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Westminster Hall

Wednesday 10 February 2010

[Sir Nicholas Winterton in the Chair]

Fuel Duty (Rural Areas)

Motion made, and Question proposed, That the sitting be now adjourned.-(Mrs. Sharon Hodgson.)

9.30 am

Sir Nicholas Winterton (in the Chair): I welcome all Members to the first debate in Westminster Hall today. I am not sure whether the weather will deteriorate or improve, but for those who will have to go a distance, I hope that it will improve. As this is the last day before we break for the half-term holiday, may I express the hope that everyone has a restful and enjoyable time at home or in their constituencies? The first debate is to be initiated by someone who has come a very long way to be here-the hon. Member for Orkney and Shetland (Mr. Carmichael).

Mr. Alistair Carmichael (Orkney and Shetland) (LD): It is indeed a long way from Orkney and Shetland to Westminster, but as it affords me the privilege of serving under your chairmanship, Sir Nicholas, it is worth every inch of the journey.

I return this morning to a subject on which I have addressed the House on a number of occasions over the past nine years. It is a source of considerable and genuine regret that we have not made more progress on a public policy that brings with it one of the most significant burdens to life in island and rural communities. I shall confine my remarks this morning largely to the island communities, for reasons that I hope are so obvious that I shall not need to state them. It is plain from the geographical spread of the constituencies of Members here today that the problem affects communities in all remote and peripheral parts of the country, not only those that I represent.

My ask for the Minister this morning, as on previous occasions, is that if she cannot consider a derogation of fuel duty-I recognise that a substantial element of the cost of petrol is attributable to fuel duty-there may be a possibility of getting a derogation from European Union legislation to allow the imposition in some areas of a lower rate of duty, thus recognising that that there are market-based reasons for the higher prices.

The importance of the problem cannot be overstated. In communities such those that I represent, which are geographically substantial but with small populations that are spread very thinly, the use of the private car is not a luxury but an essential. It is also an environmental essential. If we had a fleet of buses running around the west side of Shetland to provide the required transport access to other parts of Shetland, they would effectively be running empty. Having smaller private cars on those roads makes environmental sense. Buses, with their emissions and their use of fuel, would be carrying air around the west side of Shetland or the remoter parts of Orkney. That makes no environmental sense. Although the mindset in many parts of the Government may be that the private car is bad for environmental reasons
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and should be pushed off our roads in favour of public transport, the private car makes good environmental sense in areas such as those that I represent.

Mr. Nigel Evans (Ribble Valley) (Con): Does the hon. Gentleman recognise that the bus service is either thin or non-existent in many rural areas? The car is therefore a necessity. He talks about taxation on fuel. Does he also recognise that the price of petrol is much higher in many rural areas than in the cities? It is not as though we are trying to give a tax advantage to those who live in rural areas; we simply want to give them a fair crack of the whip.

Mr. Carmichael: The hon. Gentleman says nothing with which I could disagree. Indeed, he leads me on rather nicely to the first point that I wish to bring to hon. Members' attention-the prices being paid at the pump by my constituents in Orkney and Shetland. I checked these figures yesterday.

Lerwick is the largest town in Shetland, and the largest garages are able to provide the cheapest petrol. Pump prices there for unleaded petrol go from 124.5p per litre to 125.9p per litre. On other islands, including Unst, my constituents are paying 130.9p per litre. For reasons that I shall explain in a moment, the prices in Orkney are slightly lower. At most filling stations in Kirkwall, the pump price is about 120.9p, but in Westray, which has a fairly substantial island population in the context of Orkney, my constituents are paying 129.9p per litre.

I want to say a word or two about the structural market reasons why such variations should be the case. We have no supermarkets selling petrol in Orkney and Shetland. We do not have big retailers with the buying muscle of garages in the urban conurbations, which can get cheap fuel. One retailer on the west side of Shetland told my office yesterday that he makes only 6p per litre. He said that he could buy the fuel more cheaply at a petrol station in Aberdeen-at the retail price, including duty and VAT-than he can buy it from the wholesaler or distributor.

David Simpson (Upper Bann) (DUP): I congratulate the hon. Gentleman on securing this important debate. He will know that the price of fuel has been long-running sore. He touched on the price differential. Northern Ireland is the only part of the United Kingdom that has a land border with the eurozone. Filling stations in the border areas are finding it difficult; one can buy fuel a few yards down the road in the Republic of Ireland at 99p per litre, but it costs almost 116p a few hundred yards in the other direction. I trust that the hon. Gentleman will join me and include Northern Ireland in his debate.

Mr. Carmichael: Indeed. As a Front-Bencher, I am well acquainted with the situation that the hon. Gentleman outlines. For my constituents, it is particularly galling. His constituents look across the border to a foreign country; we look to other parts of the same country. The Treasury is not prepared to deal with that basic unfairness by treating my constituents in the same way as it would expect other constituents to be treated.

