Formal request made to EU for 5p fuel duty rebate scheme in islands

The government has formally submitted its request to introduce a fuel duty rebate of 5p a litre in Shetland, Orkney, the Hebrides, the Clyde islands and the Isles of Scilly to the European Commission, it emerged today.

Preliminary discussions on the scheme between chief secretary to the Treasury Danny Alexander and Brussels bureaucrats have been taking place for some time and it is now hoped that permission will be granted. No timescale has so far been suggested.

The request was announced in documents accompanying chancellor George Osborne’s budget, in which he brought relief for motorists and firms with high transportation costs in the isles by announcing that fuel duty will be cut by 1p from 6pm today. Prices in the isles for both petrol and diesel have been hovering just under £1.50 a litre.

Next week’s planned increase in fuel duty by inflation (4.4 per cent) has also been deferred until 1st January next year and the government is to scrap the fuel duty escalator, replacing it with a “fair fuel stabiliser”. However there will be no change to VAT on fuel.

The new “stabiliser” means that fuel duty will only increase by the retail price index plus a penny per litre when the price of a barrel of oil falls below a suggested $75, although consultation is to be carried out on the appropriate level. A short while ago on the market Brent Crude was trading at $115.55.

In his statement Mr Osborne said: “It’s about doing what we can to help with the high cost of living and the high cost of oil.

“The fuel duty escalator, that adds an extra penny on top of inflation every year, will be cancelled,” he said, “not just for this year, or next year, but for the rest of this parliament.”

“We will delay the inflation rise in duty planned for next week until next year – and also delay the April 2012 inflation rise until the following summer.”

Isles MP Alistair Carmichael said the immediate cut of 1p to fuel duty would provide drivers in Shetland and Orkney with important relief as formal discussions over the rebate scheme get underway in Brussels.

“Crucially, we have seen action to help motorists that have been hit hard by recent increases in the price of petrol. The decision to scrap Labour’s above-inflation fuel duty increase is the right choice at a time when millions are struggling to afford a tank of petrol.

“As people in Orkney and Shetland are well aware, the impact of another price increase would have been acute across the Highlands and Islands, hitting many people who have no alternative but to use their cars to get around. Cutting 1p from fuel duty will provide local drivers with immediate relief as plans for a larger tax derogation for the Northern Isles are discussed in Europe.”

Scottish Liberal Democrat Holyrood election candidate for Shetland Tavish Scott said: “Cutting fuel tax is the right thing to do. Every family, individual and business is being hit by this and at last, the government have acted. This is real help at this really tough time for Scottish families and the Scottish economy.

“Shetlanders still pay far more for fuel than mainland Scotland. So we need the EU to agree to the islands measures which could further reduce the exorbitant cost we face. I have raised the importance of this with the UK government and want real action as quickly as possible. That would help along with today’s cut in fuel duty.”

Meanwhile tax relief for North Sea decommissioning work is to be restricted to 20 per cent to avoid “accelerated decomissioning” although a longer-term strategy for decomissioning is to be worked out in time for next year’s budget.