Economy
The next item of business is a debate on motion S3M-4006, in the name of Liam McArthur, on the economy.
It is almost a year since Alasdair Allan, Tavish Scott and I were engaged in a Dutch auction as to whose constituency boasted the most outlandish price for a litre of petrol or diesel. I won, or rather Eday and North Ronaldsay in my constituency won, but it was a victory from which I drew absolutely no satisfaction. Since that debate, the price of oil has tumbled from about $130 to just over $50 a barrel. That has provided some relief to islanders and to those who live and work in rural communities throughout Scotland. However, the consensus remains that oil prices will not stay this low for long—that is a reflection of economic and environmental reality.
Consensus exists, too—at least, it did during the debate last May—on the need to take steps to safeguard our more fragile communities and economies. There is recognition that in remote rural areas a car is rarely a luxury, and that public transport alternatives to the private car will inevitably always be limited. There is also recognition that such communities, particularly on the islands, already pay a significant premium through far higher fuel costs. A Liberal Democrat survey that has been published today puts that premium at between 10 per cent and 12 per cent. The financial and social impact of that on households and businesses can be punitive, especially when there are the sort of price rises that occurred through the back end of 2007 and into 2008.
Will that consensus give rise to a solution to the specific challenge that faces remote rural areas? I believe that it could and should. It is a solution that will be achieved through action by the United Kingdom Government at Europe level, but a clear statement of intent from this Parliament can help to bring it about.
The energy products directive, quaintly named 92/82/EEC, states:
"it is possible to permit certain Member States to apply reduced rates to products consumed within particular regions of their territories".
On that basis, France, Greece and Portugal operate derogations for their remote and island areas. Inexplicably, however, although the UK Government has supported that approach in those member states, it has resisted any attempt thus far to introduce such a scheme in any part of UK. Each time my Liberal Democrat colleagues at Westminster have tabled amendments to finance bills calling for such a derogation for remote rural areas in Scotland, it has been voted down by Labour and Tory MPs.
I welcome the support of the member's colleagues at Westminster for the plight of rural car users, but could he explain why some of his colleagues at Westminster—at least Ming Campbell, Jo Swinson and Willie Rennie—all voted to increase the price of fuel in the recent budget?
It is interesting that Alasdair Allan issues his attacks before the debate, although it is usually done through Dave Thompson. I will come to that. The SNP supports the establishment of a regulator, which would have absolutely no impact on the premium that is paid by Alasdair Allan's constituents or, indeed, by mine.
UK Labour ministers warn of the dangers of petrol tourism, but that is frankly ridiculous. It is akin to suggesting that people will drive around looking for free parking spaces. Prices are likely to remain higher in rural areas, albeit that they will be less dramatically or painfully high than at present, even after the introduction of such a scheme. I encourage Peter Peacock, David Stewart and other Highland colleagues to use their influence to ensure that when the UK Cabinet next goes on tour, it makes it north of Inverness, so that ministers can see for themselves why the notion of the Highlands and Islands ever becoming a Mecca for petrol tourists is the stuff of "Alice in Wonderland".
Tory MPs, too, have consistently voted down any attempt to have such a derogation considered at Westminster. Last May, Gavin Brown at least agreed that the initiative was "worthy of examination".
I thank the member for raising the issue of the Cabinet tour. I can let Mr McArthur know that I have already written to the Prime Minister, inviting him to come to the Highlands to hold a full meeting of the Cabinet there.
That is excellent and welcome news. I am sure that the Cabinet will consider the derogation then.
Despite Gavin Brown's comment, there was a catch, as is invariably the case with Mr Browns. Sure enough, the Tories have provided the long grass into which the Scottish ministers will happily kick the issue later today. I am a little surprised that Alex Johnstone is performing the role of gardener. If SNP ministers are so thirled to the idea that the Tories have put forward in their amendment, it is hard to fathom why Mike Russell did not implement it immediately after last May's members' business debate on fuel costs. Alasdair Allan did not call for an impact assessment on a derogation last May when we debated the motion in his name, and nor did his SNP colleagues who spoke in the debate. The SNP called for action and for a clear statement from Parliament. The SNP called for a commitment to press the UK Government for a derogation. Given that there was no vote on Alasdair Allan's motion, perhaps they felt able to speak up for their constituents.
Of course, the SNP's preference is not for a derogation but for a fuel duty regulator. The basis on which that would operate has changed almost as often as oil prices have changed over recent years. Stewart Hosie, to his credit, has been remarkably honest in his assessment of the ever-changing approach to a regulator, and has said that the approach is not perfect—there is no false modesty there. When he was asked whether a fuel duty regulator would do anything to address the premium that is paid in rural areas such as the Western Isles and Orkney or whether the premium would be enshrined by the regulator, he confessed that,
"Sadly, it is the latter".
In its most recent incarnation, SNP policy is that
"indexed fuel duty increases shall be frozen until the international oil prices"
drop. Mr Hosie has said that freezes on fuel duty would be
"automatically triggered by world oil prices."
and that
"It is not our intention to deny the Government any money … when the price goes down."—[Official Report, House of Commons, 6 July 2005; c 362-3.]
Therefore, under the SNP's proposal, when oil prices dropped in January, the SNP's regulator would have automatically ended and duty rises would have been unfrozen. Under the SNP proposal, Scottish motorists, including motorists in my constituency and Alasdair Allan's constituency, would have experienced duty rises in January rather than in April, when they voted against rises, or in September. The SNP MPs were quite happy to wave the September rises through Parliament without demanding a vote.
It is sad that there was no opportunity to vote on Alasdair Allan's motion last May, but Liberal Democrats are offering Parliament another opportunity today. I will be interested to see whether SNP members vote with their consciences and for their constituents or with their whip.
