Road Fuel Duties

Alan Reid Excerpts

Tuesday 13th September 2011 Westminster Hall

[Mr Alan Reid (Argyll and Bute) (LD)]

It is a pleasure to serve under your chairmanship, Mr Hancock. I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate and on bringing this important issue before the House.

I represent a sparsely populated constituency, so I am well aware of the impact of high fuel prices on people and businesses. I represent many of the islands of the Inner Hebrides. The price of fuel on the larger islands, such as Mull and Islay, is typically 15p a litre higher than at a city centre supermarket, and on the smaller islands, such as Coll and Colonsay, the price is usually about 30p a litre higher. That is not due to any profiteering by local filling stations; Office of Fair Trading investigations have shown that there is no local profiteering. The main reason is the low turnover. The high fixed costs of running a filling station mean a high price.

[Mr MacNeil]

On that point, Donald MacNeil of the Burnside filling station in Daliburgh, South Uist, has told me that, if he paid somebody to sell fuel all day, they would not raise their own wage from the amount they sold, which is a reflection of why the price of rural fuel is so high. There is no profiteering. Apart from the high prices, we also know that there are distribution issues.

[Mr Reid]

I am grateful to the hon. Gentleman for his intervention. He is correct that there is no profiteering at the local filling station, although the distribution network, as he has indicated, might be another issue.

The high price obviously has a great impact on people’s living standards and on anyone trying to run a business on an island or in a remote rural area. I was therefore delighted when the Government announced their intention to pursue a pilot scheme under which there will be a 5p a litre fuel duty discount on many of the country’s islands, including all the islands of the Inner Hebrides and the Clyde. The Treasury is currently consulting filling station operators on the terms of the pilot scheme. Its original consultation proposals were met with significant concern by filling station operators, because they would have caused a cash-flow problem. I was pleased when the Government responded quickly to those concerns and revised their proposals in a way that removes the cash-flow problem.

The revised consultation proposals envisage two possible schemes—a distributor-based scheme and a retailer-based scheme. Of the two, it looks like the distributor-based scheme would be easier to operate, because the distributor has the resources to carry out the administration, which the small retailer would often find more difficult. I appreciate, however, the Government’s concern that a distributor-based scheme may fall foul of EU state aid rules and might not be approved by the European Commission. I hope that a distributor-based scheme can be devised that is acceptable to the Commission. If not, we would have to proceed with a retailer-based scheme.

The cash-flow problem in the original proposals has been overcome, but filling station operators are still concerned that it is not clear how they can prove to the Treasury that they are passing on the discount to the consumer. An essential principle of the scheme is that the 5p discount is passed on to the consumer. What retailers have asked me is whether the Government can provide clarity on how they should demonstrate that they are passing on the discount. That clarity would be welcomed because, as I say, the retailers are still not clear what they would have to do to comply with the scheme—and, of course, they are all keen to participate. If the islands’ pilot scheme is successful, as I am sure it will be, I would like it to be extended to remote areas of the mainland.

[Anne Marie Morris]

I absolutely endorse what my hon. Friend says, but some of the rebates that have been given in France, Portugal and so on are not limited just to the islands. The Government’s current view is that it is only in an island situation that such relief can be made available, but that does not seem valid.

[Mr Reid]

I wholeheartedly agree with my hon. Friend. As she said, other EU countries are operating a similar scheme, so I am sure that it can be successful here.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Mr Reid]

The Chairman asked for limited interventions and I have already given way to the hon. Gentleman.

I have accepted the Government’s view that we must have an islands pilot first, but after that I would certainly press for it to be extended to remote areas of the mainland.

[Jim Shannon]

The hon. Gentleman refers to the mainland; obviously, I am very keen for the same opportunities to exist for the people of Northern Ireland. Will he address that issue and does he agree that Northern Ireland also needs to have a similar pilot scheme, because the prices there are equal to those in the western islands of Scotland?

[Mr Reid]

I agree with the hon. Gentleman. From the perspective of a Scottish island, the mainland is the mainland of Great Britain, but I accept that there is another part of the United Kingdom. I am not sure whether calling it the mainland is the correct way to refer to it or not.

[Jim Shannon]

As Margaret Thatcher said, we are more British than Finchley.

[Mr Reid]

We are straying into another debate here. I think we will stick to fuel duty, which is probably a lot less contentious.

