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

Mr. Alan Reid (Argyll and Bute) (LD): If my hon. Friend were to take a example from small islands, he would find a far greater differential. The usual price differential between the isle of Coll and Glasgow is about 30p a litre.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

7.15 pm

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

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

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

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

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

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

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

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

Mr. Paul Goodman: I want to pay two compliments to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander). First, he undoubtedly spoke from the heart on behalf of his constituents. Secondly, in putting the proposal together, his party has made some attempt to listen to some of the criticisms that were ventilated in relation to last year’s proposals, which he mentioned, and to which I will return in a moment.

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

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

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

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

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

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

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

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

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

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