I am pleased to move,
That the Parliament notes the UK Budget and the plans to increase fuel duty; recognises the high premium over the national average paid for fuel at filling stations in remote rural and particularly island areas and the financial and social impact that this has on individuals and businesses; believes that increased fuel duty will have a damaging effect on the economy and competitiveness in these areas, not least due to the limited public transport alternatives; notes that current EU law allows fuel duty to be cut by up to 2.4p per litre and that this power is already used in France, Portugal and Greece, and calls on the Scottish Government to work with the UK Government and the European Commission before the final passage of the Finance Bill to construct a derogation under the EU energy products directive, or otherwise, to permit variable rates of duty for specified remote rural areas to bring down the price of fuel at the pump to that available in other parts of the United Kingdom.
It is my pleasure to speak to the amendment on behalf of the Conservative group. I welcome the opportunity that the Liberal Democrats have given us to consider the price of fuel, which is a fundamental problem for Scotland's rural economy. I assure members that we are not opposed in principle to the proposal in the motion and will not oppose it. Towards the end of my speech I will explain why we think Parliament should support the amendment that we have lodged.
Will the member take a quick intervention on that point?
No.
It is important that we address rural fuel prices, because as fuel prices have risen they have had a compound effect on the cost of running businesses and vehicles in rural Scotland. When fuel costs are high, it is natural that they should be even higher in remote areas, because the cost of transport is higher in such areas. We need to tackle that compound effect.
The Government has considered options for relieving the burden on business and travellers in Scotland's far-flung areas—particularly the islands. The jury is still out on the current experiment with the road equivalent tariff on routes to our islands, but it will be interesting to learn how the approach affects investment and tourism in island communities.
I note that the Conservatives have never argued for an impact assessment that considers whether emissions increase or decrease as a result of the RET. Will they call for such an assessment now, for consistency?
We might consider the need for such an assessment, which we have not called for in relation to the RET. We have taken no position on whether we support the RET because we want to examine the results of the current trial before we decide whether it is appropriate. The figures to which Liam McArthur referred might well be made available in the future.
The Scottish Government has proposed a fuel price regulator. Many members are aware that the Conservatives in London are considering the possibility of a fuel price stabiliser, which has significant similarities to the SNP's proposed regulator. We hope to consider our proposal when we are in government and in a position to bring it forward.
We must be careful not to tie ourselves into a particular course of action. That is good advice for the Liberal Democrats, whose record on fuel tax demonstrates that they have had a number of policies over the years. I understand that they fought the 1997 election campaign on a commitment that the fuel price escalator be increased to 8 per cent. Since then, they have proposed that fuel taxes be slashed and the equivalent money raised through higher vehicle excise duty. Today, Liberal Democrats are proposing a different option.
Will the member take an intervention, given that he has talked about the Liberal Democrats' position?
Okay—go on then.
I thank Alex Johnstone. The member is never out of The Press and Journal, calling for action to reduce petrol prices for rural areas in north-east Scotland. We are giving him the chance to do just that, but the amendment in his name would remove that chance by calling instead for a study.
We are considering the impact on the islands and the most distant areas. However, Mike Rumbles has raised the issue, so I make the point that all Scotland's distant rural areas and areas that have more urban populations, such as the north-east, suffer from high fuel costs. The Liberal Democrat proposal would not address problems in Scotland's fishing and farming communities, nor would it address the impact on the road haulage industry and all the other industries in more distant rural areas that depend on road haulage for their profitability. That includes industries that are based in Aberdeen, which are affected by the cost of road haulage, given their distance from the main markets. We need to think more broadly about the impact of fuel tax on the Scottish economy, particularly in the peripheral areas. The motion does not do that and addresses only the cost of fuel at filling stations.
I would like to think that the Liberal Democrats will take a responsible position on funding their proposal. Will they clarify whether they want the proposal to be addressed through Westminster or should the power to do that be devolved to the Scottish Government, as they said in their submission to the Calman commission on Scottish devolution? If the latter is their preferred route, they must identify the funding savings that will be necessary.
I lodged the amendment to ensure that at decision time we do not simply ask the Westminster Government to note a position. We want direct action by the Scottish Government.
I therefore move amendment S3M-4006.1, to leave out from "notes that current" to end and insert:
"and calls on the Scottish Government to report back to the Parliament on the extent to which a fuel duty derogation for rural areas would be permissible under EU law and what impact such a derogation would have on carbon emissions and the Scottish budget."
I congratulate the Liberals on lodging the motion and giving us the opportunity to debate an important subject. The Scottish Government is concerned about increases in fuel duty, which affect our rural communities and businesses throughout Scotland. That is why our parliamentarians at Westminster voted against rises on Tuesday night. I congratulate Mr Rumbles's colleague Robert Smith on voting against the fuel duty rise, and I hope that the debate will provide the Liberals, who voted every which way on Tuesday night, with an opportunity to clarify their overall position.
I am interested in the minister's point about voting patterns, as the SNP MPs did not vote against the September rise. The fuel duty regulator would have done nothing to the premium that is paid for petrol in the Highlands and Islands. The fuel duty rise was also irrelevant to it.
I make it clear that we will support the motion in Liam McArthur's name. We are open to any effective way of addressing the problem.
There is a substantial volume of letters flowing between us and other parties on the subject. My colleague, the Cabinet Secretary for Finance and Sustainable Growth, wrote to the Chancellor of the Exchequer on 14 November highlighting what had been done in France using derogation, and commented that
"By applying for this derogation the UK Government could reduce the tax on fuel borne by consumers in rural Scotland, including the islands."
However, the chancellor seems to think that administrative barriers would get in the way. He said in his reply of 27 November that
"The process of drawing the boundaries of any fuel duty rebate area would be extremely complicated."
It is quite simple. We have already done it. There are 149 filling stations in Scotland that we suggest should be considered for such a derogation. They are defined as being very remote, which means that they are at least 60 minutes' travel away from a community of 10,000 or more. That is 45 per cent of our filling stations. They are all low-turnover rural stations that are vital to the communities in which they operate.
Will the minister give way?
