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25 Jun 2007 : Column 92

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

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

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

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

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

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

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

New clause 8 would help reduce the burden on people living in remote rural areas. It restricts the definition of such areas so that the combined total of qualifying areas would not cover more than 3 per cent. of the UK’s total population. Therefore, its cost to the Treasury would be very small. The maximum
25 Jun 2007 : Column 93
differentiation of duties allowed under the EU energy products directive is 3.54 eurocents per litre for unleaded petrol. At current exchange rates, that amounts to 2.4p a litre, or roughly 5 per cent. of the duty. For diesel fuel, the maximum differentiation is 2.3 eurocents, or 1.56p.

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

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

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

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

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

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

Other, more environmentally friendly ways exist to help people facing additional costs. We have debated on other occasions the Scottish Executive’s rural transport fund, which has helped more than 150 rural community transport schemes since 1998. Moreover,
25 Jun 2007 : Column 94
the Commission for Rural Communities has found that Government policies on transport in rural areas have made a significant difference in the fight against disadvantage there.

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

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

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

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

Danny Alexander indicated dissent.

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

Danny Alexander: No.

Julia Goldsworthy rose—

John Healey: I will give way to the hon. Lady instead.

8 pm

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

John Healey: I shall move on.

It is important to be clear about what would not be guaranteed under the proposals and about their practical impact. Trying to implement such proposals would involve complex and expensive changes to the tax system. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) knows
25 Jun 2007 : Column 95
that the duty point for hydrocarbon oils is either when the oil is imported into the UK or when it leaves a refinery. At present there is no mechanism—as would be required under his proposals—to account for duty where the fuel is used. Moving the point at which the duty becomes payable down the consumer chain would mean that instead of hundreds of companies being liable to pay fuel duty, thousands would have to pay it. Such an exercise would self-evidently be complex, expensive and burdensome.

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

Danny Alexander: I am grateful for the contributions that have been made in the debate. We have heard some positive remarks from the Liberal Democrat Benches and a grudgingly positive remark from the hon. Member for Dundee, East (Stewart Hosie).

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

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

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

Danny Alexander: My hon. Friend is correct.

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

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

The Minister referred to the impact of the new clause on the market. It has been demonstrated, not
25 Jun 2007 : Column 96
least by the comments of my hon. Friends, that the market operates quite differently in the areas we have been talking about. The provision will not obstruct the more general operation of the fuel market across the country; it will deliver a small but important and significant rebate to hard-pressed communities.

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

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

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

The House divided: Ayes 55, Noes 268.
Division No. 150]
[8.5 pm


Alexander, Danny
Beith, rh Mr. Alan
Brake, Tom
Brooke, Annette
Browne, Mr. Jeremy
Burstow, Mr. Paul
Burt, Lorely
Cable, Dr. Vincent
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Clegg, Mr. Nick
Davey, Mr. Edward
Featherstone, Lynne
Foster, Mr. Don
Gidley, Sandra
Goldsworthy, Julia
Harvey, Nick
Heath, Mr. David
Hemming, John
Hosie, Stewart
Howarth, David
Hughes, Simon
Huhne, Chris
Keetch, Mr. Paul
Kennedy, rh Mr. Charles
Kramer, Susan
Lamb, Norman
Leech, Mr. John
Llwyd, Mr. Elfyn
McCrea, Dr. William
Moore, Mr. Michael
Mulholland, Greg
Öpik, Lembit
Price, Adam
Pugh, Dr. John
Reid, Mr. Alan
Robertson, Angus
Rogerson, Dan
Russell, Bob
Smith, Sir Robert
Stunell, Andrew
Swinson, Jo
Taylor, Matthew
Taylor, Dr. Richard
Teather, Sarah
Thurso, John
Webb, Steve
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Wishart, Pete
Younger-Ross, Richard
Tellers for the Ayes:

Mr. Adrian Sanders and
Paul Rowen

Abbott, Ms Diane
Ainger, Nick
Ainsworth, rh Mr. Bob
Alexander, rh Mr. Douglas

Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Armstrong, rh Hilary
Atkins, Charlotte
Baird, Vera
Balls, Ed
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Bayley, Hugh
Begg, Miss Anne
Bell, Sir Stuart
Benton, Mr. Joe
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, Lyn
Brown, Mr. Russell
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burnham, Andy
Butler, Ms Dawn
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Alan
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cook, Frank
Cooper, Yvette
Cousins, Jim
Crausby, Mr. David
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Curtis-Thomas, Mrs. Claire
Darling, rh Mr. Alistair
David, Mr. Wayne
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Dismore, Mr. Andrew
Dobbin, Jim
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Dunwoody, Mrs. Gwyneth
Eagle, Angela
Efford, Clive
Ellman, Mrs. Louise
Engel, Natascha
Ennis, Jeff
Farrelly, Paul
Field, rh Mr. Frank
Flint, Caroline
Follett, Barbara
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
Gardiner, Barry
George, rh Mr. Bruce
Gerrard, Mr. Neil
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hoey, Kate
Hood, Mr. Jim
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Hoyle, Mr. Lindsay
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Ingram, rh Mr. Adam
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jones, Lynne
Jones, Mr. Martyn
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Ann
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen

Lammy, Mr. David
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
Mactaggart, Fiona
Malik, Mr. Shahid
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Marshall-Andrews, Mr. Robert
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCarthy, Kerry
McCarthy-Fry, Sarah
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, Mrs. Anne
McKechin, Ann
McKenna, Rosemary
McNulty, Mr. Tony
Meacher, rh Mr. Michael
Merron, Gillian
Michael, rh Alun
Milburn, rh Mr. Alan
Miliband, rh David
Miller, Andrew
Mitchell, Mr. Austin
Moffat, Anne
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Morgan, Julie
Morley, rh Mr. Elliot
Mountford, Kali
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Murphy, Mr. Jim
Murphy, rh Mr. Paul
Naysmith, Dr. Doug
O'Brien, Mr. Mike
Olner, Mr. Bill
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Rammell, Bill
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Roy, Mr. Frank
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, Joan
Salter, Martin
Seabeck, Alison
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Smith, John
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Starkey, Dr. Phyllis
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Tami, Mark
Taylor, Ms Dari
Taylor, David
Thomas, Mr. Gareth
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Touhig, rh Mr. Don
Turner, Dr. Desmond
Turner, Mr. Neil
Walley, Joan
Waltho, Lynda
Wareing, Mr. Robert N.
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Williams, rh Mr. Alan
Winnick, Mr. David
Winterton, rh Ms Rosie
Woodward, Mr. Shaun
Woolas, Mr. Phil
Wright, David
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:

Steve McCabe and
Mr. Michael Foster
Question accordingly negatived.
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