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10 Feb 2010 : Column 269WH—continued
I want to endorse what other hon. Members have said this morning and suggest a pilot scheme on one or two islands. There is absolutely no possibility of people taking advantage of the reduced cost of fuel by travelling to an island on which such a scheme operates, as it simply would not be worth paying the ferry fare, and there is no possibility of fraud because an island is clearly separated from the rest of the country. The lower
fuel duty would apply at petrol stations on that island and nowhere else, so there seems to be no possibility of fraud at all.
Dr. William McCrea (South Antrim) (DUP): Does the hon. Gentleman accept that the highlands and islands are not the only remote and peripheral areas in the United Kingdom, and that areas such as Northern Ireland face many of the same problems?
Mr. Reid: The hon. Gentleman is perfectly correct, and I fully endorse what he has said. I propose that the pilot scheme should run on one or two islands, and once it has been proven to work, it could be extended to other parts of the country. I am absolutely convinced that such a pilot scheme would be workable. As we heard earlier in the debate, France, Greece and Portugal have tried such schemes on their islands, and it is perfectly compatible with EU law, so I urge the Treasury to look at how those countries have implemented the schemes, try a pilot scheme on one or two islands and, if it is successful, extend it to other parts of the country.
The SNP Government in Edinburgh have cut ferry fares to the western isles but have neglected the other islands of Scotland. I suggest to the Government here that they could be seen to be helping the islands of Scotland if they introduced a trial scheme on some of them. I suggest that the larger islands of Mull and Islay would be ideal for a pilot scheme. That would allow the Government to say to the people of Scotland that they, too, are helping the islands and that it is not just the SNP Government who are making an effort to help them. It must be said that the SNP Government have been of no help to the islands in my constituency, and are only of help to the islands in a constituency represented by an SNP Member.-[Interruption.] In response to all these sedentary interventions, I note that no SNP Members are present for the debate.
Albert Owen: The SNP are partners of Plaid Cymru, and no one from Plaid Cymru is representing rural Welsh interests either.
Mr. Reid: That is correct. I urge the Government to adopt such a pilot scheme. In the short time left I want to refer to the OFT. The OFT carried out some inquires several years ago, but for some inexplicable reason found no market failure. I urge it to have another look at the matter, because there clearly is market failure. I hope that some action will be taken by both the OFT and the Government and that the Minister, when responding, will indicate a willingness to look at carrying out a pilot scheme on one or two islands, such as Mull and Islay, because it is a serious problem that needs to be addressed.
10.24 am
John Thurso (Caithness, Sutherland and Easter Ross) (LD):
I can usually claim in debates to represent the constituency that is furthest away, but clearly my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) has that honour today, and I congratulate him on securing the debate. I will first pick up on the question of opportunity raised by several hon. Members, particularly the right hon. Member for Stirling (Mrs. McGuire). The OFT has conducted several inquiries
on the matter in my part of the world, but the problem is that it has concentrated on whether there are anti-competitive practices between garages in one or two local towns and found, quite properly, that there are not.
The problem is that in large metropolitan centres, such as Edinburgh or Glasgow, a forecourt with eight to 12 pumps and a throughput of vehicles could have a cash profit per litre of as little as 1p or 0.5p, so there would be sufficient cash throughput to amortise across the fixed costs. A petrol station with two pumps in a remote village such as Durness, on the top west corner of Sutherland, however, will have one car stop every half hour and so will be forced to have a larger cash margin per litre to be able to survive. The right hon. Member for Stirling is right that there is something fishy going on further up the supply chain, and that is where the Competition Commission should be looking.
What is the problem? The problem is that my constituents regularly face a premium ranging between 9p and 14p over the national average, and I have looked at that several times over the past nine years. The scheme I proposed would have rebated around 3p-it might have been 2 points or 3 points, but of that order. Therefore, the idea that people would drive across a boundary 30 or 40 miles away to pay less for their petrol, which in the early years of my proposal is what the Treasury said would happen, as my hon. Friend the Member for Argyll and Bute (Mr. Reid) said, is ludicrous. In fact, a rebate scheme would counter that by enabling people to fill up nearer home, and reduce the incentive to go off to the supermarket in Inverness to fill up. It would therefore have the opposite effect, with regard to carbon, by reducing the amount of petrol or other fuel used and allowing people to fill up more cheaply.
The absolutely critical point is not just that there is a premium, but that there is no alternative, and there never will be on the north coast of Sutherland. There was a post bus, but it has been taken away. There is now no way one can get from the middle of the north coast to Thurso, which is an hour away, and back on the same day. It is simply not possible. Therefore, if one does not have a car, or some good friends to stay with overnight, one simply cannot go into Thurso to see a doctor or dentist, go to the shops or do all the things that are a requirement of ordinary life, and the key point is that there are no alternatives.