I am sorry—I do not have time, in my short speech.
The bottom line is that there are aspects on which we have broad sympathy with the motion, which gives us the option to consider a range of ways forward. We should be sensible and pragmatic and exclude nothing. I hope that the debate will draw together across the Parliament consensus that there is, although there is a range of options available, the necessity for action. If derogations can be applied elsewhere, it should be possible to do so in the UK. By the way, a proper scheme would also benefit filling stations in other parts of the United Kingdom, such as Cumbria, the south-west of England and Wales.
We provide various supports to transport for our remote and rural communities, particularly ferry services. We are bearing the fuel price risk for many ferry services, which at least insulates communities from that risk. We are also conducting a substantial trial on the road equivalent tariff. We have seen some local reports, which I have not yet personally verified, that the fuel price difference between the Isle of Harris and the mainland has shrunk substantially mainly because the RET means that new tankers are carrying fuel to Harris in competition with some of the incumbents.
There are things happening and we are doing things. We have carried out initial work on how a derogation might apply in Scotland and we continue to explore options for going some way towards offsetting the current differentials. However, I am afraid that the UK Government is remarkably intransigent and inflexible in respect of considering options. Therefore, I hope the Parliament will unite—and that the Labour Party will join the other parties, which are, so far, indicating a broad consensus on the subject—to find a way forward that will benefit rural dwellers throughout the UK and fundamentally those whom we represent in Scotland.
We debated a motion on the cost of fuel in the Western Isles and the northern isles on 28 May 2008, which also happened to be the day on which Gordon Brown and Alistair Darling held a summit meeting in Aberdeen with the leaders of the UK oil and gas industry. Those of us who attended the cross-party group on oil and gas yesterday evening heard a good deal about the consequences of that meeting and the ways in which it was reflected in the announcements that were made in last week's budget. The discussions in May last year also set the context for today's debate.
As members know, the price of Brent crude peaked last summer at $147 a barrel. The average price in 2008 was $97; in the year to date, it has been only $45. Those crude oil prices are the greatest influence on the cost of fuel at the pump, and the lower oil price is the main reason why unleaded petrol retails at £1 or less a litre in most of mainland Scotland and, indeed, in the Isle of Harris today.
What proportion of the pump price is taxation and how does that compare with the proportion elsewhere in Europe?
The minister knows the answer to that question and knows that it is high for reasons to do with tackling climate change, an issue that I would have thought is close to his policy priorities.
The differential in retail prices in rural Scotland still exists, albeit that it is less than it was. It is entirely reasonable to ask the Scottish ministers what they will do about that, but it is also important to acknowledge that the price of a litre of diesel in Kirkwall or Lerwick today is some 10p less than it was in Aberdeen or Edinburgh at the time of our previous debate on the matter.
Today's motion offers little challenge to the Scottish ministers to address the relative disadvantage of island consumers. That is disappointing, because Tavish Scott said last May:
"We certainly need action, but we need it here in Edinburgh as well as in London."—[Official Report, 28 May 2008; c 9069.]
That emphasis seems to have been lost a little today. Instead, the focus of the motion is entirely on UK excise duty on fuel.
The chancellor wisely postponed a 2p rise in fuel duty when oil prices were at their peak. He has now brought in that increase while, at the same time, introducing new field allowances offshore and abolishing some elements of the taxation that used to apply when North Sea assets changed hands. That seems to me a sensible balance of maximising production, limiting carbon impacts and protecting public revenues.
That sensible balance of production and consumption has its origins in the Aberdeen summit that took place at the time of our previous debate. Following that summit, Treasury ministers considered a rural fuel duty rebate but rejected the idea for a wide range of reasons. The most fundamental was the simple fact that differentials in price are not a result of differentials in duty, because differentials in duty do not exist. Differentials in price arise despite the Government charging consumers everywhere a single, standard rate. If the tax take on a litre of fuel in the islands is greater than that on a litre of fuel in the cities, it is not because of a difference that the Government has imposed but because of a difference that those selling the fuel have imposed.
That is why it is disappointing that parties in the Scottish Parliament continue to focus on matters for which the Parliament is not responsible. It is disappointing that John Swinney continues merely to write to Treasury ministers about the tax issue as if he believed that he was unable to address it directly. Surely the right approach for the Scottish ministers and members of this Parliament is to focus on the causes of the differential prices that fuel suppliers set and to consider what they can do to address them. That is the real issue within the scope of devolved powers.
The Scottish ministers are piloting road equivalent tariffs on ferry travel to the Western Isles, but they need to explain why they have failed to extend that price intervention to the retail or wholesale price of fuel. They have responsibility for harbour dues, which directly or indirectly have a bearing on the cost of delivering fuel. They also have powers to provide additional support for rural transport. All those measures are within their competence, and John Swinney and Stewart Stevenson should take a leaf out of Alistair Darling's and Gordon Brown's book—
The world's biggest debt?
Presiding Officer, I want to complete this point without sedentary interventions from the minister. I am encouraging him to follow the good example of the chancellor and Prime Minister of Great Britain, and to sit down with the producers and refiners of oil, the suppliers of fuel and the retailers of petrol and diesel and agree what they can do to address differential pricing. John Swinney and Stewart Stevenson should accept that varying the tax rates is not a simple answer that they can hide behind when it comes to addressing variable prices. They should stop using fuel duty as an alibi for doing nothing and use the powers that they have, as any mature and responsible Government should.
If anything sums up the limitations of devolution, it is a debate about fuel duties that are set in London. We should first consider the issue of fuel prices in the round. The current situation in Scotland, according to this month's AA survey, is that the average price of diesel is 102.3p. Of course, it is much dearer than that in the north and the Western Isles. In Ireland, the comparable price is 84.2p—so a country that is derided for its economic difficulties has not set further difficulties for its remote communities.
