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As income in rural areas is low, the price of fuel makes up a much higher proportion of weekly outgoings. People are therefore hit by an additional burden every time fuel duties or prices go up. Such rises have a disproportionate effect on the rural population and on the way in which people in rural areas carry out their business. There is also an indirect effect: it costs more to send delivery vans to local shops and stores. In every way, there is an economic disadvantage that has the price of fuel as a major determinant. The amendment, to which I am a cosignatory, is an attempt to address that basic economic injustice.
Dr. William McCrea (South Antrim) (DUP): Does the hon. Gentleman accept that his argument also applies to people in Northern Ireland? Wages there are also low, and there is no appropriate or widespread public transport system in the Province.
Mr. Heath: I am sure that that is true, and I have observed what the hon. Gentleman has described in many parts of the Province. The problem spreads across England, Scotland, Wales and Northern Ireland, as interventions on even my brief comments have shown.
Although we need to address the economic injustice that I have described, we must also deal with one undesirable outcome of an otherwise desirable policy. I think that we all strongly support the idea that, to help to tackle climate change, we must try to reduce our reliance on cars and our use of fuel. We understand that, but the principle that that can be achieved by adding to the cost of fuel works only if there is a viable alternative. In rural areas, there is no elasticity in the system, because there is no alternative, so raising fuel prices does not encourage people to use their cars less. Instead, it merely encourages them to use more of their wages to carry on as before, which is entirely the opposite of what happens in conurbations and areas with public transport. I strongly believe that we should use fiscal means to discourage car use in areas in which an alternative is available, but it is essential that we accept that such a policy cannot and will not work in rural areas where that alternative is not available.
John Thurso: My hon. Friend eloquently makes the point that using taxation to change behaviour is simply a punishment if there is no way in which that behaviour can change.
Mr. Heath: My hon. Friend is absolutely correct. He will remember that last year, when we were debating the retrospective change to VED, it was argued that, although there was a strong case for using a VED differential, by making it retrospective we would not be changing behaviour—we would simply be taxing the individual more. That was the argument then. Now, the argument is that if the aim is to achieve environmental goods, there are ways to do that, but if a measure does not achieve an environmental good, it simply becomes yet another form of taxation affecting a part of our community that can least afford it—the poorly paid people in rural areas whom we represent.
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The solution offered by amendment 5 is elegant in many ways. Rightly, not all the detail is written into the amendment. There is supporting material, as my hon.
Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) says, but more definition is required. Arriving at some of the definitions will be quite difficult, especially for an area such as mine, where the population distribution and density are very different from those found in the highlands and islands of Scotland. It is by no means straightforward to translate the intention behind the amendment into reality in parts of England such as my constituency, but the argument is one that we have to make—and we have to make it repeatedly—because the present system is unfair to people in rural areas. It is particularly unfair to the highlands and islands, but it is also unfair to parts of the south-west. We should recognise that it is unfair to the whole of England, Wales and Northern Ireland.
Danny Alexander: It is a great pleasure to follow my hon. Friend the Member for Somerton and Frome (Mr. Heath), who eloquently set out precisely why the measure proposed in the amendment would be of great benefit to people who live in remote and rural areas.
First, I shall attempt to answer some of the points made by the hon. Member for South-West Hertfordshire (Mr. Gauke), because I do not believe that they should be allowed to pass unrebutted. I am sure that others will do the same, perhaps with more humour, but let me have a go. He said at the start of his speech that this subject comes up every year—that it is a hardy perennial. There is a good reason for that: it is a matter of great importance, especially to those of us who represent a part of the country that is in many ways very different from the rest of the country. If he wants the debate to cease, he could assist by encouraging his hon. Friends to vote in the right direction and helping us to persuade the Minister to accept our proposal. If the scheme were allowed on to the statute book, there would be no need to have this debate next year and in subsequent years.
Mr. Gauke: The hon. Gentleman is being uncharacteristically tetchy. As I acknowledged, we have this debate regularly because of the genuine concerns shared by a number of Members. However, every year the Liberal Democrats offer proposals that are pretty sketchy, and they cannot convince many other hon. Members of their case.
Danny Alexander: Our proposal is not sketchy. It is well thought through and carefully analysed. Although I do not want to steal his thunder, I may say that it was set out in the paper that my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) prepared last year and circulated—including to Conservative Front Benchers, so the hon. Gentleman has had the opportunity to study it.
Mr. Carmichael: Does my hon. Friend not think it significant that every year, we hear Conservatives’ accusations of sketchiness, but year after year, they never feel motivated to do anything themselves to add more detail?
Danny Alexander: My hon. Friend makes an important point. If the Conservatives wanted to support such a measure, they could produce one that they thought would be workable. They have failed to do so over the many years in which Liberal Democrat Members have proposed such measures—
Mr. MacNeil: Not just Liberal Democrats.
