to support it.
I am grateful to Mr. Reid for tabling this amendment. Such discussions are, it is fair to say, a regular event for those of us who have dealt with a few Finance Bills; indeed, I sometimes wonder whether it is a constitutional obligation that we debate a remote rural fuel discount scheme during our deliberations on the Finance Bill. Such debates provide a good opportunity for some Members to highlight what is clearly an important issue for the areas that they represent—the higher fuel prices that their constituents experience. I also recognise that in many remote rural areas public transport is very limited. Some people work in areas where using their own vehicles is a necessity—and they are very often vehicles that are not as efficient as others, because they are dual-purpose. For those reasons, it is understandable that Members should wish to highlight this issue.
I have some concerns, however; again, I think it is part of the routine on these occasions for both the Government and the party aspiring to government to raise one or two practical concerns, and I shall do so during the course of my brief remarks. One thought that crossed my mind is that, essentially, what the hon. Gentleman and the other supporters of the amendment—including those on the Liberal Democrat Front Bench—want to do is manipulate the price paid at the pump in order to bring down the price in remote rural areas. I do not support that idea, because the way that such things are done is by reducing tax, but—unless I am missing something—based on the logic of what we heard in the previous debate, presumably there are some who think that this is an attack on the free market. As I have said, that is not my position, but I look forward to hearing the comments of Mr. Browne.
I was present for the contribution of my hon. Friend Mr. Browne; in fact, I am distraught that the intervention I made on the hon. Gentleman himself had so little impact that he has forgotten it already. What I wish to say to him now, however, is that there is a distinction to be drawn between a properly operating free market, which is what we were talking about earlier, and a failed market, which is the case with fuel prices in the highlands and islands. Does he agree with his colleague in the Scottish Parliament, Alex Johnstone, who in a debate a few weeks ago, said:
"I assure members that we are not opposed in principle to the proposal in the motion"— that is the same principle and the same sort of proposal as is before us today—
"and will not oppose it."—[ Scottish Parliament Official Report,
First, I seek the hon. Gentleman's forgiveness for failing to remember that he made an intervention that, on second thoughts, I realise was memorable. Secondly, we will not oppose the amendment, just as we have not opposed this proposal in any of the previous years when it has come up. We are not persuaded by the amendment, so we shall abstain—assuming that the hon. Member for Argyll and Bute presses it to a Division—but that is consistent with the comments made by my friend in Scotland.
I am being provoked by the hon. Gentleman. Is there not a distinction between believing that it is not suitable to set oil prices for the whole country in a Whitehall Department, which is what I understood him to be arguing in the previous debate, and this amendment, which recognises that additional costs are incurred in sparsely populated areas? The same recognition applies to the greater sum given per pupil to small primary schools in remote rural areas because of the lack of critical population mass. That is nothing to do with free markets; it is just a realisation of the difficulty in providing for low-density populations.
I do not want to go back over the whole of the previous debate, but I do not accept the hon. Gentleman's contention that our policy on the fuel stabiliser was about setting a price. I do not think that having a rural fuel discount undermines the free market; that is not my argument. I simply think that some of his comments do not make it entirely easy to distinguish between those two things.
The hon. Gentleman will have heard my earlier intervention. The problem in rural areas is that this is not an argument about a discount; it is an argument about a premium that monopolistic petrol companies can exact, not only in isolated rural areas but in all rural areas. There is no competition, because those companies set whatever price they set, and people can do nothing about it. I have talked to countless proprietors of petrol stations and they tell me that there is no negotiation and no competition, because they are set a target and that is what they have to face. That is unfair.
The hon. Gentleman is on to a very important practical point—which is also one of the potential difficulties with any kind of rural discount, because of course price is set by supply and demand. Whatever discount we provide on the fuel duty the supply will essentially be the same, and it will be one calculation. That is a practical point that is well worth considering.
The argument here is about equitable taxation. There are two parts to the taxation on a litre of fuel—duty and VAT. The argument for our rural fuel derogation is that it would ensure that the higher tax being paid in such areas was reduced, so that the tax was equitable—or at least as close to equitable as we could get it—across the UK, instead of people in rural places, particularly islands such as those that comprise my constituency, paying more tax on a litre of fuel than anyone anywhere else in the UK.
I can fully understand the hon. Gentleman's concern, and he is right to press this particular case. I anticipate that the Minister will make the following point, but I shall bring it into the debate a little earlier than I intended. Other products have regional variations in price —[Interruption.] Well, the VAT applies at the same rate, but may I briefly discuss the example of alcohol? The price of a pint of beer is considerably higher in London than in some other places. The argument that can be made— [ Interruption. ] Let me complete my point. I am not making this argument in my capacity as a Member of Parliament for Hertfordshire, where beer prices are higher than in some other parts of the country. One could, however, make the argument—to follow it to its logical extreme—that people pay more for beer in London and the south-east, so the taxation system should provide a London discount. I hasten to add that I do not advocate that approach, but it is a point worth addressing.
Does the hon. Gentleman realise how offensive the comparison that he has just drawn is to my constituents? Petrol is a necessity of life in the highlands. I come from an area where a car is a necessity, not a luxury. People can choose whether to drink a pint of beer according to their own preferences: the ability to get in their car and drive to work is a necessity. I hope that the hon. Gentleman will withdraw that comparison, because it is grossly offensive.
I would be surprised if the good people of Inverness were quite so easily offended— [ Interruption. ] I dare say that hon. Members are composing their letters to the newspapers already. We heard last night from the hon. Member for Taunton about the importance of the alcohol industry, but of course alcohol is not a necessity in the same way as petrol. However, if hon. Members are arguing that there should be no regional variations in prices, we run into difficulties. I appreciate that there are particular difficulties with fuel prices in rural areas, and they can form a large part of an individual's expenditure, but it is only reasonable to point to regional variations in other goods, too.
I wish to assist the hon. Gentleman on the reaction that he may anticipate in tomorrow's papers. The point that he is making was made from the Dispatch Box by a former Economic Secretary to the Treasury three years ago, and there was outrage. The hon. Gentleman has, sadly, reprised that ill-advised comment, and that will probably result in similar outrage in the John O'Groat Journal and Caithness Courier.
I appreciate that part of the routine of these occasions is for hon. Members to contact their local press as this matter is about to arise. Then the Government and the official Opposition raise one or two gentle queries about whether the policy is necessarily workable, and that is treated as highly offensive.
The hon. Gentleman has misrepresented the situation. He said that Liberal Democrats thought that there should be no regional variation in prices. That is manifestly not the case, as I suspect he knows. The argument is being made, first, that this is a special case because fuel is such a pressing necessity in such areas. Secondly, the regional variation in fuel prices is now extreme. In the most densely populated parts of my constituency, petrol is about 15p a litre more than it is on the mainland. Will the hon. Gentleman address those points, instead of setting up false premises in order to knock them down?