Mrs. Anne McGuire (Stirling) (Lab): I accept what the hon. Gentleman's feelings may be about fuel duty. Does he not accept that the oil companies have a
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responsibility in how they price petrol and diesel for rural communities? He has already indicated that one can buy fuel cheaper in Aberdeen at retail prices than one can buy it wholesale in Orkney.

Mr. Carmichael: I understand that there is a need for more responsible behaviour by the oil companies, particularly the wholesalers and distributors. I am not suggesting that the sort of difference that could be made by a duty reduction would be the silver bullet, but it could be part of a package that would make a significant difference. Moreover, it would be a useful way for the Government to send the message that it is time for the oil companies to smarten up their thinking. When one looks around the European Union, one realises that such behaviour is pretty well accepted there.

Let me briefly turn to how the extra costs of diesel and petrol and fuel duty have an increased impact on agriculture. The Minister will be aware that, since October 2007, the duty increases of 2p a litre have been applied across the board-to road fuels, rebated fuels or red diesel, biofuels and other domestic fuels-and that has affected the agricultural sector that relies on red diesel, because 2p as a proportion of the red diesel duty is significantly larger than it is on non-rebated fuels. Therefore, over the past six years, farmers have faced a red diesel price increase of more that 180 per cent., which has been driven not by increased oil prices but by the duty element. Such an increase is disproportionate, and for a community such as mine in Orkney and Shetland, which relies heavily on agriculture as the core of its local economy, the impact is particularly severe. If we add the peripherality of the area and the small size of the community market to the extra burden of fuel duty increases that have been imposed in a very crude way, we can see that the most fragile of economic communities has been put at the most substantial disadvantage.

The Government's argument for increasing duty on red diesel was to combat oil fraud. I do not know how such a measure will combat oil fraud. I would have thought that raising duty increases the incentive for people to take a chance of putting red diesel in their tractor or private car. None the less, combating fraud seems to be the basis of the Government's logic, but it is not as robust as we might expect from the Treasury.

Mr. Gregory Campbell (East Londonderry) (DUP): I congratulate the hon. Gentleman on securing this important debate. He touched on the issue of fraud, and I can appreciate the extreme difficulties that come from rurality and peripherality. Does he agree that one of the issues in Northern Ireland is that Revenue and Customs has not been diligent enough in dealing with the oil that is illegally brought across from the Irish Republic to be sold in Northern Ireland and that hundreds of millions of pounds are therefore lost to the Treasury?

Mr. Carmichael: Indeed. As we scrutinise with ever-increasing rigour where money is coming from and where it is going to, such considerations will become more and more weighty. Indeed, the matter requires substantial attention.

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The assistance that is given to island and peripheral communities in other parts of the European Union is an issue that has been picked up recently by my colleague, George Lyon, in the European Parliament. He put a series of questions to the EU Commission and was given an answer on 8 January that states:

that could be put in better English and, being an islander, I do not like the term "insularity"-

I bring that answer to hon. Members' attention because it is important for us to understand that the problems that are faced by our communities are not unique; they are shared by different communities in the European Union. However, they get very different treatment from their Governments than that which we have experienced.

I have asked Ministers in the past to consider such a derogation, and I make the same request of the Minister today. Will she consider setting up a pilot scheme to assess whether the Government's concerns are legitimate, real and substantial-I suspect that they are not-or whether they are just an excuse for continuing to do nothing?

John Thurso (Caithness, Sutherland and Easter Ross) (LD): My hon. Friend will know that during excessive considerations of the Finance Bill, I proposed-or other colleagues did so and I spoke to-amendments seeking to achieve what he suggests. He will also know that, two years ago, I prepared a worked-up scheme that covered all the details. I sent it to the Treasury and had detailed correspondence with it on the matter. Can he explain why the Treasury, in the face of so much detail and so many clear-cut proposals, is adamantly and resolutely opposed to a scheme that would bring a little fairness to the islands?

Mr. Carmichael: My hon. Friend invites me to speculate. I will resist that invitation in the hope that we might get a proper explanation from the Minister when she replies to the debate. However, I shall briefly touch on some of the reasons that Ministers have offered us in the past for refusing the sort of derogation that I would like. I do that on doctor's advice. My doctor tells me that I must avoid putting myself in a situation where I will suffer high blood pressure, because it is bad for my health. I should explain to hon. Members that nothing gives me worse high blood pressure than hearing Treasury Ministers using specious arguments time and again. In the past, my hon. Friend and others have demonstrated that such arguments were specious. It might seem to be a bit of a
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wheeze for those who write speeches for Ministers to come up with such arguments, but it demonstrates a quite reprehensible lack of respect for the people who elect me and my hon. Friends and for the problems that they face day in, day out.

