Britain faces a “tough” battle to win permission from Brussels to cut fuel prices for motorists in rural areas, the Chief Secretary to the Treasury has admitted as pressure mounts for a reduction in petrol duty in next week’s Budget.
Lib Dem Minister Danny Alexander told The Yorkshire Post he expects a “fight” to convince fellow European finance Ministers to allow his plan to cut fuel prices in the most remote parts of the country by 5p-a-litre.
Petrol prices are typically significantly higher in rural areas than in larger towns and cities, due to the premium rates petrol stations are charged by oil companies for delivery and the lack of competition to drive down prices.
The beauty spot of Hawes, deep within the Yorkshire Dales, is among the areas that would benefit from the reduced rate if the Government’s plan is deemed acceptable under EU ‘state aid’ laws.
So far, commons market rules have only permitted member states to offer differing fuel duty rates on remote islands, away from their mainlands, where it has proven relatively easy to demonstrate that fuel prices are significantly higher than in the rest of the country.
A number of islands off the Scottish coast have thus already benefited from reduced petrol duty under a pilot scheme launched by the coalition in 2012.
But the Treasury accepts the most remote parts of mainland Britain face similar issues, and earlier this year submitted to Brussels a list of areas where it believes duty should also be cut.
A decision is due later this year.
“It’s going to be tough,” Mr Alexander said. “We’re the first country in the European Union to apply for a derogation for mainland areas.
“We were successful for island communities – it was a Liberal Democrat election commitment that I pushed through in the Treasury. I’m now trying to make sure we can bring that forward for remote mainland areas with high costs and long distances.”
The Treasury issued a “call for evidence” last year and received submissions from petrol stations across rural Britain.
To stand any chance of qualifying, fuel stations were told they must have higher fuel prices than those on the Scottish islands where the scheme is already underway; be located in equally sparsely-populated areas; and be more than 100 miles from the nearest oil refinery.
In all, 17 areas across the UK met these criteria and were included in the submission to the EU in January. Two were in the North of England – Hawes, in Wensleydale, and Hexham, in Northumberland. Three other petrol stations in Yorkshire - all of them in Ryedale – were told they did not qualify.
“I think we’ve made a very good case,” Mr Alexander said. “I think it’s backed up by fact, its backed up by the economics and I’m going to work bloody hard to persuade the commission to back it – but I would say it’s going to be a fight.”
More immediate relief for motorists could come in next week’s Budget, with Chancellor George Osborne under pressure to cut fuel duty after repeatedly freezing prices in previous years.
The FairFuel UK campaign said a 3p cut in duty on Wednesday would generate 70,000 new jobs, stimulate GDP by 0.2 per cent and help lower inflation.
Campaign spokesman Quentin Willson said: “When two-thirds of the population say they want a cut in fuel duty, it’s time to listen.”