The hon. Gentleman is quick to take offence. I am merely seeking to tease out some of the arguments that hon. Members are making. I merely raised the issue of other regional variations, and I am grateful for his acceptance that there will always be regional variations. Perhaps I can best describe the position of those who tabled the amendment by saying that they are trying to iron out some of the spikes. That is a perfectly understandable objective.
Let me turn to the technical points. When this issue is raised every year, it is striking that very little detail is set out as to what constitutes a remote rural area. I know that that matter would be decided under regulations, but further detail would be helpful— [ Interruption. ] For the benefit of the Official Report, I should say that a map is being held up on the Liberal Democrat Benches. We have heard no details about what the population of such an area would be, or the land mass— [ Interruption. ] I am hearing comments from a sedentary position, but there is nothing in the amendment other than a statement that regulations will specify the details. There is nothing for the Committee to rely on.
May I help the hon. Gentleman by suggesting that one definition that could be considered would be "land surrounded by water"? That would be quite a simple area to define.
As my hon. Friend points out, the whole country is surrounded by water. I think that I understand where Mr. MacNeil is coming from: obviously, his constituency is a place surrounded by water. I do not know whether, if he put that definition to all hon. Members in the Chamber, they would accept it—but I suspect not. We are faced with an amendment that does not give us the details. We do not have an estimate of what the costs would be. We will not oppose the amendment, but, as it still represents a largely unknown quantity, hon. Members still have some way to go to persuade us to support it.
I want to speak mainly so that I can demonstrate that this is not purely a Scottish issue, despite the eloquent proposition put forward by my hon. Friend Mr. Reid. This matter affects rural communities across the country, albeit in different ways, although it is demonstrated in its most extreme form in the sort of communities represented by my hon. Friends who have already contributed to the debate. That is particularly true for the island communities and the very remote areas in Scotland where the population density is extremely low.
I want to impress on the Committee the problems that each of our rural areas have due to the premium on fuel, as has been demonstrated by Mr. Drew, and the necessity to use cars to carry out normal business. It is quite impossible for people in my Somerset constituency to use public transport to get to work because there is simply no system that allows them to do so. In my village, there is one bus a week. A person cannot ask their employer if they can attend only once a week, on the day that the bus runs, and expect to hold down a job. That shows the difficulty for people in my area. Of course, most couples and even families have to go to several destinations, because there is not one place that is a convenient provider of employment to which people can drive from a village or a very rural area. That means that some families need several cars—certainly two, and sometimes more—to allow their members to get to work or school, or to carry out all aspects of their normal lives.
My hon. Friend is making a point that I was going to raise. Even when their incomes are low, families in rural areas need two cars because there is no public transport. That means that their dependence on petrol is even greater than that of more affluent families.
Absolutely. Another factor in the sort of areas that my hon. Friend and I represent is that income is well below the national average, and the result is that the vehicles that people use are often older and less efficient. A statistic—it might not still be correct—has suggested that the number of cars per household was higher in Somerset than almost anywhere else in the country, and that those cars were also the oldest, because people generally kept one or two old bangers to get them to their various destinations.
As income in rural areas is low, the price of fuel makes up a much higher proportion of weekly outgoings. People are therefore hit by an additional burden every time fuel duties or prices go up. Such rises have a disproportionate effect on the rural population and on the way in which people in rural areas carry out their business. There is also an indirect effect: it costs more to send delivery vans to local shops and stores. In every way, there is an economic disadvantage that has the price of fuel as a major determinant. The amendment, to which I am a cosignatory, is an attempt to address that basic economic injustice.
I am sure that that is true, and I have observed what the hon. Gentleman has described in many parts of the Province. The problem spreads across England, Scotland, Wales and Northern Ireland, as interventions on even my brief comments have shown.
Although we need to address the economic injustice that I have described, we must also deal with one undesirable outcome of an otherwise desirable policy. I think that we all strongly support the idea that, to help to tackle climate change, we must try to reduce our reliance on cars and our use of fuel. We understand that, but the principle that that can be achieved by adding to the cost of fuel works only if there is a viable alternative. In rural areas, there is no elasticity in the system, because there is no alternative, so raising fuel prices does not encourage people to use their cars less. Instead, it merely encourages them to use more of their wages to carry on as before, which is entirely the opposite of what happens in conurbations and areas with public transport. I strongly believe that we should use fiscal means to discourage car use in areas in which an alternative is available, but it is essential that we accept that such a policy cannot and will not work in rural areas where that alternative is not available.
My hon. Friend eloquently makes the point that using taxation to change behaviour is simply a punishment if there is no way in which that behaviour can change.
My hon. Friend is absolutely correct. He will remember that last year, when we were debating the retrospective change to VED, it was argued that, although there was a strong case for using a VED differential, by making it retrospective we would not be changing behaviour—we would simply be taxing the individual more. That was the argument then. Now, the argument is that if the aim is to achieve environmental goods, there are ways to do that, but if a measure does not achieve an environmental good, it simply becomes yet another form of taxation affecting a part of our community that can least afford it—the poorly paid people in rural areas whom we represent.
The solution offered by amendment 5 is elegant in many ways. Rightly, not all the detail is written into the amendment. There is supporting material, as my hon. Friend John Thurso says, but more definition is required. Arriving at some of the definitions will be quite difficult, especially for an area such as mine, where the population distribution and density are very different from those found in the highlands and islands of Scotland. It is by no means straightforward to translate the intention behind the amendment into reality in parts of England such as my constituency, but the argument is one that we have to make—and we have to make it repeatedly—because the present system is unfair to people in rural areas. It is particularly unfair to the highlands and islands, but it is also unfair to parts of the south-west. We should recognise that it is unfair to the whole of England, Wales and Northern Ireland.
It is a great pleasure to follow my hon. Friend Mr. Heath, who eloquently set out precisely why the measure proposed in the amendment would be of great benefit to people who live in remote and rural areas.
First, I shall attempt to answer some of the points made by Mr. Gauke, because I do not believe that they should be allowed to pass unrebutted. I am sure that others will do the same, perhaps with more humour, but let me have a go. He said at the start of his speech that this subject comes up every year—that it is a hardy perennial. There is a good reason for that: it is a matter of great importance, especially to those of us who represent a part of the country that is in many ways very different from the rest of the country. If he wants the debate to cease, he could assist by encouraging his hon. Friends to vote in the right direction and helping us to persuade the Minister to accept our proposal. If the scheme were allowed on to the statute book, there would be no need to have this debate next year and in subsequent years.
The hon. Gentleman is being uncharacteristically tetchy. As I acknowledged, we have this debate regularly because of the genuine concerns shared by a number of Members. However, every year the Liberal Democrats offer proposals that are pretty sketchy, and they cannot convince many other hon. Members of their case.
Our proposal is not sketchy. It is well thought through and carefully analysed. Although I do not want to steal his thunder, I may say that it was set out in the paper that my hon. Friend John Thurso prepared last year and circulated—including to Conservative Front Benchers, so the hon. Gentleman has had the opportunity to study it.