I support the call my hon. Friend the Member for Orkney and Shetland has made for a pilot scheme, because I really believe that that can work. It would be an easy and simple way of showing that the scheme can work, or showing that it will not work, if the Treasury are convinced that it will not, and that will help the argument for other areas. I support the concept of a pilot scheme, but I will continue to argue that it should come across to the mainland in due course.
I will not go into the details of the scheme I proposed, but if any Members have serious trouble sleeping, I can send them a copy of the lengthy document and allow them to study it. I have gone through it in detail in several Finance Bill debates over the years. Three years ago, the Financial Secretary at the time-the right hon. Member for Wentworth (John Healey), I think-infamously responded to the proposal by comparing what I was
requesting with giving Londoners a rebate on duty on beer. That simply demonstrated a complete lack of understanding.
By contrast, we made progress with the Minister for Pensions and the Ageing Society, the hon. Member for Wallasey (Angela Eagle), who was in the Treasury at the time and was extremely sympathetic. I met her, and she went through the detail and corresponded with me. I thought that we had nearly persuaded her but then she was promoted elsewhere, so we were back at the bottom again.
The scheme is entirely workable and is permitted under EU law. It will not give cheaper fuel in remote areas but will simply give a little bit of an alleviation to a massive disadvantage. Frankly, my constituents cannot understand why a Government who were elected on a promise of looking after those in need simply ignore this obvious and unfair situation.
Sir Nicholas Winterton (in the Chair): Before I call the Liberal Democrat spokesman, odd little noises have been interrupting our proceedings. I am advised that, because of our amplification system, digital telephones that are switched on might be contributing to the noises that are slightly annoying to me. If anyone has a digital phone, could they please switch it off?
10.31 am
Mr. Jeremy Browne (Taunton) (LD): Thank you, Sir Nicholas. I share your fondness for the old type of telephone that had a dial, as you knew where you stood on such occasions-[Interruption.] Appropriately, this is the first of the wind-ups in this debate.
I see from the Order Paper that today's next debate in the Chamber is entitled "Revitalising Parliament". I congratulate my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael) on going a long way towards achieving exactly that goal with our first debate, which has been about fuel duty on petrol prices in remote and peripheral areas. Understandably, and quite rightly, he chose to address most of his comments to the particular concerns felt by people living in island communities, and those views were echoed by, among others, my hon. Friend the Member for Argyll and Bute (Mr. Reid) and the hon. Member for Isle of Wight (Mr. Turner).
Before I go into the more general disadvantages and difficulties faced by people in rural communities, especially remote rural communities, it is worth looking at the case for duty on fuel. I believe that most, or perhaps all, hon. Members would accept that there is a case for imposing duty on fuel. I can think of two reasonably compelling arguments why the Government would wish to carry on in that vein, and why all political parties share the view that it is appropriate to tax petrol.
The first argument is that the duty raises a considerable amount of revenue, and all of us who are concerned about achieving the proper level of funding for public services, such as the national health service and schools, realise that they have to be paid for and funded effectively. At present, this country is running a big public sector deficit. We are borrowing an extra £500 million every day, so everyone understands that it is extremely difficult for the Government to argue in favour of policies that would substantially reduce revenue.
The second case for having duty on fuel, which is often made and has been touched on already in this debate, is an environmental one. In most circumstances, it is true that the higher the price of a commodity, the less inclined one is to consume it. One can therefore drive down the consumption of environmentally damaging products by artificially increasing their price through taxation.
Having said that-this gets to the nub of the debate-one can do that only if there are alternatives, and that point was made well by my hon. Friend the Member for Argyll and Bute. To put it in economic terms, the price elasticity relating to demand for petrol is different in urban and rural areas. Under an economic model, one could double petrol prices in an urban area-I am not proposing this-and virtually wipe out private car use altogether, but if one were to double petrol prices in an area in which there is no alternative to driving a car, it would probably have a very small impact in environmental terms and on reducing car usage. What that would do, of course, is severely financially disadvantage people in isolated communities who have no choice but to drive.
This gets to the nub of the point that was made by my hon. Friend the Member for Orkney and Shetland when he introduced the debate on behalf of his constituents. In remote rural areas, there is a lack of critical mass to run an efficient and regular public transport system. In a city, where there is a density of population, one can run trains, underground trains and buses, and even turn a profit on their operation, because of the sheer number of people who wish to travel within a limited and confined space. However, if one were trying to provide a service on the islands of Scotland, or even in remote areas of England, Scotland, Wales or Northern Ireland, they would not have that critical mass.
Even if one were persuaded of the case for subsidising such services because of the lack of critical mass of population, there would be environmental as well as financial reasons for not doing so. My hon. Friend pointed out that it would be a bad use of public money, as well as environmentally disadvantageous, to run empty buses on the off-chance that somebody in a remote rural area might at some point wish to catch a bus.
Even in my constituency in rural Somerset, for example, it is possible to run a bus service out of Taunton through or near reasonably large villages such as Norton Fitzwarren, Cotford St. Luke, Milverton and Wiveliscombe. That route joins up several places with populations that are big enough to sustain a fairly frequent public transport service, but in other areas in which the critical mass does not exist, services are far more infrequent because the population is not there to sustain them.
