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Speech Proposing a Remote Area Fuel Discount Scheme
Danny Alexander: I beg to move, That the clause by read a Second time.
The new clause would reduce the burden of high fuel costs on residents in remote rural areas, such as those in the highlands and islands, including in parts of my constituency and those of other hon. Members. Some hon. Members here were present for a similar debate this time last year, and I welcome the opportunity to return to the subject. I recall that Labour Members chose to vote against the new clause on that occasion, and Conservative Members by and large abstained. I hope to have a little more support this time, although I note—perhaps this is an augury for the future—that the Chancellor of the Exchequer did not vote last time, so perhaps this is an issue on which he wishes to move forward when he becomes Prime Minister in a few days' time. However, as my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) says from a sedentary position, his track record may suggest that his heart does not warm to this issue.
In bringing forward the new clause, I have tried to address some of the criticisms that were made whenthe matter was last debated and I have come up witha modest proposal, but one that will make a real difference and help to remedy a real disadvantage. This is a matter that I raised, in writing, with the Chancellor before the last Budget, and I am grateful for the reply that I received from the Financial Secretary, although it was not particularly positive in terms of moving the issue forward.
John Redwood (Wokingham, Conservative): Will not second home owners and millionaires be eligible for this within the chosen areas?
Danny Alexander: The right hon. Gentleman raises an important question about the definitions, to which I will come, but I should like to outline my argument first and then address his point.
The justification for the new clause is that in those remote areas where a car is most necessary, where public transport is lacking and long distances are the norm, fuel prices are far higher than they are elsewhere. As of yesterday, the average price for a litre of unleaded petrol in the UK was 96.9p. In Aviemore, in my constituency, it was 99.9p. In Stromness, in the constituency of my hon. Friend the Member for Orkney and Shetland (Mr. Carmichael), it was 102.9p. In Lerwick, in Shetland, it was 105.4p, a difference of 10p compared with the UK average. In Dalwhinnie,in my constituency, the average price was 10l.1p. In Thurso, the average was 102.3p, showing a range of differences in the sorts of areas that might well be caught within the scope of the new clause, of between 3p and 10p a litre.
Alan Reid (Argyll & Bute, Liberal Democrat): If my hon. Friend were to take a example from small islands, he would find a far greater differential. The usual price differential between the isle of Coll and Glasgow is about 30p a litre.
Danny Alexander: My hon. Friend makes an important point about the impact of high fuel prices on island communities.
Two pensioners wrote urging me to point out to the Chancellor that their car was their lifeline and that this proposal does a great deal to take into account the needs of pensioners in remote highland communities.
Not only is the price of fuel important. There is a triple whammy. There are the higher fuel prices, the fact that people in such areas travel much longer distances than in other parts of the country, and the lack of public transport. In many cases, there is either no viable public transport alternative, or a very limited public transport alternative. That all contributes to the fact that in the highlands, fuel costs are a higher proportion of domestic costs than the average across the UK—18 per cent. of disposable income is spent on fuel in the highlands, compared with a UK average of 13 per cent.
James Duddridge (Rochford & Southend East, Conservative): The hon. Gentleman repeatedly refers to the highlands and to Scottish constituencies. Would any English or Welsh constituencies be affected, particularly given his definition of remote rural areas? Was the 3 per cent. figure put in place to includeand exclude certain constituencies, and why not 2 or4 per cent?
Danny Alexander: The hon. Gentleman makes an important point. That figure was not put in to limit the measure to particular constituencies, but to make it clear—this was a criticism made from the Opposition Front Bench last year—that there was no particular limit on the scope of the number of people who might be entitled to this rebate. It is important to make it clear that it is not just Scottish constituencies, but areas within constituencies in England and Wales, that would benefit from this scheme. I intend to explain in more detail the definitions that I propose to use.