Does my hon. Friend not think it significant that every year, we hear Conservatives' accusations of sketchiness, but year after year, they never feel motivated to do anything themselves to add more detail?
My hon. Friend makes an important point. If the Conservatives wanted to support such a measure, they could produce one that they thought would be workable. They have failed to do so over the many years in which Liberal Democrat Members have proposed such measures—
Indeed, Members of other parties have made proposals. The intervention from the hon. Member for South-West Hertfordshire suggests a complete absence of desire on the part of the Conservatives to produce a measure of their own. It also suggests that they are out of touch with the reality in constituencies such as mine, which those of us who come from the north of Scotland—and, I am sure, those from other rural areas—see as characteristic of his party.
My hon. Friend Mr. Reid has eloquently set out the problem that this measure is intended to address, if not fully resolve. Let me add to his evidence some perspective from my own constituency. First, it is worth setting the amendment in context, and an important aspect is that the cost of fuel has clearly been rising even over the last three or four months. The figures given in the AA's fuel prices report show that since January this year, the average price of a litre of petrol has risen in Scotland by 8.6p in comparison with 8.4p across the UK.
These increases have a much more dramatic effect in constituencies such as mine and those of other Members who have spoken in the debate. For example, in Dalwhinnie in my constituency, a litre of diesel—for the benefit of the hon. Member for South-West Hertfordshire, I am afraid I do not have the figures for a pint of beer—is 109.9p, compared with 99.9p in Edinburgh. A litre of petrol is 101.9p in Fort Augustus, compared with 92.9p in Edinburgh. In Carrbridge, also in my constituency, a litre of petrol is 102.9p, which is 10p more than the equivalent price in Edinburgh. Members representing island constituencies have rightly stressed that the differentials are even more severe in the island areas, but the point I want to emphasise through these examples is that there are severe differentials in mainland areas of the highlands, too.
On a point of information, I add that in Stornoway today, the price for a litre of petrol is £1.03, and diesel is £1.13. I hope that that provides further context for the prices that the hon. Gentleman mentioned.
Alongside the higher costs, we need to consider the impact of not only fuel duty, but VAT. The fact that the price is higher means that, as well as paying more for their fuel, people are paying more VAT. It is not just that the individual faces higher costs; the Treasury is then reaping more benefit from the misfortune of the people who have no choice but to pay these higher prices. That provides yet another reason for those on the Treasury Bench to look positively on these proposals.
Apart from the cost of fuel, this problem is highly burdensome to my constituents. As a matter of course, people living in the highlands and islands and other rural parts of the country have much longer distances to travel. I mentioned Dalwhinnie; someone living there who chooses to commute to work in Inverness faces a daily round trip of about 120 miles—a substantial fuel cost by any measure. It is also worth saying that anyone living in Dalwhinnie who wants to go to a supermarket faces a 60-mile round trip. Just obtaining the basic necessities of life, quite outside the work environment, necessitates a long journey, and in other constituencies the distances can sometimes be even greater. Many tens of thousands of miles can be involved for people just to commute back and forth to work and to go about their daily business—it is not in any way unusual.
My hon. Friend the Member for Somerton and Frome eloquently addressed the third element of the triple whammy of additional costs and pressures in relation to fuel for those who live in remote, rural areas: the availability of public transport. For those who live in Dalwhinnie, there is no local bus service—there is an occasional Citylink coach service, but that requires a two-mile walk on to the main A9 roadway. My hon. Friends who have driven up and down that way from time to time will know that walking from the village to the motorway in any conditions other than the most clement is not ideal. In Carrbridge, there is no local bus service, and in places such as Fort Augustus and Drumnadrochit, a bus every two hours would be regarded as a high-frequency service.
Such frequency or availability of public transport provides people with no realistic alternative to car use for necessary journeys. That is why I said in an intervention that in places such as the highlands and islands, using a car and filling it with fuel is not a luxury but a necessity; it is the only way people can go about their usual business. As my hon. Friend the Member for Argyll and Bute observed, environmental incentives in fuel duty can apply only when a genuine choice or alternative is on offer, and for many of my constituents that is simply not the case. For such people, the environmental incentive argument for fuel duty is not right.
The case for the measure that we propose is accentuated by the current economic situation. We have seen a 75 per cent. increase in unemployment in the Highland council area, and many costs are increasing. For example, on price differentials, the latest rural Scotland price survey showed that food was 11 per cent. more expensive in rural areas covered by Highlands and Islands Enterprise than in urban Scotland. [Interruption.] As my hon. Friend the Member for Caithness, Sutherland and Easter Ross rightly observes from a sedentary position, part of the reason for those excess costs is the impact of the fuel price on transporting those goods to village shops and individuals. People are affected not just by the cost of journeys, but by the cost of goods and services.
Is there not another corollary: many businesses based in rural areas face higher costs in getting their goods to market? That has a knock-on effect on businesses in rural areas and the attempt to keep employment there.
The hon. Gentleman is absolutely right and makes an important point. The issue affects more or less every business in my constituency and, I am sure, in his. The disproportionate cost of fuel has a knock-on effect on businesses and customers. I will not stray from the matter under discussion to talk about the effect on parcel delivery charges, for example, but that is another bone of contention—a hardy perennial perhaps. People rightly feel strongly that the excessive parcel charges they must pay are not justified by the fuel price, and that that does not begin to cover the differential. Hon. Members will be aware that research by Highlands and Islands Enterprise shows that fuel accounts for 18 per cent. of the costs of people living in the highlands and islands, compared with 13 per cent. across the country as a whole. That goes some way to show the substantially greater economic burden on the rural communities that I and others represent.
The merits of our proposal are many, and I will not develop all of them at length, although I am sure that the paper written by my hon. Friend the Member for Caithness, Sutherland and Easter Ross could be read into the record if that was felt necessary. First, the proposal offers a clear route forward to applying the principle that we are trying to set out. The Scottish Executive's eightfold urban-rural classification scheme provides a ready, well worked out, carefully thought-through basis on which to apply a discount. English MPs will know that Natural England has produced a similar—it is not precisely the same—classification for England.
I differ slightly with my hon. Friend the Member for Argyll and Bute in that I think that the discount could usefully be applied to three of the categories. I would add to the two that he mentioned the category of remote rural—areas with a population of fewer than 3,000 people, within a 30 to 60-minute drive of a settlement with a population of 10,000 or more. Even if those three groups in the classification were included within the scope of the application of the proposal, it would still mean that areas lived in by roughly only 3 per cent. of the population of Scotland would benefit from it.