A point that was made by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), among others, is that people in rural areas travel larger distances, and, of course, one's fuel consumption is greater the further one travels. On average, those people earn less money than those living in urban conurbations, so even if they were to buy the same amount of fuel at the same price-typically they buy more fuel at a higher price-that would still consume a larger proportion of their overall income.
The transportation costs of fuel have been discussed in this debate, and I have had a look at those for the south-west of England. I am concerned-this point was touched on by my right hon. Friend the Member for
Gordon (Malcolm Bruce)-that one of the cases made by the petrol companies does not seem to stand up to scrutiny. At one point, I asked them why petrol prices seemed to be higher in Taunton, which is on the M5 and a fairly straightforward place to reach using public and private transport, compared with large parts of south-west England, given that the transport costs must be lower compared with other areas.
I was told that the market was actually much more competitive than I fully understood, and that companies regularly looked at prices at the other outlets in Taunton before setting their own price. That struck me as a good description of an informal cartel arrangement. They were not trying to undercut their competitors or, if they were, they were trying to undercut them by a token amount. They were not trying to drive the price to the lowest point that the market would bear to achieve the maximum percentage of customers in the marketplace. There is a strong case for looking at the behaviour of the oil companies when it comes to setting prices.
To conclude, during our proceedings on last year's Finance Bill, my hon. Friend the Member for Argyll and Bute proposed his rural fuel discount scheme. It was well thought through and built on work done by my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso). The idea was to give flesh to the proposal and assist the Treasury to bring it to fruition.
My hon. Friend the Member for Argyll and Bute did not specify in his proposal precisely what constituted a rural area or what the rebate level would be, but he put in place the legislative possibility of having a framework whereby the Treasury could run a scheme that would address all the points that we have been discussing this morning. Those proposals in turn were built on ones set out by members of my party in respect of the Finance Act 2007 and the Finance Act 2008. I understand that on all those occasions the Conservative party abstained, so I hope that its Front-Bench spokesman will say something rather more decisive and significant today. The Government, however, have dragged their feet on the matter. I hope that the Minister will at least say something encouraging about the possibility of running a pilot scheme in a confined area so that the Government can start to deal with a serious concern for my constituents and for people living in remote rural areas throughout the United Kingdom.
10.40 am
Mr. David Gauke (South-West Hertfordshire) (Con): It is an enormous pleasure to serve under your chairmanship once again, Sir Nicholas. I congratulate the hon. Member for Orkney and Shetland (Mr. Carmichael) on securing this debate and on speaking with such passion and eloquence on a matter that is dear to his heart and which he has pursued over a number of years.
Several hon. Members have made it clear that there is significant concern in remote areas that fuel there is much more expensive than in most of the country. During this useful and informative debate, we have heard a number of explanations for why that is so, and concerns have been expressed about a lack of competition, principally in the supply chain. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) made a point about the lack of customers for remote
petrol stations and their need to deal with fixed costs with fewer customers. The lower density of population in remote areas means that petrol stations are some distance apart and might not necessarily experience some of the competitive pressures that would exist in urban areas, although a number of hon. Members said that that was not really the fault of individual petrol stations, as they were just placed in a difficult position.
One argument dismissed by the hon. Member for Taunton (Mr. Browne)-a number of hon. Members have expressed the same view today and in the past-is that higher petrol and fuel prices are essentially caused by the inherently more expensive transport costs in remote areas. Hon. Members argued strongly against that point.
A number of hon. Members have stressed that fuel costs are particularly important in rural areas because public transport is not available-and not practical in many cases-and it is necessary to travel further and longer distances to reach amenities and facilities. Consequently, car travel is much more of a necessity than a luxury in such areas, yet it is more expensive to travel by car. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), among others, made the point that such areas are often poor, so higher fuel costs have a disproportionate effect on those living in them.
At the risk of upsetting the blood pressure of the hon. Member for Orkney and Shetland, I shall cite some of the arguments that could be made against his suggestions, although many are weak and have rightly been pilloried during the debate. The argument that people will travel longer distances to fill up their car is particularly absurd in respect of islands, and even in certain mainland areas, so we can safely dismiss it. Any environmental arguments have been rightly dealt with. In remote areas, there is no choice regarding public transport, although higher fuel duty is often used as a means of persuading people to get off the roads and to use public transport. That is not a reasonable case in such circumstances, so the environmental argument is not particularly strong.
I shall touch on an argument regarding price variations throughout the country, although I will tread carefully in this area because if it is expressed in a particular way, it can cause concern. Clearly, fuel is more expensive in remote areas, but one could look at housing costs, which also vary throughout the country, as an example of something that is a necessity and not a luxury. Some areas are much more expensive than others. One counter-argument-
Mr. Carmichael: Will the hon. Gentleman give way?
Mr. Gauke: May I just finish this point, because I want to set it out fairly?
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