Interestingly, much of the fuel that is used in Donegal comes from tanks in Belfast. The lorries pass through the international boundary and their contents are then served up to customers in Ireland. Setting fuel prices in that international context shows that it is possible to have different policies in different countries. Unfortunately, however, we are tied to the inflexible UK policy, and UK policy making means that the north of Scotland, the northern isles and the Western Isles suffer hugely year in, year out. It is a bad policy for the whole of Britain, but the Lib Dems seem to support the idea of continuing that policy in Britain. Have they not submitted to the Calman commission the idea of dealing with fuel duties in the Scottish Parliament? If not, why not?
When Alasdair Allan moved his motion last May, he was at pains to point out that he was not arguing for lower duties in the round and that his was an environmental argument. He said that he was trying to attack the premium that was paid in the Highlands and Islands. What alternative system does Rob Gibson advocate? Is it to have flat-rate duties à la Spain, or what?
We are in a moving situation. We advocate a different proposal from that of the Lib Dems, but I will come to that in a minute. First, I want to deal with the proposers of the motion and how they behave.
If we had the relevant taxation powers in the Scottish Parliament, we could decide what levels were suitable and, indeed, whether people in cities should pay more than those in the countryside, rather than the other way round. We could decide whether the duty should be a flat rate. We could decide many such matters in Scotland, as other countries do for themselves.
Will the member take an intervention?
Not at the moment, thank you. I want to make some progress, and I would not do so if the member intervened.
The Liberal Democrats say one thing in one part of Scotland and another elsewhere in Scotland. The minister referred to the fact that the Liberal Democrats' recent voting record in the House of Commons has been all over the place. Thirty-seven Liberal Democrats, including some from the central belt of Scotland, voted for increases in duty. Mr Rennie, Menzies Campbell and Jo Swinson were among those who voted against the interests of the people of the north. We found that only two Highland and Islands Liberals, one of whom is from Argyll, had the guts to get up and vote against the increase. The others—Mr Kennedy, Lord John Thurso, Alistair Carmichael and Danny Alexander—managed to absent themselves from the vote. However, they were present for the vote on the next amendment or the previous one—whichever it was—on alcohol duties.
I have to ask members: where are their guts? They do not stand up for the people in the Highlands, despite the fact that every time an election comes along there is another Lib Dem fuel petition. "Yes, indeed," they say, "we are fighting hard to stop what amounts to an unfair fuel tax on the north." I wonder what happens to all the signatures that they claim they get for their petitions. Do the petitions get ripped up in Liberal headquarters before they are presented to anyone because they oppose—
Will the member give way?
I am not finished.
Do they get ripped up because they oppose UK Lib Dem policy? We need an answer to that question.
Charles Kennedy and I delivered the petition on fuel prices to the Treasury. The member may care to ask the chancellor what he did with it.
Please face the microphone when speaking, Mr Stone.
Members can hear me anyway.
Every time an election is imminent, those Lib Dem petitions arise. We have a proposal today from the Liberal Democrats that seeks to ask the British Government to apply here European Union powers whose use in other countries it supported. I suggest that, in the UK context, we could use the SNP's fuel duty proposal. A forecasting mechanism for VAT revenues would be created so that, when VAT went past a specific point, the high revenues would be used to offset the price of fuel. There would be specific reductions in sparsely populated areas. As the minister pointed out, the 149 fuel pumps that represent 45 per cent of filling stations in Scotland would be targeted.
You are over your time, Mr Gibson.
We ask members to support the idea of having such a method, but we must ensure that we have the basic right to decide fuel prices here in future.
I welcome the opportunity to make a brief contribution to the debate. I thank Liam McArthur and his team for giving us an opportunity to have the debate today.
I am a Highlander whose first job was in Dumfries. I must confess that I was once a fresh-faced councillor in my 20s. I am well aware of the effect that—
You still are fresh faced.
I thank Jamie Stone for that sedentary remark—I appreciate it.
I am well aware of the disproportionate effect that high fuel prices have on rural communities—on the haulier from Lerwick and the pensioner from Lossiemouth. I start with a slight health warning. Rural areas cannot be easily packaged as a single, uniform area across Scotland. To be fair, the Scottish Government recognises that in its classification system, which goes from urban to accessible rural to remote rural. There is a world of difference between Inverness and Ardnamurchan and between Dumfries and Eskdalemuir.
I want to touch briefly on the work that was carried out by the previous Enterprise and Lifelong Learning Committee for its 2001 report on fuel prices, and consider briefly the Office of Fair Trading and EKOS reports from the same era. I make a passing reference to the important EU context for the debate, namely article 19 of the energy products directive.
Some members have already asked what determines the price of fuel in our rural filling stations. The Enterprise and Lifelong Learning Committee considered that in detail in 2001. As we all know, the price is determined by the elements of duty and VAT, along with upstream elements—for example, the cost of extraction and refining—and downstream retail elements. As Lewis Macdonald and other members have pointed out, there is also the element of the price of crude oil on the spot market in Amsterdam and the technical issue of the exchange rate between the pound and the dollar—international fuel prices are quoted in dollars.
In addition, individual petrol stations operate individual agreements with suppliers, leading to discounts, rebates and price support. As a general rule, prices in larger towns in rural areas, such as Dumfries and Elgin, are the same, within a few pence, as prices in cities such as Glasgow and Edinburgh. Why? Because suppliers provide price support there. However, lower-volume rural sites with standalone petrol stations that have no immediate competition have no price support and a higher retailer mark-up because volumes are lower, which leads to the higher price. For the technocrats among members, there is a good worked example of that process in appendix A of the OFT report of July 2000. Obviously, the prices were different then, but the underlying logic remains the same. As members have pointed out, that pricing effect is amplified in our super-rural and island communities.
The motion focuses on reserved issues and EU derogations on fuel duty. However, as Lewis Macdonald said, surely the emphasis should be on what the Scottish Parliament can do to promote social inclusion, economic development and community cohesion in Scotland, particularly in our remote rural and island communities. When the proposed fuel duty derogation was debated in Westminster, a series of issues was raised. Perhaps Mr Stone can address some of them in his winding-up speech. For example, what are the qualifying criteria for retail outlets? What guarantees will there be that the fuel duty reduction will be passed on to the customer? Danny Alexander MP quoted a cost of £35 million for the measure.