It is worth placing it on record that although the scheme would benefit many of the rural areas in my constituency, the large city of Inverness, which has slightly higher prices than other parts of the country, would not be a direct beneficiary. Last year, I was involved in protracted but successful negotiations with Tesco to persuade it to reduce its petrol price in the city of Inverness, so Inverness has benefited in other ways from Liberal Democrat Members' efforts to reduce the cost of fuel. The scheme would not directly benefit the city of Inverness, but it certainly would benefit the rest of the rural highlands and islands. There is some merit in the suggestion made by my hon. Friend the Member for Argyll and Bute, that starting the scheme in island areas would be a good way to establish the principle and check for fraud and so on—issues that he rightly addressed, but on which I do not intend to focus. That would be a good way of starting the ball rolling.
There are established international precedents for our proposal. Indeed, a derogation from the European Union's energy products directive explicitly allows member states to have differential levels of fuel duty. That power is already exercised by the Governments of France, Greece and Portugal. Each of them has chosen to use the measure to benefit geographically remote, sparsely populated areas that they consider sufficiently important to merit use of the power for their benefit. There is no legal barrier to the United Kingdom Government using the same power—
There is just a political one, as my hon. Friend says. Indeed, I understand that UK Ministers supported the power to vary fuel duty in the Council of Ministers. I fail to see why, having done so, our Ministers cannot find a way to apply that power in the UK for the benefit of the remote and rural communities of this country. The derogation in the directive allows a maximum differential of 3.54 euro cents on a litre of petrol. Those who follow exchange rates carefully will know that that currently amounts to about 3p per litre. That would make a difference, although perhaps not enough of a difference in many areas. There is a strong case for lobbying, and working within, the European Union to increase the size of the differential allowed. None the less, a differential is allowed.
The measure is fair because the benefit is targeted at a small but important group of people who suffer as a result of a particular unfairness under the current system. The hon. Member for South-West Hertfordshire implied that anyone interested in government would not support the proposal; I think that anyone interested in governing the country fairly would support it, and that is why Liberal Democrat Members— [Interruption ]—and the whole country support it. Liberal Democrats from not just the north of Scotland, but across the whole United Kingdom, support it. It is proposed not just on sectional, regional grounds, but on the basis of fairness; we think that the measure is the right thing to do for the country as a whole.
Of course, the current economic circumstances reinforce the reason why the measure is important for the country as a whole. It would support an economic stimulus in the highlands and islands. The point has been made that it is not just local people who would benefit from the reduction proposed in the amendment, but tourists visiting the area. Tourism is an important part of the economy in parts of my constituency. In areas such as Badenoch and Strathspey, it is thought to be about 80 per cent. of the economy. Clearly, the measure would help to reduce tourists' costs, and would also help to increase tourism spend in what is already a very popular tourist destination—
As I said a moment ago in a sedentary intervention, there would be increased tax revenue from greater economic activity. The measure might be revenue neutral or create a larger tax take for the Exchequer, which should probably be grasped with both hands by the Minister.
The hon. Gentleman indulges in economic forecasting. There is reason to believe that the measure would bring some benefit by increasing economic activity, reducing the burden on small businesses, putting more money in people's pockets that they could then spend on other things, and supporting the tourism industry. All those things are potentially revenue generators that would help to defray, if not completely offset, the cost of the measure.
I recall that last time we debated the measure, the cost was estimated to be in the region of £20 million to £40 million a year. The lower of those estimates is not dissimilar from the pension pot for Fred Goodwin that was waved through on the nod, without a moment's consideration, by one of the ministerial colleagues of the Exchequer Secretary, who is not listening. As I understand it, after a brief phone call, the noble Lord Myners decided that a £16 million pension pot for the Royal Bank of Scotland's ex-chief executive was fine. We are discussing a measure that costs—
I am grateful for that guidance, Mrs. Heal. The point that I was seeking to make in the context of the overall Government spending of many billions of pounds on an economic stimulus and by highlighting one individual commitment that was entered into by a Minister was that it should be a matter of great ease for Treasury Ministers to support the scheme. It is low cost, simple and fair; it has a strong international precedent; it is the right thing to do; and I urge the House to support it.
I shall be brief. We on the Scottish national party Benches will support the amendment tonight, despite the disgraceful failure of the Liberals to support our excellent amendment on the previous vote. We are very forgiving people.
Mr. Heath made a good speech and very good points about public transport. When I travel on the train from London to Montrose, I can get a bus from Montrose to Brechin, where I live. That is relatively easy. Recently, my trusty old Honda—that should be rusty old Honda now; I shall certainly go for the Government's scrappage scheme—was in the garage, and I found myself having to get from my home to my offices, which I found difficult.
One of my assistants who lives in Brechin travels to my office in Arbroath. He cannot get in for 9 am, despite those being two of the larger towns in the county. He has to go via Montrose on the bus to Angus college because that is the only public transport available. It is extremely difficult for people to travel around by public transport, even within the main towns. Outwith the main towns, up in glens of Angus—I am sure it is the same elsewhere—there is little or no bus service. Even the intercity buses that travel between the cities will not stop in many of these areas, so one has to make several connections to get to, say, Dundee or Aberdeen. There is a real problem with the few alternatives to public transport, which is why cars are so important in rural areas.
The hon. Member for Somerton and Frome also made an important point about the price of petrol and about petrol stations. In Brechin, there is now only one petrol station, which is attached to a small Tesco store. On the main road that runs from Dundee to Aberdeen, there is another petrol station, but its prices are astronomical because it has a captive audience, so to speak. The map that John Thurso produced is very interesting and shows the area that the scheme would cover. Very little of my constituency—only the remoter glens—falls into that area, but that in turn produces another problem. People living in those glens require the benefit of the proposed scheme, but there are no petrol stations.
One point that has not come out of the debate so far is that petrol stations have disappeared from many rural areas. People have to get in their cars not only to go to supermarkets and to commute to work, but to find a petrol station, because they simply do not exist in many areas any more. Many small, independent rural petrol stations have gone—effectively driven out of business by the majors. In my constituency, one will be lucky to find a petrol station that is not run either by Shell or Esso. I believe that there is one Mobil station left, but that is it; the independents have gone. Even under the proposed scheme, there would be a potential difficulty with persuading petrol stations to become involved.
The proposed scheme is good and important, but I have some queries about the wording of the amendment and, for the first time in my life, agree with Mr. Gauke, because proposed new section 14G(5)(c) states that regulations will "define 'remote rural areas'". I understand that point, and papers may be available elsewhere, but I have a horrible memory of serving on the Committee that scrutinised what became the Energy Act 2004. In it, there was a wonderful power defining the area where it would be possible to cap charges for renewable energy. Everybody assumed that that area was the highlands and islands of Scotland and gaily passed the legislation, but we then found that it was not; it was only some of the islands of Scotland. That has been a source of contention ever since, so there is a danger in not defining exactly what one means by "remote rural areas".
I must accept that, apart from the glens, most of my constituency does not constitute a remote rural area. There are difficulties, however, and people in those areas would have to go to other areas to find petrol in the first place. Defining "qualifying retail outlets" would also be a problem because of the lack of such outlets in the remote rural areas that form part of my constituency. The outlets that people use are not in remote areas but in the more populated, coastal area, because that is the only place where one can get petrol in Angus. There are difficulties with the amendment, but that does not mean that we will not support it, because we will.
