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3.45 pm

Mr. John Swinney (North Tayside): I listened carefully to the remarks of the hon. Member for West Worcestershire (Sir M. Spicer); I wish to take up amendment No. 33, in the name of my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan). The amendment is designed to provide a mechanism to enable the Government to vary the proposed increase in petrol duty, to compensate for the increased costs that will be suffered by those who live in rural areas. The issue has already been discussed, but it is important that the Government should have the opportunity once again to reflect on the proposals that are set out in the amendment.

The costs of the additional increase in petrol duty introduced by the Budget would increase the burden on those who live in rural areas by about £60 a year. That is on top of the £300-a-year increase that was introduced by the previous Conservative Government, through their commitment to an increase in petrol duty by an additional 5 per cent. on top of inflation.

The new Labour Government have added to that burden, and we seek through amendment No. 33 to encourage the Government to take a step back from the previous commitment. There is an undeniable case that rural areas are disadvantaged in this instance, and I shall provide some information on the subject.

The Highlands and Islands development board, in one of its publications in 1987, argued that

The study went on to examine the greater dependency of people in rural areas on the use of a car. It showed that on average 57.5 per cent. of households in Scotland had access to a car, whereas in the highlands and islands, which is the principal rural area in Scotland, the average was 68.5 per cent. It was 68.3 per cent. in Grampian and more than 70 per cent. in the northern isles.

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It is interesting to contrast those figures with the dependence on and utilisation of public transport in rural areas. The contrast makes the burden clear. It is estimated that in the United Kingdom 3.66 per cent. of the population travel to work by train and 9.85 per cent. travel to work by bus. In the highlands and islands, 6.6 per cent. travel by bus and 0.65 per cent. by train. Access to public transport in rural areas is not as good or convenient as in city and urban communities. It is clear that in rural areas the burden of petrol duty is much greater than elsewhere, and dependence on the car is much more significant in all respects.

Over the weekend, I conducted a number of surgeries in the highland Perthshire area of my large rural constituency. Complaints and problems were brought to my attention by those who were seeking to use public services such as nursery education and primary school facilities, or other public services that involved substantial car journeys.

One lady was contemplating travelling 300 miles each week to take her young child to a nursery in Dunkeld. The increased burden that will be brought about by the proposed increase in duty will be formidable for that lady. Given the impact of increased transport costs in rural areas, people who live there are faced with a considerable burden. In many constituencies in the north of Scotland, local businesses, post offices, general stores and other small shops supporting life in the rural areas are haemorrhaging away, because of the spiralling costs of obtaining produce and supplies for sale.

The Government have suggested that the increase in petrol duty is being imposed on the wisest advice in respect of the environment. Certainly, travelling around London it is clear to me that there is a huge environmental problem caused by the over-use of cars and by the congestion that they cause. It is, however, unfortunate that the Government have tried to justify the increase in petrol prices on environmental grounds. It will punish rural areas even though it is dressed up as an environmental measure.

The Government need to pursue a long-term environmental strategy. Indeed, some of its details may have been announced by the Deputy Prime Minister during the past few minutes--who knows? Such a strategy will have to tackle congestion, among other issues, but it must not do so at the expense of fragile rural areas, not just in Scotland, but in England, Wales and Northern Ireland. Petrol prices are already high in those areas.

My last piece of evidence comes from an analysis published in the Petroleum Times Energy Report, which shows that the average price per litre of unleaded petrol in Scotland was 61.76p in June 1997; whereas the average price in England was 58.6p. That clear disparity of price is only exacerbated by the heavier dependence in rural areas on the use of the car. I urge the Government at this late stage in the passage of the Finance Bill to think again about that measure because of the damage that it will undeniably do to already fragile rural communities.

Mr. David Heathcoat-Amory (Wells) rose--

Mr. Geoffrey Clifton-Brown (Cotswold) rose--

Mr. Heathcoat-Amory: Would it be in order, Madam Speaker, for me to speak at this point?

Madam Speaker: Yes.