Will the member give way?
I will just finish this point.
Is that to be a new Liberal Democrat spending commitment?
The member has outlined some of the pressures on fuel prices in rural areas. Does he believe that Greece, France and Portugal are wrong to think that the effect of fuel duty on pricing is relevant? Are they wrong to think that fuel tax needs to be adjusted in rural areas?
I am glad that the member has raised that point, because I hope to touch on what happens elsewhere in the EU in a few seconds. That will answer the member's point.
What will happen with leakages across the borders between urban and rural areas? Who will qualify—will they be domestic users, businesses or tourists?
Finally—I see that my time is running out—there are other proposals that would benefit rural motorists. I flag up, for example, the rural transport fund that the previous Administration introduced, the rate relief that was introduced for rural petrol stations and the derogation from EU legislation that the UK Government secured for petrol vapour recovery.
In conclusion, I am in no doubt that fuel prices are a major burden, particularly on remote rural and island communities. However, there is no magic bullet. We must develop new public transport solutions—which will also be good for climate change—and support existing petrol stations. We should also consider the Scandinavian model of having unmanned petrol stations and look at co-operative buying, which Highland Council has done in the case of fishing. Of course we must pass on the savings to motorists. We must also pursue the idea of hosting a summit of rural petrol retailers. All those proposals would contribute to sustaining our rural communities.
In Scotland, we have one of the world's most beautiful and diverse regions. For thousands of years, people have made their homes in places such as Skara Brae, Glencoe and Calanais. Captivated by the deep allure and stunning tranquillity of such areas, generations of appreciative Scots have nurtured the landscape and made a living out of it. Today, those communities face a harsh reality: economic inequalities and high transport costs make it harder to pay the bills and maintain a home. As a result, many people have left and our peripheral communities are in severe decline. Nowhere is that worse than in the more remote and isolated parts of the Highlands and Islands. That is why we will support the motion today.
As Liam McArthur's motion states, a derogation would allow us to reduce fuel duty by up to 2.4p per litre and is perfectly permissible under EU law. Unfortunately, we must rely on the Westminster Government to do that for us.
Does the member believe that there are any steps that the Scottish Government could take to address the differential pricing that affects rural areas?
I will come to that later in my speech, when I will answer Mr Macdonald's point.
I am afraid that we will have an awful long wait for Westminster to do anything, given Mr Macdonald's comments and those of David Stewart. Labour claims that introducing such a derogation would be too complicated but, as others have already pointed out, France, Portugal and Greece have secured derogations. I wonder how those countries managed to deal with the issues. Are we unable to come up with the same sort of arrangements that they have devised?
Has the member analysed what happens in France? There may be a reduction in fuel prices in one part of France but there must be a higher price in urban areas, so the net effect on the French Government is zero. Is the member arguing that higher costs should be imposed on motorists in our urban areas?
I am arguing that we have the brains and wherewithal to devise a system that would benefit our remote and peripheral communities in Scotland.
In my work as a trading standards officer in the Highlands and Islands, I had responsibility for petrol licensing and storage and for enforcing pricing legislation. In that capacity, I was instrumental in getting the Office of Fair Trading to undertake quite a number of investigations into the supply and price of petrol. Mr Stewart suggested that ideas such as unmanned filling stations and so on would solve the problem. I tell him that although the OFT and Highland Council have been looking at the issue for 30 years, nothing has happened, so none of David Stewart's proposed solutions would affect the price of petrol in the Highlands and Islands.
Dave Thompson was nevertheless a good director at Highland Council.
I thank Jamie Stone for that. He was a good councillor, too.
As a result of high prices over the past 30 years, many of our small filling stations are struggling to survive. Many have closed down and those that remain rely on subsidies and on the sterling efforts of local communities. The fact that the OFT has been unable to do anything about the price of fuel means that the only way that the Highlands and Islands can ever achieve a level playing field is through political action. Unfortunately, almost all the cards are in the hands of Westminster and of those who do not want to do anything about the problem.
Will the member give way?
No, I need to make progress.
Of course, some in Westminster say that they want to tackle the problem of high fuel prices but never seem to get round to doing anything when the crunch comes. Enter the happy band of Scottish Liberal Democrat MPs, who supported a 2p per litre increase in fuel duty in a vote on the budget proposals in Westminster two nights ago. As has already been mentioned, Ming Campbell, Willie Rennie and Jo Swinson voted in favour of that increase, whereas the rest of the Scottish Lib Dem contingent was posted missing. In answer to an earlier intervention, Liam McArthur said that the proposal will make no impact on the premium that is paid by our constituents. That is correct, but it will raise four times the amount that is raised by the new 50p tax rate and it will hit Scotland's poorest disproportionately hard.
I have no idea why Charles Kennedy, Danny Alexander, Lord Thurso and Alistair Carmichael—to name but four—did not turn up to protect the interests of their constituents, but the people of the Highlands and Islands deserve an answer. As leader of the Scottish Lib Dems, does Tavish Scott have anything to say about that? He has plenty to say about high fuel prices in his local press, but he remains strangely silent about his MPs' failure to protect his constituents. Perhaps Liam McArthur can give us the answer. Did they not think that the vote was important? Do they support increasing taxes as part of their green taxation policy? Do they just not care?
Whatever the answer, the Lib Dems did not take the opportunity to support the Highlands and Islands two days ago, and no amount of motions and waffle in this Parliament will hide that fact. They talk a good game, but their actions rarely match their words—"mealie-moothed" and "twa-faced" are the words that spring to mind. Nevertheless, I will support the Liberal Democrats' motion and hope against hope that they might just mean it this time.