We have heard a lot about how the situation affects individuals and families, and goods going into the area, and it is true, because the lack of an alternative to road transport means that the price of fuel feeds through to the price of everything. Everything in rural areas costs more because it costs more to transport it there, but, when intervening on Danny Alexander, I made the point that it also affects businesses that are based in, and try to transport goods out of, rural areas. Many are food-based, farming or food-processing businesses, and their products have a relatively short shelf life, so they have to move them quickly and pay the costs of doing so. The situation impacts on people's ability to set up, run and maintain rural businesses, which are important in this period of recession, as employment in rural areas is under considerable pressure. We must maintain that employment, so anything that creates greater costs and increased pressure for such businesses is wrong. It is wrong that they face the discriminatory fuel cost before us. For all those reasons, we will support the amendment.
Things are slightly better, however. My hon. Friend Mr. MacNeil discussed the Scottish Government's wonderful scheme for road-equivalent transport, which is doing great things for the western isles. Mr. Reid was a bit sniffy about it, but I should remind him that while his party and the Labour party were in power for eight years in Scotland, there was no road-equivalent tariff and no attempt to do anything for any island. The SNP Government have made a real start, and we are making progress.
For all those reasons, we will support the amendment, despite our differences with our Liberal friends.
When I came into the Chamber to support my hon. Friend Mr. Reid, I did not intend to speak about the amendment, but I am brought to my feet partly by the comments of Mr. Gauke, and also to say what has happened to my paper since last year.
Let me pick up two points that Mr. Weir made. First, I want to comment on the definition of the area. The map in my paper and the area chosen are used for the Scottish Executive's definition and are available on their website. They are also used for a variety of Government definitions. If the amendment progressed to Committee, it is an accepted convention of the House that Members can work on the assumption that any paper supporting secondary legislation broadly outlines the scheme. That happens when the Government publish notes to secondary legislation that might be introduced. By producing a detailed paper, which can say far more than the limited wording of an amendment, I hoped that there would be sufficient detail to satisfy hon. Members who took an interest in those points.
The second point was the availability of rural filling stations, about which the hon. Gentleman is right. If one drives along the coast of Caithness, Sutherland and Easter Ross, one sees many abandoned filling stations, which no longer serve fuel for many reasons. However, I deliberately chose a tight area to exclude any accusation that petrol stations that did not charge the premium might be included. I therefore acknowledge that the remedy for the injustice to those who suffer from a premium will apply only to the remoter areas. Other areas on boundaries will not benefit. I make no apology for that because I would rather get something for those most in need than try to satisfy everybody.
The hon. Member for South-West Hertfordshire and I served together on the Treasury Committee—indeed, I also served with the Exchequer Secretary. Both are reasonable Members and I will therefore try a reasoned approach. The hon. Gentleman said that our amendment was sketchy. Last year, when I wrote the paper before tabling an amendment, which was similar to the one that my hon. Friend the Member for Argyll and Bute has tabled today, I circulated it to Conservative Front Benchers, wrote to the Chancellor and raised the matter in Committee and elsewhere. The paper was deliberately framed to answer questions that had been asked on many previous occasions about lack of detail. The amendment would enable Ministers to take the appropriate action and the paper proposes a reasoned scheme for achieving that. The paper defines the area and the number of people, and touches on cost. Our paper cannot, therefore, be accused of being sketchy. Perhaps the research of the hon. Member for South-West Hertfordshire was a little sketchy.
I was grateful for the sympathy with which the Exchequer Secretary and her colleagues received my entreaties and for our interchange. Unfortunately, it resulted in the Treasury's saying no—not a wholly unexpected result. Nevertheless, I am grateful for the progress of having a good discussion. The Treasury said no for two reasons: the cross-border issue and the complexity of the administration. I believe that my hon. Friends have already addressed the cross-border issue. We are talking about reducing a premium. However, the premium will always exist; therefore, it will never make sense for anybody to drive into an area where there is a premium and pay more for their petrol. No one will be encouraged to do that. The situation is quite different in Northern Ireland, where there are two wholly separate prices. I would ask the Exchequer Secretary's officials to look into that point.
The other point is about the administration of the scheme. I believe that, without having written an entire financial accounting system, I have put forward a relatively straightforward scheme, in which the VAT system could be used to operate our proposal to ensure that any rebate given, via the wholesaler to the petrol station, would have to go to the individual motorist. I still believe that to be a sensible and viable way forward and, frankly, no more complex than many schemes run by the Government in other areas.
What the hon. Gentleman is really saying is: "Where there's a will, there's a way." It will be noted in the highlands and islands of Scotland that, when it comes to the difficulties with rural fuel, there seems to be no will from this Labour Government.
I am not sure that the hon. Gentleman expects me to answer that, but let me say that I have always been a far more charitable animal than his colleagues. I am therefore willing to believe in the Government and hope to the last that the natural justice of our cause will, after years of perseverance, be rewarded.
Thank you for allowing me to take part in this debate again this year, Mrs. Heal.
We are discussing the one issue that has generated more correspondence and representations to me in the years that I have been in the House than any other. It is an issue that underpins just about everything that happens in island communities such as those that I represent. I make no apology for returning to the issue year after year. Mr. Gauke said that we had acquired some constitutional status. I just hope that it will help us come to a resolution, because believe me, Mrs. Heal, we will keep coming back to this debate until something is done. If hon. Members cannot be bothered to listen to a bunch of teuchters going on about the cost of fuel every year, there is a perfectly simple remedy: they can do something to solve the problem.
As others have remarked, the hon. Gentleman made an accusation of sketchiness, which is one that must be addressed. I do not accept that accusation, for reasons that have been outlined eloquently and in detail, most recently by my hon. Friend John Thurso, but let us take it at face value. We hear that accusation year in year out from the Conservatives; and year in year out, that is their only contribution to this debate. The conclusion that I draw, as will many of my constituents and many across the highlands and islands, is that the Conservatives make that contribution because they cannot be bothered to do anything more.
If, by some electoral freak, the next general election results in the Conservatives on the Opposition Benches replacing the conservatives on the Government Benches, absolutely nothing will change in the highlands and islands. There is no more political will among the Conservatives than there is among the Government to do anything about the problem. If I am wrong about that and if the hon. Member for South-West Hertfordshire has a plan to address the problem, I will cheerfully give way so that he can intervene. [ Interruption. ] I see no intervention. People will doubtless draw their own conclusions about that.
Before I give way to the hon. Gentleman, let me give him a warning: his words will be taken down and may be used against him.
I am grateful to the hon. Gentleman for giving way. As I made clear in my initial remarks, hon. Members have a legitimate cause for concern. I make no criticism of the fact that they regularly—and rightly—raise the matter, but we would assist if they presented an amendment that we thought was more persuasive. We do not object in principle to what they are trying to do, but we remain unconvinced. It is up to him and his hon. Friends to set out a more detailed amendment that we could support.
