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Fuel Duty Derogation

Volume 524: debated on Wednesday 9 March 2011

2. What recent discussions he has had with the Chancellor of the Exchequer on the implementation of a fuel duty derogation for rural areas. (44076)

I have regular discussions with the Chancellor of the Exchequer on a wide range of issues. The Government have already announced that they intend to introduce a pilot scheme that will deliver a discount on petrol and diesel in rural areas, including the inner and outer Hebrides, the Northern Isles, the islands in the Clyde, and the Isles of Scilly.

Through the rural fuel derogation we must ensure that there is transparency in fuel distribution in the highlands and islands. Nine months ago, there was 8p difference between Stornoway and Inverness; now there is 18p difference in the price of a litre of fuel. Will the Secretary of State make sure that the Office of Fair Trading looks at issues surrounding fuel distribution, so that any savings from a rural fuel derogation are passed on to families, businesses and the community in the islands?

I welcome the hon. Gentleman’s implicit recognition of the importance of the derogation, which we are seeking and on which my right hon. Friends in the Treasury will make formal submissions in the near future. As for distribution issues, the hon. Gentleman is right to highlight the complexities of the price of fuel across the country. He knows that better than most people, and I am happy to meet him to discuss the issue further.

I greatly welcome the introduction of the fuel duty discount pilot scheme on the islands, and I also welcome its extension to the Isle of Bute. While we wait for permission from the EU, however, urgent action is needed to stop the price of fuel going up even further. Will the Secretary of State speak to the Chancellor and tell him that he must cancel the 4p fuel tax rise that Labour planned for this year’s Budget?

My hon. Friend will be the first to acknowledge that the fuel duty increases over the past year reflect the previous Government’s plans to increase duty by 1p per litre over the retail prices index this year and for years to come, and, as we have already discussed, the derogation is now being sought. The Chancellor and the Chief Secretary to the Treasury will have heard my hon. Friend’s strong representations on behalf of his communities, and I recognise how serious an issue petrol and diesel prices are throughout the country.