I actually have some sympathy for the Liberal Democrat motion. Many of my constituents, and people across Dumfries and Galloway, are almost totally dependent on private cars for access to employment and services. As Liam McArthur said, in many rural communities a car is a necessity rather than a luxury. Coupled with that, wages in rural areas tend to be below average and housing is often difficult to obtain: there are long waiting lists for social housing and house purchase is impossible as prices are above what is affordable to local people. Fuel prices are higher at rural petrol stations for the very reasons that David Stewart explained. Deprivation in rural areas might not be as large scale or as visible as in urban areas, but such deprivation exists and is endemic. Therefore, I sympathise with the motivation behind the Liberal Democrat motion.
However, there are questions about how the system that the Liberal Democrats propose would operate in practice throughout the UK. For example, in France—which was referred to by both Mr McArthur and the minister—variable excise duty is part of a decentralisation agenda, under which excise duty collection and some powers to reduce excise duty have been devolved to the regions. In the context of the UK, the proposed derogation would presumably be applied by the four nations rather than by local councils. Is it the Liberal Democrats' intention that there should be further devolution to local authority level? Would that be possible under EU law? Moreover, as David Stewart said in his intervention, the system in France requires the total excise duty take to be constant so, in effect, any reduction of excise duty in some areas must be cross-subsidised by other areas.
In addition, I am not quite sure whether any part of Dumfries and Galloway would be on the minister's list of areas that are a 60-minute drive from a major town, but I suspect that those constituents who did not qualify might be a little miffed if they ended up paying more in excise duty to subsidise people in other rural areas who would benefit from lower duty. Given the difficulties of defining remote and rural areas, some places with real problems might well be missed out.
Is the motivation behind the proposal to stimulate the local economy, or is it to benefit private individuals? In France, only petrol for domestic users is subject to the derogation. Under a similar regime in Scotland, local freight businesses in rural areas would not benefit.
The member asked whether her constituency would meet the 60-minutes measure. The answer is that it would not, but a substantial number of filling stations in her part of the country would meet the 30-minutes rural measure. However, if she wants to encourage the Parliament to use the rural areas definition, rather than the very rural areas definition, of course we will be interested in considering that.
I thank the minister for clarifying his definitions.
However, it is more fundamental that we address the other part of the equation. According to a written answer by Paul Clark, the Parliamentary Under-Secretary of State for Transport, to a question on transport costs that Norman Baker MP asked in March this year, the real cost of transport by private car declined by 13 per cent between 1997 and 2008, whereas there were real-terms increases in bus and coach fares of 17 per cent and in rail fares of 7 per cent over the same period. Over the past 30 years, the cost of motoring has declined by 17 per cent in real terms, whereas bus and coach fares and the cost of rail travel have increased by 55 per cent and 49 per cent, respectively, in real terms.
In rural areas in particular, public transport is expensive and infrequent. As of last December, for example, the frequency of buses in Dumfries, which is a town of significant size, was reduced—it is now an hourly service—and routes were curtailed. Residents who live west of the River Nith can no longer access the hospital using one bus. If that is how bad the situation has become in the town of Dumfries, I am sure that members can imagine how poor bus services are in the more rural parts of the region. Fuel excise duty is only a green tax when there is a genuine alternative to the use of private transport. In the absence of such an alternative, it is solely an income generator.
Why is public transport in much of the UK so poor in comparison with other parts of Europe? That is the case, I would argue, for the same reason that bus fares rose by 42 per cent in real terms and rail fares by 41 per cent in real terms between 1979 and 1997—it is down to privatisation and deregulation during the 18 years of Conservative rule. That is why my colleague Charlie Gordon's proposed member's bill on the reregulation of bus services is so welcome.
The chancellor will be able to exercise his discretion later this year. If fuel prices, and therefore the VAT take, remain high, he will be able to decide whether to implement the proposed increase. In the meantime, as my colleagues have said, the Scottish ministers need to consider what action they can take to help the situation. They should consider the proposal to hold an oil and gas summit, which could examine issues such as what the devolved Administration could do. However, in my view, the real challenge is first to reverse the decline in, and thereafter to improve, public transport in rural areas so that people in those areas will be able to make the green choice of leaving their car at home.
We move to the winding-up speeches.
Like my colleague Alex Johnstone, I welcome the opportunity to debate fuel duty. To be fair, good comments have been made by members of all parties and the standard of debate has been reasonably high.
The problem is clear. Our fuel is close to being the most expensive in the world. Almost 70 per cent of the cost is made up of tax—both fuel duty and VAT. The present weakness of sterling means that the drop in oil prices from $147 a barrel to approximately $50 a barrel has not resulted in a dramatic drop in prices at the pump. The drop in prices that we have seen has not been as dramatic as we might have hoped for because of the weakness of sterling, against the dollar in particular.
As a number of members have said, costs in Scotland's islands and remote communities are particularly high. Some members have suggested that they are 10 to 12 per cent higher than in urban areas. Coupled with those higher costs is the greater reliance on the car of people who live in rural areas, which do not have the same public transport infrastructure as urban areas.
Last week's proposal by the chancellor to increase fuel duty by 2p a litre from September this year will put quite a big burden on our economy as we try to stem the tide of recession. It is worth noting that a few months later, in December of this year, VAT, which of course applies to fuel, will go back up to 17.5 per cent from 15 per cent. The AA described the proposal as "highway robbery" and the RAC said:
"It's time for the Government to stop treating motorists' pockets as a bottomless pit of money and recognise their right to drive at a fair, affordable price."
In addition, the road haulage industry believes that the lifeblood has been sucked out of the industry. Insolvencies among road haulage companies have doubled in a year and the number of drivers who are looking for work has quadrupled.
What should we do? What solutions should we adopt? Derogation has been the main subject of debate. As others have said, it is a measure that works in a number of other EU countries, such as France, the Azores and on the Greek islands, but in some of those cases, exceptions have been made. David Stewart told us about the position in France, and Greece was allowed to implement a derogation as part of its accession to the EU.