I am extremely grateful to the hon. Gentleman for that highly telling intervention. He was asked what the Conservatives would do in government, and he answered by repeating the critique of our proposals that he has already offered tonight. The only conclusion that we can draw from that is that, if the Conservatives were in government, they would do absolutely nothing more. He has been given the chance to tell us what they would do, and he has repeatedly refused to do so.
Far be it from me to correct the Chair, Mrs. Heal, but I think that Mr. MacNeil wanted to intervene on me.
My criticism of the Labour Government also applies to the Conservatives. Where there is a will there is a way, but we are clearly seeing no will from them. The only thing that I would say about the Government is that, when I raised this matter three years ago, their excuses were laughable. Their excuses are getting a little bit better, but they are still hollow.
Their excuses are laughable, and the joke has worn rather thin for my constituents over the years.
There was a time when I began to think that we were making a small degree of progress on this issue. On
"Having filled up my car with diesel in Lewis just a couple of weeks ago, I am acutely aware of how high the petrol prices are."
He went on:
"I am struck by the variation in petrol prices across the highlands and islands; they vary substantially...the price of diesel seems to vary quite a bit depending on which side of the Minch one is on."—[ Hansard, 24 April 2008; Vol. 474, c. 1461.]
I will return later to the point about stretches of water but that was the Chancellor accepting our argument. It does not get much better than that. The Chancellor accepted that he knew about the problem because he had a family connection with the western isles.
As a result of that exchange, I was offered—and accepted—a meeting, to which I took the hon. Member for Na h-Eileanan an Iar, my hon. Friend Mr. Reid and the president of the National Farmers Union of Scotland. I give all credit to the Minister for the conduct of that meeting. It was very open, frank, friendly and constructive. It was held on
Summer turned to autumn, and autumn turned to winter. On
First, the observation was made that the high price of fuel was
"the result of market conditions, in particular the extra costs involved in transporting fuel to relatively inaccessible locations."
I appreciate that, when viewed from the Treasury, Orkney and Shetland might seem like an inaccessible location, but is the Minister really telling us that the 15p a litre premium that is paid by my constituents is simply down to transportation? I do not believe that nonsense, and an instance recently brought to my attention refutes it.
For some time, fuel has been supplied to us in Orkney by a company from Caithness. It is taken from Gill's Bay, on the less fashionable side of the Pentland Firth, to St Margaret's Hope in South Ronaldsay, on an open deck in a road tanker. For some time that option was not available, so the company in Caithness took it in a tanker from Caithness down to Aberdeen, put it on a ferry and took it to Orkney. It was able to do all that at a price lower than that charged by the local supplier. Surely we can all now accept that whatever the reason for the increased price of fuel in my constituency, it is nothing to do with road transport.
The Minister made two more points in her letter. I hope that she will explain the basis of her thinking, because what we see in these letters is not a reference to the substantial work that we were promised, but merely the politics of assertion. She wrote that a fuel duty rebate was
"likely to increase the amount of duty lost through fraud"—
I must say that I am less than impressed with the slight to my constituents—
"by creating greater opportunities and incentives for false accounting or fuel smuggling."
The Minister offered no evidence in support of that assertion, although she had five and a half months in which to come up with it. When she responds to the debate, will she undertake to place the evidence that she acquired over those five and a half months in the House of Commons Library? We shall wait to hear what she has to say.
The second point that the Minister made in her letter was:
"Having different duty rates in different areas could well create perverse incentives for motorists to drive further in order to fill up on 'low-duty' fuel, both distorting the fuel market and resulting in an increase in CO2 emissions, contrary to the Government's policy of seeking to reduce polluting emissions."
I consider that to be the most illuminating example of Treasury thinking that we have seen so far. The Minister honestly presents to us, and expects us to take seriously, the proposition that someone will embark on a 12-hour ferry journey from Aberdeen to Shetland in order to buy petrol that will still be about 10p dearer than it would have been in Aberdeen. That is obviously the way the Treasury's mind works, and when we understand that, we understand why the economy is in the mess that it is in today.
My hon. Friend Danny Alexander—who, unfortunately, is no longer in the Chamber—referred to the impact of high fuel costs on prices, which I think is widely accepted. There is, however, an even wider impact. The higher prices paid by people in our communities make living in those communities that much more difficult. As a consequence of the increased costs, we see the continuation of population drift—and if there is a single threat to my communities that is greater and more immediate than the high cost of fuel, it is a declining population.
The hon. Gentleman is making a very good case. People—certainly people in my constituency—recognise that we have had no joy whatever from the Treasury, which fails to realise that tax on a litre of petrol is actually higher. However, my disappointment with the Treasury is matched only by my disappointment with the Office of Fair Trading. I think that, like me, the hon. Gentleman has met representatives of the OFT in the past year. When told of the two types of contract between the island and the mainland, they did not want to investigate at all.
I have been to the Office of Fair Trading, and its representatives have come to see me. I can tell Members that the only thing one can be sure about is that the Office of Fair Trading is an office. It understands nothing about trading, and it certainly has no concept of fairness. That, however, is a debate for another day, although I could cheerfully hold forth on it for another 20 minutes without drawing breath. I promise that I will not do that, Mrs. Heal. [Interruption.] If Ann Coffey wants me to do it, I will cheerfully do it—no, she is more interested in her BlackBerry. Very wise.
The point about population decline is that, in the present economic circumstances, communities in the highlands and islands, especially the islands, become particularly vulnerable, and the problem becomes particularly acute. As I have indicated already to the hon. Member for South-West Hertfordshire and to others, I am a forgiving man, so I am prepared to offer the Minister one more opportunity tonight—unnecessarily perhaps and perhaps it is unwise to be so generous, but that is the sort of man I am. She can take the proposal seriously. If she has massive problems with defining where to draw lines on maps, let her take the lines that nature has drawn for her. She can start with a scheme that applies to island communities only. Then we will know the truth about the assertions about people driving great distances to get cheap fuel, which costs them more. Then we will know the truth about fraud and duty evasion, and then we will know the truth about the extra costs of transport. Give us a pilot scheme that applies to island communities only. Let us see how that works and do something, instead of just offering the warm words that we have had in the past.
Thank you, Mrs. Heal, for giving me an opportunity briefly to contribute to this debate, which is important. I am delighted to see so many of my colleagues, who are standing up for the rural communities of the UK. It is notable, I am afraid to say, that, with the honourable exception of Mr. Drew, who has been here for part of our deliberations, no Conservative or Labour MPs feel that it is worth their while defending the interests of rural communities. That is a source of some regret.
I will not rehearse the arguments that have been advanced for amendment 5, because those have been advanced powerfully and passionately by a number of my hon. Friends. I congratulate my hon. Friend Mr. Reid on again raising this important subject and my colleagues representing constituencies in Scotland, England and Wales, who have all championed the interests of their constituents so persuasively and made a robust but highly considered case to the Treasury Minister.