The arguments that we have heard in the past are that the extra cost is down to transport. Hon. Members will know how much petrol costs in urban conurbations. They have heard the figures that I have offered today. We are talking about a difference of between 10p and 15p a litre. That is not a transport cost. The Treasury then tells us that, if we had derogation and a variable rate of duty in different parts of the country, people would drive from those urban conurbations to get their cheap petrol. It tells us something about how figures are added up in the Treasury that the people there think that petrol will still be perhaps 8p or 10p a litre more expensive in the communities that we represent, but that people will get in their cars and use petrol to drive to our communities to buy petrol that is still more expensive than they would get at home.

Mr. Andrew Turner (Isle of Wight) (Con): Does the hon. Gentleman accept that the situation is the same in the Isle of Wight, which is a considerably shorter distance from many urban conurbations than the Orkneys and Shetlands?

Mr. Carmichael: Indeed. I have heard the hon. Gentleman make that case in the past. That is why I hope that we could have a pilot project in areas such as ours, which are more easily defined. Someone might make this nonsensical argument-I hope that the Minister will not do so-that people will drive from urban conurbations to get cheap petrol. However, surely even the Minister will not stand there and suggest that somebody in Aberdeen will put their car on an overnight ferry to go to Lerwick to get cheaper petrol.

Mrs. McGuire rose-

Mr. Carmichael: I have given way to the right hon. Lady once already, so I will not give way again. I would really like to make some progress and conclude my speech. Sorry.

Christopher Fraser (South-West Norfolk) (Con): I should like to thank the hon. Gentleman. This is a first-class debate on a very important subject. My constituency in Norfolk covers 1,200 square miles, a very large proportion of which is at sea level or below, and there is no chance that anyone will ever drive out from Norwich to try to get petrol in the fens-an area that, as I am sure he will accept, has not only deprivation but many people for whom a car is a necessity and not a luxury.

Mr. Carmichael: I am aware of the situation in the fens, not least that if things continue the way that they are going, the hon. Gentleman may one day join that elite band of island MPs. [Laughter.]

The final objection that we get from the Treasury is that different price trends are not restricted to neatly definable geographical areas.

Albert Owen (Ynys Môn) (Lab): I hope that the hon. Gentleman can relax and get his blood pressure down a little, while I make a short intervention. He is making a
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very serious point about the price differential, which has an adverse effect on the community that I represent, where people who face paying higher prices actually go out of the community, 30 or 40 miles down the road, to purchase their petrol. In addition, petrol stations in my area are not just suppliers of petrol; they are also often convenience stores, which close down as a result of people buying fuel elsewhere.

Mr. Carmichael: Doubtless in the past many of those petrol stations would have had post offices attached, too. That is how people make a business work in a small island community. The post office on its own, the petrol pump on its own and the shop on its own may not be viable businesses, but bring all three together and there can be something that functions. That is why those businesses are important.

Malcolm Bruce (Gordon) (LD): I know that we have a Treasury Minister here today and I fully support what my hon. Friend is looking for, particularly for his community. However, should not the competition authorities be engaged with this issue, because the number of petrol stations in Scotland has gone down from 880 to 510 in the past 10 years? My hon. Friend has talked about Aberdeen, but part of my constituency has a Tesco that sells petrol at a price 5p cheaper than that of the Tesco at the other end of the constituency. Tesco has told me that there is no difference in the cost of providing that petrol; it is simply what Tesco thinks the local market will bear.

Mr. Carmichael: I agree absolutely with my right hon. Friend. I live for the day when the Office of Fair Trading might be persuaded to do the job that we set it up to do, which is to examine the market and take meaningful measures that might bring some relief to people such as my constituents. However, the OFT has always resisted the opportunity to do so.

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): My hon. Friend is quite rightly highlighting the problems in island communities. Exactly the same experience is replicated in my constituency in the highlands. However, does he accept-this point is important in terms of fairness-that these problems are exacerbated by the fact that areas such as the ones that he and I represent have significantly lower incomes than the rest of the country and the effect of the higher price is therefore magnified?

Mr. Carmichael: Indeed, and Orkney is one of the lowest-wage economies in Scotland, so a higher proportion of a smaller income is being spent on something that is really an unavoidable item of expenditure.

I have been trying for the past five minutes to make my very last 30-second point: I fear that the Minister will doubtless find it all too easy to say no to me; certainly, her predecessors have never had any difficulty in that regard. I hope that I am not boring her-I hope that we are not keeping her up. Perhaps she might listen to what she has heard about this problem from the right hon. Member for Stirling (Mrs. McGuire) and the hon. Member for Ynys Môn (Albert Owen). If she does not want to listen even to them, she might listen to
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Des McNulty, who is a Labour MSP, who said in a debate in the Scottish Parliament in April 2009, and I quote him verbatim:

We understand that because of the communities that we represent. Will the Minister and the Treasury please start listening and do something to address our needs?

Sir Nicholas Winterton (in the Chair): May I make a plea to Members? Obviously, there will be many more interventions and a number of people have indicated to the Chair that they wish to speak. I should start the winding-up speeches at 10.30 am, to give the Minister sufficient time to reply to what is a very important debate.

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