The proposal is worthy of consideration, but Alex Johnstone's amendment is slightly different from the motion because we think that there are genuine questions to be answered about the legality of derogation in parts of Scotland. That is why we have asked the Scottish Government to explain to Parliament why it thinks that such a measure is legal. Another critical question is what impact such a programme might have on the public finances, were it to be implemented. It is clear that it is more difficult to obtain a derogation on fuel duty than some SNP and Lib Dem members have suggested. If it were as easy as putting together a business plan and sending it off to the EU, I suggest that more than three countries in the EU would have been granted such a derogation. We support the proposal to investigate the issue, but we think that there are questions that need to be answered before we rush headlong into anything.
The Conservatives have pushed long and hard for a fair fuel stabiliser. We are consulting on plans under which a fair fuel stabiliser would replace entirely the current fuel tax regime. The basic gist of the proposal is that the level of tax would fall when the price of fuel rose, and vice versa. Such a system would help families to cope with rapid changes in the cost of living and would protect the public finances from fluctuations in the international oil price.
The exact wording that the chancellor used in last week's budget speech is worth noting. He said:
"I expect that fuel duty will increase by 2p per litre in September".—[Official Report, House of Commons, 22 April 2009; Vol 491, c 244.]
Does the fact that he used the word "expect" mean that if there is sufficient campaigning and a good case is made, the increase will not be implemented? Has the door been left ever so slightly ajar?
It has been an interesting debate. It is clear that there are considerable tensions between the three other parties on how a subsidy should be secured and how it should be applied. The main thrust of SNP members was that the Lib Dems are two-faced. Well, that might be true. Jo Swinson would have some difficulty in explaining to people in Bearsden why they should pay more in order to subsidise fuel prices in the Highlands; perhaps that is why she has not done so. On a previous occasion, Liam McArthur argued for increased prices for air travel, except for air travel from the north of Scotland, so inconsistency seems to be the hallmark of Lib Dem policy.
During the campaign for the most recent election, I was coruscated by my Labour opponent for suggesting that the Labour Party was recommending that lifeline services should not be exempt from such a duty. Is the member really suggesting that the Labour Party should make no distinction between lifeline air services and air services that people can choose to use when other modes of transport are available?
We helped to introduce lifeline air services, but the point is that Liam McArthur argued that other people should pay more but that services for his constituents should be exempt from the process.
Hypocrisy is not entirely the purview of the Liberal Democrats. If I have heard Rob Gibson talk about peak oil once, I have heard him talk about it 100 times, but what he is arguing for would involve more emissions and faster depletion of oil.
I do not hear Scottish National Party members from urban areas arguing vociferously for their constituents to pay more in taxation on fuel in order to subsidise people elsewhere. Bluntly, if the minister has identified 149 filling stations in Scotland where he thinks that subsidies should be put in place, why does he not do it? There is a rural petrol stations grant scheme. He could make money available if he wished to do so. It is perfectly straightforward, and he would not come across any EU difficulties in so doing. It is a matter of political choice—a political choice that he has not made.
The Liberal Democrats accused the Conservatives of sitting on the fence. All I can say is that it must be a stout fence for Alex Johnstone to sit on it.
Oh!
There is a point here, which the other parties are missing.
I explain directly to the member that there is no chance of me sitting on that fence because there is no space left, given that the Liberal Democrats are crouched on it.
It does seem to be a crowded place.
There is something that we could do. There is a particular case in relation to fuel costs on Scottish islands. I am looking at the average fuel prices as of 28 April 2009, and I inform Mr Johnstone that Aberdeen has the lowest average fuel price in Scotland—so much for the problems in Aberdeen.
For a litre of diesel, the following places are a sizeable amount above the Scottish average: Brodick, at 115.4p; Kirkwall, at 110.9p; Lerwick, at 114.4p; Stornoway, at 113.7p; and Tobermory, at 111.9p. Those prices are significantly different from the average. The island communities are particularly disadvantaged with regard to fuel prices, and we could do something about that. There is an argument that we could successfully make and carry forward on behalf of the island communities. The Scottish Government has introduced an RET scheme that discriminates between some islands and others, but we could have an RET fuel scheme that applied to all islands. The Scottish Government could say, "Because of the particular problems in the island communities, we think that there is a case for introducing a fuel subsidy to protect those islands from an undue cost of fuel."
It is a real problem and there is a real way forward but the Government is not taking it. Why not? Why does the Government not stand up for island communities? The Government is politically fettered from doing so because it knows that everyone else will want it. If we say that island communities will get it, people in remote rural communities will want it. If people in remote rural communities want it, people in rural communities will want it. People in urban communities would then say that they were not prepared to subsidise it.
There is a genuine case for derogation for island communities, and I think that the case is winnable. Why do we not consider it? Why are we not having a sensible discussion? It is because the other parties are not prepared to do that.
It has been an interesting debate, although the final remarks from the Labour benches have created a shared sense of mystification among the other political parties because, suddenly, we seem to be hearing the Labour Party arguing for a derogation scheme. There is more joy in a sinner who repenteth, and so on—if repentance is what we heard. We will perhaps have to examine the Official Report very carefully indeed.
I will try to deal with a number of the points that members have made in the debate. Fuel duty derogation is a matter that engages the European Union, and is therefore is a matter on which the UK Government needs to represent Scotland's interests. However, it would also be representing the interests of rural areas throughout the UK—we would be equally pleased if other places were also to receive that benefit.
Elaine Murray said that the tax on fuel is income generating. Indeed it is. It is probably one of the things that are keeping the fragile UK economy afloat. With fuel duty currently at 54.19p a litre, we can see the scale of the revenue. Of course, there is VAT on top of that. That raises an interesting little question. If the prices are higher, the VAT take is higher. I have done a back-of-an-envelope sum. I am happy to have someone tell me that my sums are wrong, but if there is a 20p difference in price, the increase in VAT take, curiously enough, is almost exactly the 2.4p that we require to put into the system under the derogation that the Liberals talk about in the motion.