I do not think that anyone is claiming that the amendment has every final detail in it. That is not the intention, but it provides a valuable framework by which the Treasury could progress. The Treasury would have to put its mind to how things would work in practice, but it has been ably assisted in that task by the contributions of my hon. Friend Danny Alexander, who spoke about how it would work in practice and even put figures on the number of people who would be able to benefit from the proposals.
My hon. Friend John Thurso has spoken on the subject many times and even produced a detailed report explaining how the proposal could work in practice. We have also heard from my hon. Friend Mr. Carmichael, who put more flesh on the bones, so I do not think it is fair for either Conservative Front Benchers or Treasury Ministers to claim, as they do, I am afraid, that this is an empty amendment. It inevitably provides a framework, because that is the way these proposals are often tabled, but behind it is a large amount of work that we have happily volunteered and are continuing to volunteer to the Treasury. We hope that its finest minds will be put to work to ensure that the scheme can be implemented.
For all the reasons given by my hon. Friends, this is a point of not only great economic importance but great sensitivity in rural communities throughout the UK. It is essential that all parties try to come up with a workable scheme that satisfies the legitimate requirements that have been persuasively articulated by my hon. Friends throughout the deliberations on the amendment.
We have had a passionate debate, and it is right that I should begin by acknowledging the genuine issues surrounding the fact that cars are a necessity in remote rural areas. No one in their right mind could think otherwise. Some rural areas are not served by regular bus routes, so having a vehicle, and having access to petrol with which to run it, can be seen as a necessity. I also acknowledge the worries that have been expressed about higher fuel prices, to which all the Members who have spoken in the debate clearly respond, as it comes up regularly in their contacts with their constituents. I would have expected that to be the case; the fact that I do not represent glens or remote rural areas does not mean that I do not understand that such issues come up in Members' meetings with their constituents. They rightly receive those representations and reflect in this House the frustration and anger, and worry and sense of unfairness felt by their constituents. That is them doing their job, as I would expect.
The hon. Lady says that we have a legitimate case. Does she not therefore think that our constituents deserve that case to be addressed better than by the rather spurious arguments put in her correspondence of which I have reminded her tonight?
I intend to deal with some of those points. By acknowledging certain issues and that the fuel price in one area might be different from the fuel price in another area, and that in some areas, particularly the islands, there are higher fuel prices because of the costs of getting petrol out to them—
Let me finish my point. I have listened to what has been a long debate, and I would appreciate it if the hon. Gentleman would let me make some preliminary comments so that I can address some of the issues that have been raised. I acknowledge real issues of difficulty, but nobody is saying that fuel prices ought to be directly connected to duty rates, because although those rates have an effect on fuel prices, they are not the whole story.
It is only right that I acknowledge that fuel prices account for a higher percentage of the cost of living in remote rural areas. Mr. Reid, who moved the amendment, has proposed a reasonably specific measure, which Members representing rural areas have presented to us before over the years. As the process has gone on, we have had debates about that measure. As well as hearing from Members from Scotland and its remote rural areas or islands, we have heard from Northern Irish Members, and Mr. Heath, who has his own rural areas to represent. I acknowledge the cost issues for those who live in rural areas, but I think that other Members—particularly opposition Members—ought also to acknowledge that their solution to this is not an easy one and that it is not without its own difficulties. In a grown-up debate on the issue, I would acknowledge the problems related to the higher fuel prices and other Members would acknowledge that the solution that they are pushing is not without its problems. If we were to do that, we might have the chance of a reasonable discussion.
I am grateful to the Minister for giving way. Will she acknowledge that the highest fuel prices mentioned in the debate are up in Stornoway, where petrol costs £1.03 and diesel costs £1.13? Will she therefore acknowledge that people living on the islands of Scotland are paying more tax per litre of fuel in duty and VAT than those living anywhere else in the country? The argument is about tax fairness. The tax the Exchequer gets from a litre of petrol in Stornoway should be the same as it gets from a litre of petrol in London.
By definition, that can be the case only if fuel prices are exactly the same everywhere in the country—that is the logical response to the hon. Gentleman's point. Nobody is arguing that there is a direct 100 per cent. connection between the rate of fuel duty and the price. I do not know whether he is suggesting any opposite or different approach, but in the UK we leave petrol producers to decide on the price. The Government levy a duty, but there is not always an easy connection between the level of duty and the price at the pump. When there is more competition the price at the pump can be driven lower than it is when there is no competition, as has been said by several opposition Members. That much is true, but this is about whether they are arguing that we should maintain one set level of petrol price—it is almost like the universal service obligation for the post. Setting a commodity price, albeit an important one, at the UK level represents a very different approach from the one to which we have become used over the years.
The fact is that the people who need petrol the most pay the most and can afford it least, whereas those who need it the least pay the least and can afford it most—that is the basic equation. If the Exchequer Secretary does not accept the proposal that my hon. Friend Mr. Reid is making, surely it is incumbent on a Government who believe in social justice and good economy to find an alternative way of dealing with that basic problem.
I was going to discuss the issue that the hon. Gentleman raises. I just wanted to make the point that it is not obvious that trying to manipulate the duty in different ways would have a predictable read-through to the price at the pump. There is no guarantee that it would, without our setting an actual price for petrol. We have never done that in the UK and it may well not be legal. The amendment assumes that predictability. Nobody on the opposition Benches has questioned that, but there are big question marks around it.
It is also not necessarily the case that those who are least able to afford it pay the highest prices in all cases, because great variation in price exists across the country and sometimes from one petrol station to another. The difference in prices on the various websites demonstrates that variation. It is greater in the highlands and islands than anywhere else, but there is a lot of variation and there is no obvious logic to the prices that one pays at the pump, despite the fact that fuel duty is the same across the country. That needs to be acknowledged and it might point to the fact that trying to manipulate the fuel duty is not the answer.
I accept the point that the Exchequer Secretary made—solving this problem is not without its difficulties—and I, for one, am entirely ready to engage in a process with her. If her officials have read the paper that I sent them last year, they will know that every one of the points that she just made is answered. The premium is pretty constant in the north and the price varies. This proposal deals with a reduction in the premium, but the price continues to vary. The mechanism that I set out, through the supply chain, means that the money is guaranteed to go to the motorist—it cannot do anything but. May I suggest to the officials who briefed her, perhaps this evening, that they need to liaise with the officials who read the notes I submitted?
The hon. Gentleman's paper has been much prayed in aid and I pay tribute to the work that he has done to try to solve some of the practical problems. His eightfold classification would produce many tiny little pockets scattered all over Scotland, especially south Scotland, where the duty differential would apply. Not all of those areas experience higher fuel prices than the norm, within a reasonable fluctuation. Not all of them have similar prices either, as there is a wide variation. Some of that variation has to do with the normal workings of the petrol market and the fact that we do not mandate a single price for petrol across the country. Some of it may well have to do with rurality, but that is difficult to distinguish. Drawing boundaries on that basis would create many tiny little areas where fuel duty was lower than in other areas.