Stewart Hosie (Dundee East, Scottish National Party): The 3 per cent. figure is interesting, because it solves some of the difficulties that we have had previously with the various definitions of remote, rural and sparsely populated areas. The implication of this is that it is the car owner who is liable to get the discount. Is the hon. Gentleman suggesting that it would be a car owner or a vehicle registered in a particular area, which would include the people who lived in that area? Does he intend that this will extend more widely in the remote areas that meet that 3 per cent. definition to take into consideration tourists who travel in such areas?
Danny Alexander: The hon. Gentleman makes an important point. The scheme would not apply to tourists. There is a good case for having a more generally available scheme to answer such points, but one of the major arguments against the proposal last year, which the hon. Gentleman supported, was the potential for leakage outside the target population for the measure. The reason for limiting the scope is to try to find a way to deal with the problem of leakage in an effort, I hope not a vain one, to encourage Treasury Ministers to look more favourably on trying to find a way to move this forward.
As I was saying, fuel prices are a higher proportion of costs and average incomes are lower in the highlands—they are only 85 per cent. of the UK average—and that is important in the context of social justice. I am a member of the Scottish Affairs Committee and we recently visited Bonar Bridge in the highlands, and it was made clear that one of the major barriers to work for people on low incomes was the perception that in addition to all the other calculations that would have to be made in terms of being better off in work, there was the cost of travel to work. That also applies to the long distances that many people who live in remote areas have to travel to access public services.
John Thurso (Caithness, Sutherland & Easter Ross, Liberal Democrat): While my hon. Friend was visiting Bonar Bridge in my constituency, did he notice that there were no petrol stations there? The nearest one, a mile away in Ardgay, closed because it was not viable. The residents of the area now have the added burden of having to make roughly a 25-mile journey to fill up.
Danny Alexander: I did indeed notice that. I hope that the scheme that I am proposing would benefit not only the people who live in remote rural areas but the filling stations located in those areas, which provide a vital service to their communities.
The scope of the duty rebate would be limited under European law by the energy products directive. Briefings from the House of Commons Library have made it clear that the directive limits the scope of any rebate to 3.54 euro cents per litre. I use the euro cents definition for the benefit of the right hon. Member for Wokingham (Mr. Redwood) and others. At today's exchange rate, that would equate to 2.4p per litre of unleaded petrol. The proposal would not, therefore, go the whole way towards closing the gap that I have described. Indeed, I might choose on another occasion to argue that the amount allowable for the rebate should be greater, because of the differences inprices that I have described, particularly in island communities. However, that argument should be left until the principle behind the measure that I am proposing has been established. I hope that the House will show its support for that principle by supporting new clause 8.
The scheme would be available to people who live in remote rural areas when they purchase fuel in filling stations located in those areas, thereby protecting those valuable services. There would be a need for the scheme to be administered, perhaps using a simple swipecard system. Hon. Members representing Scottish constituencies will know about the Scottish Executive's air discount scheme, which entitles people living in island communities to discounts on their air faresas they travel back and forth from their homes. It is possible to administer schemes of this nature in a simple, cost-effective way, but administration would none the less be needed, not least to protect against the potential for fraud and leakage that Treasury Ministers were concerned about last year. For the same reason, it would be linked both to the individual and to their registered vehicle. I do not believe that there would be leakage or fraud, but having a simple registration scheme for the individual person and their vehicle would address the concerns previously expressed by Ministers.
Stewart Hosie (Dundee East, Scottish National Party): The hon. Gentleman has referred to both the owner and the vehicle. Will he clarify to which one the rebate would apply? If it would apply to a vehicle that is registered and routinely used in a sparsely populated area, I can appreciate that. If it would apply to an individual who used a number of vehicles in such an area, perhaps for work, I would understand that too, but there needs to be clarity as to whether it is the one or the other.
Danny Alexander: The new clause is clear on that point. The discount would apply to individuals who had their main residence in such areas, but the vehicles that they wished to use while claiming the discount would also have to be registered.
The right hon. Member for Wokingham made a good point when he asked how we could protect against second home owners taking advantage of the discount. There are already schemes in place in which second homes have to be registered for certain purposes, such as the claiming of council tax discounts. Perhaps that information could be used for these purposes. Equally, it could be a requirement that the home that was registered for the purposes of the discount should be the person's principal private residence for tax purposes. That does not wholly answer the right hon. Gentleman's question, but it would at least partly tackle the issue that he has raised.
