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Fuel Duty (Rural Areas)

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.