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

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

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

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

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

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

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

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

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

Danny Alexander: No.

John Bercow: The hon. Gentleman should not be sedulously tempted down that narrow path, on a completely unrelated issue, by the hon. Member for Wolverhampton, South-West (Rob Marris). I understand the concern about the perceived inequity of differential pricing, but can the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) tell the House for what proportion of the purchase price per litre in his constituency excise duty accounts?

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

The Financial Secretary to the Treasury (John Healey): Perhaps I can help the hon. Gentleman. The answer to the question asked by the hon. Member for Buckingham (John Bercow) is 47.1p per litre.

Danny Alexander: I am grateful to the Minister for that.

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

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

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

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

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

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

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

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

John Thurso (Caithness, Sutherland and Easter Ross) (LD): I ask the hon. Gentleman’s forgiveness, but it seems to me that we are discussing hydrocarbon duties now, and that debate was about vehicle excise duty. There is a difference.


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8.15 pm

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

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

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

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

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

John Bercow: Will my hon. Friend give way?

Mr. Goodman: I cannot resist the invitation from my hon. Friend.

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

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

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

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

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

David Taylor (North-West Leicestershire) (Lab/Co-op): As the hon. Gentleman is struggling to find a definition of remote areas on behalf of the Liberals, may I offer the following definition? A remote area is an area so remote from reality that it elects a Liberal Democrat to represent it in Parliament.

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

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

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

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

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

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

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

Mr. Andrew Turner: A solution that does not work is not a solution. We can examine the proposal, but we need information to do so. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), who tabled the new clause, has not provided the information that the House needs to examine the proposal, so it is neither a useful solution nor, indeed, a useful proposal.

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

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


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