International comparisons also exist. France, Greece and Portugal already take advantage of the derogation available under EU law, albeit for slightly different purposes.
James Duddridge (Rochford & Southend East, Conservative): Knowing what a hassle it is to register for the congestion charge and to pay it on various days, I wonder what assessment the hon. Gentleman has made of the administration costs and bureaucracy that would be involved in this process, in terms not only of money but of the hassle for our constituents.
Danny Alexander: I think that this scheme would be a great deal easier to administer than the congestion charge, not least because the eligible registrants would be receiving a benefit rather than paying a cost. That would result in a great deal more enthusiasm for the registration process, which could be made very simple. I gave the example earlier of the air discount scheme, which has a very simple registration process. Adopting something along those lines would ensure that the procedure was neither complicated nor bureaucratic.
I have also, quite fairly, been asked what exactly constitutes a remote rural area. The 3 per cent. figure has been referred to, and the new clause makes it clear that such an area would be defined by regulation. However, I should like to make some suggestions on that point. There are different definitions of remote rural areas in Scotland, compared with England, Wales and Northern Ireland. I would suggest that, in Scotland, areas classified as remote small towns, very remote small towns, remote rural areas and very remote rural areas under the Scottish Executive's urban and rural classification scheme—with which I know Members will be familiar—should be included. In England and Wales, sparse rural small towns, villages and dispersed areas—as defined by the Countryside Agency's rural and urban area classification scheme of 2004—seem broadly similar to the Scottish definitions that I have described.
On the basis of those definitions, I estimate that2.71 per cent. of the UK population would be entitled to claim the proposed discount. I do not have an estimate of the number of filling stations in those areas; that information is not available. The 3 per cent. limit would allow for some variability in the definitions if, for example, it became necessary to ensure that there was absolute consistency between the arrangements in Scotland, England, Wales and Northern Ireland. Those definitions are clearly understood by the agencies that promulgated them, and they are already used by the Government for other purposes.
My assumptions on costs may be challenged but, working on the basis of a discount of 2.4p or 3.54 euro cents for that percentage of the population, if everyone spent all the money that they spend on fuel in rural filling stations and consumed fuel on an equal basis, I estimate that the cost would be about £32 million.
Stewart Hosie (Dundee East, Scottish National Party): The hon. Gentleman has just mentioned people spending money in rural filling stations. The new clause states:
"The purpose of the Scheme is to provide a rebate on road fuel duty to qualifying persons at qualifying retail outlets."
Is it not possible that someone might qualify but choose to buy their petrol in an area that is not considered remote, because that was a sensible thingto do? How would the scheme work in those circumstances?
Danny Alexander: The hon. Gentleman makes an important point. The purpose of the scheme is to level the playing field. In my constituency, for example, the city of Inverness would not qualify for the discount under the scheme because petrol prices there are pretty near to the UK average. We are not seeking to implement the scheme in such a way that it would lead to a cut in prices there. Similarly, if the hon. Gentleman drove to London and bought petrol here, that would not qualify. In the case of Inverness, I shall concentrate on persuading Tesco to cut the price of its fuel to the same level that it charges at its store in Elgin, where it has competition from Asda. It has no such competition in Inverness. That would ensure an additional benefit.
The scheme would bring significant benefits to rural areas and address an obvious injustice. In the longer term, a scheme involving road user pricing would bring the combination of benefits and environmental advantages to remote rural areas that the Liberal Democrats are seeking to achieve. In the meantime, however, given that a car is a necessity in those areas, and the amount of car use will not be reduced or increased, it would be wrong to reject the new clause on an environmental basis. We have other ways to promote the use of fuel-efficient vehicles, for example through vehicle excise duty incentives. The scheme is designed to reduce the additional cost burden on people living in the communities that I have described, and I commend it to the House.
Read and comment on the full debate in the House of Commons
Posted on: 25/06/2007