Therefore, the people who are collecting the extra tax on rural communities through the existence of a higher price are precisely the people who have that extra money to feed back and reduce the prices. That is precisely why we cannot allow Westminster off the hook. Westminster is getting the financial and fiscal benefit of higher prices through the tax system. I would be happy if Westminster were to remit that extra money to the Scottish Parliament, for us to deal with. That might be a proposal—we will see in due course.
Does the minister accept that the higher tax on petrol and diesel in island communities is a result of the higher price and not the other way around?
That is self-evident. However, the point remains that if there is a higher tax, there is a higher tax take for the Westminster Government. It has the money that could fund derogation.
Of course, that is not the only thing that Lewis Macdonald and other Labour members said. In a rather incoherent contribution on fuel prices, Lewis Macdonald said that because fuel prices in Kirkwall today are lower than they were at their peak in Aberdeen, everything is okay. I do not see many nodding heads round the chamber, but that is what he actually said.
I hope that the minister will check the Official Report very carefully, because he will find that that is far from what I said. I pointed out to him that the critical issue on fuel prices was, first, the price of crude oil, and, secondly, how that price was passed on to consumers. The price for consumers throughout Scotland is a good deal less now than it was a year ago. Surely that is the critical point, and therefore the issue of differential price is one that the minister and his devolved Government ought now to address.
The differential price is the issue that we are debating. However, I am absolutely clear that Lewis Macdonald made that comparison. It is a comparison for which he will have to account to others.
Lewis Macdonald encouraged us to follow the good example of the Prime Minister and the chancellor—two individuals who have led the United Kingdom into a position of debt greater than at any time in a generation, and greater as a proportion of gross domestic product than anywhere in Europe. If we look for examples of how to conduct ourselves in public finances, I suspect that few would wish to follow the example of the chancellor and the Prime Minister, and that many would wish to look elsewhere.
Lewis Macdonald said that reducing prices runs counter to climate change reduction. Of course, what he is actually saying is that those who have the highest prices should pay the biggest price for climate change, yet they are the very people who have the fewest alternative transport options. I do not think that that commends his argument to members.
I very much support the motion.
It is a pleasure to wind up for my party in this most interesting debate.
My colleague Liam McArthur and other members pointed out that certain parts of Scotland have some of the most expensive motor fuel prices in Europe. Liam McArthur said that a car is rarely a luxury in constituencies such as his and mine.
A clear statement of intent from the Parliament, speaking with one voice if we can, would be of enormous assistance to the minister in his endeavours to persuade Her Majesty's Government, the Chancellor of the Exchequer and the Prime Minister of the absolute validity of our case.
I was most encouraged by Des McNulty's speech. I welcome Labour's acceptance of the notion of derogation for the islands—and, of course, I would never suggest that the acceptance had anything to do with wanting to gain seats in the islands. However, if Mr McNulty were to look across the Pentland Firth at some mainland areas, he would see that his notion of derogation could be extended. Mr McNulty has made a good move, and Labour did not lodge an amendment to our motion.
In Alex Johnstone's speech, there was some confusion about where all the money was coming from. We are talking about an amendment to the Finance Bill, and the Liberal Democrats at Westminster have been tabling such amendments steadily for the past few years. We have been consistent.
We reckon that the figure required to finance our proposal—this builds on what the minister has just been saying—is round about £50 million. That figure should be compared with the £25 billion of revenue that goes to the Treasury in fuel duty.
We should all study the Official Report of this morning's debate, but I got the impression—if I am wrong I apologise—that Lewis Macdonald was jumping about the calendar a bit. We must compare like with like.
Mention has been made of the figures for diesel prices, and I remind members that we are paying 104.9p a litre in Bettyhill in my constituency, compared with 94.3p in Edinburgh and 93.9p in Dundee and Aberdeen. That is the problem that is hitting my constituents.
Rob Gibson referred to his party's policy of the regulator. That policy is to be welcomed as being on the right lines. However, there is a problem: as Liam MacArthur said, the regulator would have come off earlier this year. However, such things can be worked on and tweaked.
David Stewart challenged me to flesh out some things. First, if he has not done so, I would be grateful if he were to read John Thurso's paper, which addresses the problems and presents a very workable scenario. Secondly, the fact that Greece, France and Portugal have—as others have said—introduced this form of derogation is surely very important indeed. Despite what David Stewart contends about the French view, it would behove the chancellor and the Prime Minister to instruct Treasury officials to go to those countries and see how they do it. Those countries have acknowledged the type of problem that is shared, alas, by rural parts of Scotland.
Dave Thompson's contribution should not be underestimated, although—how shall I put this?—it introduced an entirely new dimension to the standard idea of support. His experience as an official in Highland Council is important, and he was part of protracted discussions and a series of moves that we tried to make when we were in Highland Council. I am afraid that Mr Thompson is quite right: all the approaches that we made to the Office of Fair Trading, and all our discussions, were as naught. We considered every way of getting down the costs, including bulk buying, green measures, automated filling stations and others; we used the maximum power that we could, as a large council in Scotland; and we used to send Alison Magee down here frequently to raise the issue. However, we still could not get to the heart of problem, which I am certain is a derogation. Dave Thompson's contribution was hugely important.
As I say, our figures are that derogation would cost some £50 million out of £25 billion. I recommend that members read John Thurso's paper.
We have a clear choice. No amount of obfuscation or prevarication will alter the fact that, if we accept the Conservative amendment, we will kick the issue into the long grass. Other nation states use the mechanism and use it effectively. Our constituents will be watching: will we vote for the long grass, or will we vote for the Parliament to speak with one voice, thus giving the minister maximum support to go to Westminster and bring to bear maximum pressure on the Government? This problem is a dagger pointed at the heart of our most rural and remote communities in Scotland.