Danny Alexander: Indeed, Members of other parties have made proposals. The intervention from the hon. Member for South-West Hertfordshire suggests a complete absence of desire on the part of the Conservatives to produce a measure of their own. It also suggests that they are out of touch with the reality in constituencies such as mine, which those of us who come from the north of Scotland—and, I am sure, those from other rural areas—see as characteristic of his party.
My hon. Friend the Member for Argyll and Bute (Mr. Reid) has eloquently set out the problem that this measure is intended to address, if not fully resolve. Let me add to his evidence some perspective from my own constituency. First, it is worth setting the amendment in context, and an important aspect is that the cost of fuel has clearly been rising even over the last three or four months. The figures given in the AA’s fuel prices report show that since January this year, the average price of a litre of petrol has risen in Scotland by 8.6p in comparison with 8.4p across the UK.
These increases have a much more dramatic effect in constituencies such as mine and those of other Members who have spoken in the debate. For example, in Dalwhinnie in my constituency, a litre of diesel—for the benefit of the hon. Member for South-West Hertfordshire, I am afraid I do not have the figures for a pint of beer—is 109.9p, compared with 99.9p in Edinburgh. A litre of petrol is 101.9p in Fort Augustus, compared with 92.9p in Edinburgh. In Carrbridge, also in my constituency, a litre of petrol is 102.9p, which is 10p more than the equivalent price in Edinburgh. Members representing island constituencies have rightly stressed that the differentials are even more severe in the island areas, but the point I want to emphasise through these examples is that there are severe differentials in mainland areas of the highlands, too.
Mr. MacNeil: On a point of information, I add that in Stornoway today, the price for a litre of petrol is £1.03, and diesel is £1.13. I hope that that provides further context for the prices that the hon. Gentleman mentioned.
Danny Alexander: I am grateful for that intervention, as that evidence reinforces my case. I could provide further examples from my constituency, but I believe that I have already made the point.
Alongside the higher costs, we need to consider the impact of not only fuel duty, but VAT. The fact that the price is higher means that, as well as paying more for their fuel, people are paying more VAT. It is not just that the individual faces higher costs; the Treasury is then reaping more benefit from the misfortune of the people who have no choice but to pay these higher prices. That provides yet another reason for those on the Treasury Bench to look positively on these proposals.
Apart from the cost of fuel, this problem is highly burdensome to my constituents. As a matter of course, people living in the highlands and islands and other rural parts of the country have much longer distances to travel. I mentioned Dalwhinnie; someone living there who chooses to commute to work in Inverness faces a daily round trip of about 120 miles—a substantial fuel cost by any measure. It is also worth saying that anyone
living in Dalwhinnie who wants to go to a supermarket faces a 60-mile round trip. Just obtaining the basic necessities of life, quite outside the work environment, necessitates a long journey, and in other constituencies the distances can sometimes be even greater. Many tens of thousands of miles can be involved for people just to commute back and forth to work and to go about their daily business—it is not in any way unusual.
My hon. Friend the Member for Somerton and Frome eloquently addressed the third element of the triple whammy of additional costs and pressures in relation to fuel for those who live in remote, rural areas: the availability of public transport. For those who live in Dalwhinnie, there is no local bus service—there is an occasional Citylink coach service, but that requires a two-mile walk on to the main A9 roadway. My hon. Friends who have driven up and down that way from time to time will know that walking from the village to the motorway in any conditions other than the most clement is not ideal. In Carrbridge, there is no local bus service, and in places such as Fort Augustus and Drumnadrochit, a bus every two hours would be regarded as a high-frequency service.
Such frequency or availability of public transport provides people with no realistic alternative to car use for necessary journeys. That is why I said in an intervention that in places such as the highlands and islands, using a car and filling it with fuel is not a luxury but a necessity; it is the only way people can go about their usual business. As my hon. Friend the Member for Argyll and Bute observed, environmental incentives in fuel duty can apply only when a genuine choice or alternative is on offer, and for many of my constituents that is simply not the case. For such people, the environmental incentive argument for fuel duty is not right.
The case for the measure that we propose is accentuated by the current economic situation. We have seen a 75 per cent. increase in unemployment in the Highland council area, and many costs are increasing. For example, on price differentials, the latest rural Scotland price survey showed that food was 11 per cent. more expensive in rural areas covered by Highlands and Islands Enterprise than in urban Scotland. [Interruption.] As my hon. Friend the Member for Caithness, Sutherland and Easter Ross rightly observes from a sedentary position, part of the reason for those excess costs is the impact of the fuel price on transporting those goods to village shops and individuals. People are affected not just by the cost of journeys, but by the cost of goods and services.
Mr. Weir: Is there not another corollary: many businesses based in rural areas face higher costs in getting their goods to market? That has a knock-on effect on businesses in rural areas and the attempt to keep employment there.