Operating a rural filling station is clearly not a profitable business these days, and we heard from the hon. Member for Central Ayrshire about how many have closed. In my constituency, I can point to 10 that have closed since I became an MP in 2001, and that is fairly typical of the country as a whole. On the Kintyre peninsula, only three of the five filling stations that the area had at the beginning of the year are still open. Two have closed this year, which is causing real concerns on the peninsula. As the hon. Gentleman who opened the debate pointed out, people are therefore driving longer distances to fill up their tanks and the choices available to rural motorists have been reduced. Action to help rural motorists is certainly badly needed.

There was a time when it could be argued that high fuel taxation was needed to discourage people from polluting the environment, but market forces have already achieved that. Nobody drives for the fun of it these days unless they literally have money to burn and, of course, anyone in such a position would not be deterred by high fuel duty anyway. High fuel duty has played its part in discouraging people from using their cars when public transport alternatives were available but, of course, in a rural area those alternatives are not often available. The price of fuel is already very high and the Government should not be considering putting duty up any further.

I was delighted when the Government abandoned Labour’s fuel duty escalator in the Budget, introduced the fuel duty stabiliser instead and brought down the fuel duty because the price was so high. The Government have scheduled a fuel duty increase for January as it was hoped at the time of the Budget that prices would have decreased by then, although they show no sign of doing so. If prices are still at this level in January, I hope that the Government will not press ahead with the increase.

My final point, which was also touched on by the hon. Member for Central Ayrshire, is about what exactly is causing the high price of fuel. The hon. Member for Coventry South (Mr Cunningham) referred to oil companies storing fuel rather than putting it on to the market. I want to ask the Government whether any collective action can be taken internationally—for example, through the G20—to bring the price of fuel down. The price of fuel adds to the price of everything in a rural area, so anything that the Government can do to bring the price down would be greatly appreciated by my constituents and all hon. Members who represent a rural constituency.

[Mr Jim Cunningham (Coventry South) (Lab)]

This is the first time I have taken part in a debate that you have chaired, Mr Hancock, and so far you have been handling the discussion very well.

I want only to make one or two points of emphasis because I am conscious that all hon. Members present represent constituencies that are under the cosh in certain ways regarding fuel prices. I congratulate my hon. Friend the Member for Central Ayrshire (Mr Donohoe) on securing the debate. I know that there is high feeling in the country about fuel prices because I get regular letters about the subject. I also note one of the points that he made earlier: so far, we have not seen the lorry drivers demonstrating. I do not know and would not like to say whether that will happen, but I would not like it to. I would prefer to think that the Government will take action, as they promised in the run-up to the general election when they were condemning us for the fuel price escalator.

It is worth noting and reminding the hon. Member for Argyll and Bute (Mr Reid) that the fuel price escalator was introduced by a Conservative Government—in fact, it was the previous Conservative Government. I was also interested to note that the hon. Gentleman mentioned that the Government had taken action to try to stabilise fuel prices. I think it was 1p or something that they knocked off so, frankly, they did not take very much action.

[Mr Reid]

As well as knocking 1p off, the Government did not go ahead with the increase that the previous Chancellor’s fuel price escalator would have caused.

[Mr Cunningham]

I welcome the hon. Gentleman’s response because he is only apologising for the Government of whom he is part. When he was in opposition, he said the opposite; but never mind, we shall carry on.

Although we cannot broaden the debate, I would like to mention that one of the major implications of the fuel price increase is its impact on the wider economy. We could talk about pensioners who are on fixed incomes, one-parent families or people who rely on transport—whether it is the motor car or the bus. I need to check this out, but I think that, a couple of weeks ago, National Express announced that it may have to reconsider off-peak fares for pensioners because of the subsidy situation. That is something that the Minister may want to investigate.

--- Later in debate ---

[Mr Reid]

The hon. Lady has referred to the original consultation proposals, which the Government quickly changed because of feedback from retailers and the cash-flow problem that would have occurred. That feature is no longer in the revised proposals, so the issue has been solved.

[Kerry McCarthy]

I thank the hon. Gentleman for that clarification. It seems that the briefings from people lobbying on the issue are slightly out of date.

In conclusion, the Government’s efforts to reduce the burden of high fuel bills on households and businesses seem to have run out of steam, rather like a car running out of petrol. Ministers continually try to ignore the fact that their VAT rise has had the greatest impact on petrol and diesel prices by adding almost 3p to the price of a litre of petrol and £450 to the average family’s annual bills. As we know, VAT has a disproportionate impact on those who can least afford it, and evidence shows that that is harming the economy. The Treasury is happy to ask the EU for a derogation on fuel duty for the remote Scottish islands but, as we have heard today, people’s budgets all over Scotland and around the UK are being put under pressure by the cost of petrol and diesel, and the Government refuse to listen.