UK seeks permission to cut 5p off islanders' petrol

Petrol dripping into a motorcycle's tank France successfully applied for lower fuel costs on Corsica

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The government is pushing ahead with plans to cut the cost of fuel for drivers on a number of Scottish islands and the Isles of Scilly.

It has asked the European Commission if it can reduce fuel duty by 5p a litre, the BBC understands.

Ministers are not allowed to cut fuel duty without getting permission from Brussels first.

Labour said prices should be cut for all UK motorists in this month's budget - not just those in remote areas.

Ministers have hinted they could introduce a fuel duty stabiliser - which would see duty fall when the oil price goes up. Duty is due to rise again in April.

Lower costs

The plan to ease the fuel price burden on remote rural areas was included in the coalition agreement between the Liberal Democrats and the Conservatives, but there has been much speculation about whether it would be approved by the European Commission.

Analysis

So why does the government have to seek permission from Brussels to cut the price of a litre of petrol in Stornoway?

Under the Energy Tax Directive of the European Union - which the UK is signed up to - minimum rates for fuel duty are set down, and each country must have a standardised rate within their borders.

Because the Treasury is seeking to lower fuel duty by 5p per litre in selected parts of the UK ministers require permission to do this.

Sources in Brussels say the request for permission arrived from the Treasury yesterday, and it's thought it'll take around three months for the necessary administrative formalities to be completed.

Once this is done, it will be voted on by finance ministers, and will need unanimous backing by all member states.

There is a precedent for this: France applied for permission to lower the rate of duty it charges in Corsica, and this was granted.

A senior source at the European Commission told me they "don't expect there to be any problem" with the request from the UK, but it is likely to be at least the autumn before permission is given.

The planned pilot would provide a discount of up to 5p per litre of petrol and diesel on the Northern and Western isles, Argyll and Clyde islands and the Isles of Scilly.

But it could be autumn before the bid is processed and voted on by finance ministers, European Commission sources have said.

Western Isles councillor Donald Manford said high costs threatened businesses and was a cause of depopulation.

Under the Energy Tax Directive of the European Union - which the UK is signed up to - minimum rates for fuel duty are set down and each country must have a standardised rate within their borders.

UK ministers require permission to lower costs.

Sources in Brussels have told BBC 5 live the application arrived from the Treasury on Thursday.

France applied for permission to lower the rate of duty it charges in Corsica, and this was granted.

Mr Manford, transport spokesman for Comhairle nan Eilean Siar (Western Isles Council), said 5p off would bring island costs closer to those on the mainland.

VAT rise

He added: "The pain over the years has not simply been due to hardship.

"It is businesses going under, jobs ending and people in fact leaving island communities and the places they want to live in."

The Scottish Liberal Democrat conference in Perth was told the application had been made.

Chief Secretary to the Treasury Danny Alexander, who is Lib Dem MP for Inverness, Nairn, Badenoch and Strathspey, said permission to introduce the discount for island communities had been sought from the European Commission.

He said: "Everyone in the country is feeling the pressure of high fuel prices.

"But these island communities are where the prices are highest and the pressure is huge on families and I'm delighted to be part of a government that is going to deliver that help to those hard-pressed island communities."

Angela Eagle, Labour's shadow chief secretary to the Treasury, urged Mr Alexander and Chancellor George Osborne to act now to help UK motorists.

She said: "They could immediately reverse their VAT rise on petrol, which has added £1.35 to the cost of filling up a 50 litre tank, and ease the pressure on families across the country right now.

"And in the Budget later this month they should look again at the annual fuel duty rise due in April. The last Labour government often postponed planned duty increases when world oil prices were on the up - as they are now."

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