Mr. Heathcoat-Amory: In no way do I want to inhibit my hon. Friend the Member for Cotswold (Mr. Clifton-Brown), who I know has other points to make, just as he did in Committee.

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I want to speak to the amendment in my name, No. 26, which we were not able to debate in Committee because of the operation of the guillotine. We did touch on the increase in hydrocarbon duty--but not on the biggest effect that it will have on people in business: the fact that these large increases are to be introduced not from the usual date of the Budget, which is November, but from 2 July. That represents an extra five months' duty; it went partly unnoticed at the time of the Budget, but it has certainly been noticed by the victims of that large tax increase in the weeks since.

The fact is that, on the day of the Budget, the Chancellor imposed a 4p-a-litre tax increase on all who use road fuel--for those still used to gallons, that means an 18p-a-gallon increase. That represents a 6 per cent. increase above and beyond the rate of inflation, which is higher than what had been planned by the previous Government.

When we were in government, we signalled that there would be an annual real increase in duties, to show what our intentions were. We did so for environmental reasons, and to give the automobile industry a chance to design fuel-efficient engines and equipment to meet the challenge of extra hydrocarbon duties.

Without any warning or mention in the manifesto, however, the new Government have increased petrol and diesel duty by 6 per cent. in real terms; most significantly, they have brought forward the increase by five months. Taken together, those two factors will raise an extra £730 million this year. The Government have, without warning, imposed a three quarters of a billion pounds extra tax increase through that petrol and diesel duty hike.

Since Budget day, there has been an immediate increase for all motorists. I emphasise the word "immediate" and shall return to it, to contrast it with a number of relief measures that the Government have carefully postponed. All the pain is immediate, while some of the relief is delayed. This tax increase affects not only all motorists but anyone who relies on transport of any sort. I shall deal with the effect on rural areas in a moment.

Mr. Andrew F. Bennett (Denton and Reddish): Does the right hon. Gentleman accept that the previous Government were very keen to persuade motorists to use their cars less, and that their strategy was to increase fuel duties? If he does not agree with such increases, how does he suggest that we persuade the world to stop global warming and achieve the targets for reducingCO 2 emissions?

Mr. Heathcoat-Amory: The hon. Gentleman raises a matter which goes a little wide of the debate. I would love to engage with him in a wider environmental debate, but that would be out of order. People are indeed fairly attached to their cars. There is much evidence that increases in fuel duties do not necessarily lead people to switch to public transport, which is perhaps what lies behind the hon. Gentleman's question. The point that I am making, and with which I do not think the hon. Gentleman would disagree, is that yes, we did have a policy of increasing fuel duty, but the reason why the new Government have raised the rate of increase and brought it forward by five months has less to do with environmental aims than with raising money.

The effect of the increase on rural areas was outlined by the hon. Member for North Tayside (Mr. Swinney), and I agree with much of what he said. I represent a rural

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area, and a car is frequently not a luxury but a necessity for people living there. We must remember that not only cars but trains and buses will be affected by the increase in duty--in other words, public transport will also be hit. I know from first-hand experience in my constituency that many people are already regretting taking at face value Labour's promise, made during the election campaign, not to raise taxes.

The big and immediate effect of the increase is on transport, but domestic heating will also be affected. The Government have made much of the fact that they are cutting the rate of VAT on domestic fuel by 3 per cent., but the timing is interesting. That cut, modest as it is, does not come into effect until September. We discovered in Committee that there is a significant clawback of that benefit from low-income groups in particular--there will be a lower uprating of pensions and other benefits next April because of the cut in VAT. The modest benefit does not come into effect until September; why, therefore, have the Government brought forward to the date of the Budget itself the increase on heating oil which will affect many of the same people?

In summary, people are already being affected by many of the tax increases introduced by the Chancellor on Budget day. He announced 17 tax rises in general, but only one was promised in the manifesto. He did indeed promise us a windfall tax when in opposition, but when he was making plans for the windfall tax, he must have been making plans for the other 16 tax increases, including this huge extra burden on motorists and others.

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