Speech in the Scottish Parliament

30 April 2009

David Stewart 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—

Jamie Stone: You still are fresh faced.

David Stewart: 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

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.

Alasdair Allan: Will the member give way?

David Stewart: I will just finish this point.

Is that to be a new Liberal Democrat spending commitment?

Alasdair Allan: 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?

David Stewart: 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.