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5.30 pm

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.
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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—

Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): I wish The Telegraph did.

Mr. Reid: 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.

Mr. Carmichael: 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?

Mr. Reid: 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.

Sir Robert Smith: 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.

Mr. Reid: 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.

Mr. David Drew (Stroud) (Lab/Co-op): 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.

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Mr. Reid: 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.

Mr. Gauke: I am grateful to the hon. Member for Argyll and Bute (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
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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 the hon. Member for Taunton (Mr. Browne).

Mr. Carmichael rose—

Mr. Gauke: I shall give way to the hon. Gentleman. I am not sure whether he was present for the previous debate, but if he was, he will have heard that any attempt to lower the price paid at the pump is an attack on free markets.

Mr. Carmichael: I was present for the contribution of my hon. Friend the Member for Taunton (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:

that is the same principle and the same sort of proposal as is before us today—

Mr. Gauke: 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.

Mr. Jeremy Browne: 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.

Mr. Gauke: 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.

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Mr. Drew: 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.

Mr. Gauke: 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.

Mr. MacNeil: 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.

Mr. Gauke: 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.

5.45 pm

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): 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.

Mr. Gauke: 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
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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.

John Thurso: 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.

Mr. Gauke: 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.

Mr. Carmichael: 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?

Mr. Gauke: 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.

Mr. MacNeil: 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.

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Mr. Gauke rose—

Mr. Greg Hands (Hammersmith and Fulham) (Con): The whole country is that!

Mr. Gauke: As my hon. Friend points out, the whole country is surrounded by water. I think that I understand where the hon. Member for Na h-Eileanan an Iar (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.

Mr. David Heath (Somerton and Frome) (LD): 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 the Member for Argyll and Bute (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 the hon. Member for Stroud (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.

Mr. Roger Williams (Brecon and Radnorshire) (LD): 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.

Mr. Heath: 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.

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