Another aspect of the plan produced by Opposition Members is to move the duty point from petrol distribution networks and oil companies to individual petrol stations, but that would be very difficult to achieve administratively and is not something that I would wish to do unless I could see major benefits accruing from the change. I do not believe that major benefits would accrue from that change, and that is another practical and administrative difficulty with the solution that hon. Members have produced.
I recognise the difficulties, but I remain unconvinced that these proposals are the right way to tackle them. Therefore I ask the Committee to vote against amendment 5.
The hon. Gentleman is right to point out that the debate has been concentrated in one particular corner of the Chamber—
Was my hon. Friend as struck as I was by the fact that the Exchequer Secretary accepted that there was a problem, but her only contribution to the debate was to highlight problems with the solution that we have suggested? She offered absolutely no solution of her own. What consequences await a party that identifies problems, but lacks the will or the guts to do anything about them?
I perhaps have a less combative style than my hon. Friend, but I share his sentiments. The Labour and Conservative parties have not come out of the debate well. My constituents and those of other hon. Members who represent the highlands and islands may be punished at the pumps, but come
My hon. Friend may be less combative than my hon. Friend Mr. Carmichael, but does he agree that it is a strange approach for Ministers to take to say that they have identified a problem, but that they refuse to lift a finger to try to solve it? That may have been the approach that they have taken to most of the economic problems facing the country, but on this occasion the Exchequer Secretary admitted that there is a problem. I suggest that pressure is applied to the Government so that they come forward with their own solution.
My hon. Friend makes an important point. The only good thing to come out of the debate was the acknowledgement from the Government that a problem exists. However, as my hon. Friend the Member for Orkney and Shetland pointed out earlier, that acknowledgement was made more than a year ago in Treasury questions. I will at least acknowledge that the Government are sympathetic and that they realise that there is a problem. However, as my hon. Friend said, it is incumbent on the Government to come forward with a solution if they do not like the solution that we have proposed.
The Minister and the team at the Exchequer are clever—we know that—but the wilful misunderstanding that we saw tonight would never have happened if this matter were decided in Edinburgh. My constituents will be looking on and thinking that this underlines the reasons for Scottish independence. A wilful lack of understanding such as that which is being shown tonight could not and would not happen in an independent Scotland.
I do not want to stray too far from the debate, but a brief response to that intervention is that my island constituents do not like the policies of the hon. Gentleman's Government in Edinburgh. They only benefit his constituency—
May I intervene before this becomes an entirely Scottish affair again? I must say that my constituents would not be reassured if it were left to the Government in Edinburgh to determine such matters. The complete absence of focus and ideas from those on the Treasury Bench or on the Conservative Front Bench on this issue, which affects many rural areas across the UK, underlines the fact that neither party has a clue what happens in rural Britain.
My hon. Friend is quite right. The Conservative party certainly does not have much of a clue. I want to respond to the speech made by Mr. Gauke. I can assure him that by breakfast tomorrow he will be a household name in the highlands and islands. I certainly worry that one or two of my constituents might have a seizure when they read the local paper tomorrow over their porridge or their cornflakes. When they read his comments about the price of beer in London, they will be absolutely outraged, and rightly so. A former Economic Secretary to the Treasury—I cannot remember his constituency, but we all know who he is—made exactly the same comment when he replied to a similar debate three or four years ago. He quickly became a household name throughout the highlands and islands and his name is still greeted with outrage. I always encourage people to visit the highlands and islands on holiday, but perhaps the hon. Member for South-West Hertfordshire would be well advised to stay away. He might well get an abusive phone call tomorrow from his fellow party members on his party's European list in Scotland.
The Conservatives offered us nothing and, despite their sympathy, the Government have offered us nothing.
Will my hon. Friend take this opportunity briefly to rebut the Minister's assertion that the designations on the map will lead to many pockets? If she had been able to see the research that I had undertaken, she would know that the small pockets of land have no petrol stations in them, and that it therefore does not apply to them. The big areas do have the petrol stations. If she had done what I have done, and tracked those prices, she would know that there is always a premium in all of them.
My hon. Friend is quite correct. I have the map that he produced in front of me and there are one or two pockets where, as he says, there are no petrol stations. Most of the area in the mainland that would be involved in the scheme is contiguous.
The hon. Member for South-West Hertfordshire said that our scheme was rather sketchy, but my hon. Friend the Member for Caithness, Sutherland and Easter Ross put forward a very detailed scheme in his paper. I shall not read out the whole paper—[Hon. Members: "Oh, go on!"] Despite that request, I shall concentrate on the part of the scheme mentioned in paragraph 3.2 of his paper, where he gave a summary of how the scheme would be implemented.
First of all, filling stations in rural areas designated by the amendment will have to apply to be designated filling stations under subsection (3). When they do so, there will be a discussion with HMRC to establish an agreed trading margin based on VAT returns from previous years. The returns will contain both input and output tax, and so are a record of sales and costs.
Designated filling stations would then contract to use the agreed margin on all fuel sales. They would be required to keep evidence to prove conformity, which could be audited easily as part of the normal VAT checks procedure. There is plenty of detail, and the scheme is not sketchy in the way that the hon. Member for South-West Hertfordshire suggested.
I thank my hon. Friend for making that point. Does he agree that any sketchiness in the debate came from the Minister? Her speech lacked detail, and she had no case to make to the people of the highlands and islands.
I agree with my hon. Friend that there was no proposal from the Minister.
The hon. Member for South-West Hertfordshire said that the scheme was sketchy and would be difficult to operate, but my hon. Friend Danny Alexander pointed out that several European countries successfully operate similar schemes. If they can do it, the UK Treasury is capable of drawing one up.
My hon. Friend the Member for Caithness, Sutherland and Easter Ross said that the environmental argument for high fuel taxes works only in places where there is a public transport alternative. Where there is no such alternative, he said, the scheme simply punishes people.
I want to conclude by putting forward a proposal for a pilot scheme, and it is similar to the proposal made by my hon. Friend the Member for Orkney and Shetland. I suggest that the scheme apply initially to only one island, as that would allow us to identify problems and prove that it was viable. Scotland's SNP Government have already introduced a pilot scheme for certain islands, but it misses out nearly all the ones in my constituency.
That is extremely unfair, so I suggest that the Minister choose one of the Atlantic islands in my constituency, such as Mull or Islay, as a place for a pilot of the scheme that we are proposing so that we can establish whether it is feasible. I hope that she will take that suggestion forward.
Question accordingly negatived.
Amendment proposed: 11, page 10, line 40, at end add
', provided that before this date, the Chancellor has published a report examining the costs and benefits of the introduction of an automatic fuel duty stabiliser whereby the rates set out in HODA 1979 vary inversely in comparison to oil prices.'.— (Mr. Gauke.)
Question put, That the amendment be made.
The Committee divided: Ayes 134, Noes 346.