Danny Alexander:
The hon. Gentleman is absolutely right and makes an important point. The issue affects more or less every business in my constituency and, I am sure, in his. The disproportionate cost of fuel has a knock-on effect on businesses and customers. I will not stray from the matter under discussion to talk about the effect on parcel delivery charges, for example, but that is another bone of contention—a hardy perennial perhaps. People rightly feel strongly that the excessive parcel charges they must pay are not justified by the fuel price,
and that that does not begin to cover the differential. Hon. Members will be aware that research by Highlands and Islands Enterprise shows that fuel accounts for 18 per cent. of the costs of people living in the highlands and islands, compared with 13 per cent. across the country as a whole. That goes some way to show the substantially greater economic burden on the rural communities that I and others represent.
The merits of our proposal are many, and I will not develop all of them at length, although I am sure that the paper written by my hon. Friend the Member for Caithness, Sutherland and Easter Ross could be read into the record if that was felt necessary. First, the proposal offers a clear route forward to applying the principle that we are trying to set out. The Scottish Executive’s eightfold urban-rural classification scheme provides a ready, well worked out, carefully thought-through basis on which to apply a discount. English MPs will know that Natural England has produced a similar—it is not precisely the same—classification for England.
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I differ slightly with my hon. Friend the Member for Argyll and Bute in that I think that the discount could usefully be applied to three of the categories. I would add to the two that he mentioned the category of remote rural—areas with a population of fewer than 3,000 people, within a 30 to 60-minute drive of a settlement with a population of 10,000 or more. Even if those three groups in the classification were included within the scope of the application of the proposal, it would still mean that areas lived in by roughly only 3 per cent. of the population of Scotland would benefit from it.
It is worth placing it on record that although the scheme would benefit many of the rural areas in my constituency, the large city of Inverness, which has slightly higher prices than other parts of the country, would not be a direct beneficiary. Last year, I was involved in protracted but successful negotiations with Tesco to persuade it to reduce its petrol price in the city of Inverness, so Inverness has benefited in other ways from Liberal Democrat Members’ efforts to reduce the cost of fuel. The scheme would not directly benefit the city of Inverness, but it certainly would benefit the rest of the rural highlands and islands. There is some merit in the suggestion made by my hon. Friend the Member for Argyll and Bute, that starting the scheme in island areas would be a good way to establish the principle and check for fraud and so on—issues that he rightly addressed, but on which I do not intend to focus. That would be a good way of starting the ball rolling.
There are established international precedents for our proposal. Indeed, a derogation from the European Union’s energy products directive explicitly allows member states to have differential levels of fuel duty. That power is already exercised by the Governments of France, Greece and Portugal. Each of them has chosen to use the measure to benefit geographically remote, sparsely populated areas that they consider sufficiently important to merit use of the power for their benefit. There is no legal barrier to the United Kingdom Government using the same power—
Mr. Carmichael: Just a political one.
Danny Alexander: There is just a political one, as my hon. Friend says. Indeed, I understand that UK Ministers supported the power to vary fuel duty in the Council of Ministers. I fail to see why, having done so, our Ministers cannot find a way to apply that power in the UK for the benefit of the remote and rural communities of this country. The derogation in the directive allows a maximum differential of 3.54 euro cents on a litre of petrol. Those who follow exchange rates carefully will know that that currently amounts to about 3p per litre. That would make a difference, although perhaps not enough of a difference in many areas. There is a strong case for lobbying, and working within, the European Union to increase the size of the differential allowed. None the less, a differential is allowed.
The measure is fair because the benefit is targeted at a small but important group of people who suffer as a result of a particular unfairness under the current system. The hon. Member for South-West Hertfordshire implied that anyone interested in government would not support the proposal; I think that anyone interested in governing the country fairly would support it, and that is why Liberal Democrat Members— [Interruption ]—and the whole country support it. Liberal Democrats from not just the north of Scotland, but across the whole United Kingdom, support it. It is proposed not just on sectional, regional grounds, but on the basis of fairness; we think that the measure is the right thing to do for the country as a whole.
Of course, the current economic circumstances reinforce the reason why the measure is important for the country as a whole. It would support an economic stimulus in the highlands and islands. The point has been made that it is not just local people who would benefit from the reduction proposed in the amendment, but tourists visiting the area. Tourism is an important part of the economy in parts of my constituency. In areas such as Badenoch and Strathspey, it is thought to be about 80 per cent. of the economy. Clearly, the measure would help to reduce tourists’ costs, and would also help to increase tourism spend in what is already a very popular tourist destination—
Mr. MacNeil: And increase tax revenue.
Danny Alexander: It would therefore potentially increase tax revenue, too; that is quite right. It is worth saying that the cost of the measure would be very low.
Mr. MacNeil: As I said a moment ago in a sedentary intervention, there would be increased tax revenue from greater economic activity. The measure might be revenue neutral or create a larger tax take for the Exchequer, which should probably be grasped with both hands by the Minister.
Danny Alexander: The hon. Gentleman indulges in economic forecasting. There is reason to believe that the measure would bring some benefit by increasing economic activity, reducing the burden on small businesses, putting more money in people’s pockets that they could then spend on other things, and supporting the tourism industry. All those things are potentially revenue generators that would help to defray, if not completely offset, the cost of the measure.
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