Rural Fuel Duty Relief

Andrew George Excerpts

Wednesday 7th January 2026 Westminster Hall

[Andrew George (St Ives) (LD)]

It is a pleasure to serve under you, Ms Furniss. I congratulate my hon. Friend the Member for North Devon (Ian Roome) on securing this debate and making a very strong case, of which I hope the Minister will take heed.

I will return to some of the prehistory, because I have campaigned on this issue for so long. I congratulate my hon. Friends the Members for North Cornwall (Ben Maguire) and for Honiton and Sidmouth (Richard Foord), and the hon. Members for Strangford (Jim Shannon) and for Na h-Eileanan an Iar (Torcuil Crichton), for reinforcing the very strong points advanced by my hon. Friend the Member for North Devon in his opening remarks.

My hon. Friend the Member for Newton Abbot (Martin Wrigley) made an interesting intervention about useful pump comparison apps and sites. One of the places that was originally designated to receive rural fuel duty relief was the Isles of Scilly in my constituency, and I campaigned for it at the time. When the relief was announced in March 2012, it was very welcome. However, I am afraid that having comparison apps on the Isles of Scilly is pretty meaningless because there is only one pump and no competition. I do not think it can be argued that the monopoly supplier is taking advantage of that monopoly, because it is very much keyed into the community and has been running it as a public service.

When the relief scheme was originally established, I asked the supplier, Ian Sibley of Sibley’s, which provides fuel for road use as well as for marine use on the Isles of Scilly, how he obtained his fuel. He basically takes tanks over to the supermarket in Penzance and has them ferried back, so he is buying fuel at retail prices and selling it on. We can see that it is and has been impossible for him and his business to be in any way competitive in those circumstances, and he has had to transfer the fuel to local people on the islands without taking much of a cut to cover the costs of freight and providing the service. We can see how difficult it is to provide this service in such locations.

It is also worth reflecting on the justification for the relief, because it is all about equity and fairness. I know that some people will say, “Hang on, are you not campaigning to combat climate change?” Indeed I am, as are others present here today. Those same people may ask if it does not contradict everything we are campaigning for when we say that we want to reduce fuel costs. It is not.

This is about geographic equity across the country. It is about wanting to make sure that in addressing the cost of living crisis, which has been going on for many years, we also address the geographic inequity in the prices that end up being charged in such remote and rural locations. It is not relevant to undermine the case in any way by comparing it with the vital campaign to combat climate change.

To go into the prehistory of it, on 8 January 2002 and 15 January 2003, I brought debates to the Westminster Hall Chamber on the issue of rural and island transport. Indeed, my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) and Alan Reid from the Scottish islands made a very strong case for the importance of seeking equity in this regard, not only in terms of fuel duty but in relation to private car users and to community bus users and projects.

After that campaigning, I was pleased that the coalition Government agreed with the Liberal Democrat policy of investigating, as they put it, measures to help with fuel costs in remote rural areas, starting with pilot schemes. Indeed, in October 2010, they announced a 5p fuel duty discount for Scottish islands and the Isles of Scilly. In those days, that of course required EU approval—even post Brexit, any kind of parafiscal support or state-aid issue still requires some consideration and regulation, because it needs to meet competition rules.

Obviously, the case for the discount was made—the unfairness was acknowledged—and in March 2012, it was brought in. The pilot schemes were established, including on the Isles of Scilly as I mentioned. In October 2013, the project was, as promised, reviewed and it was identified to be working well, so the Government announced that they were going to expand the schemes to 17 additional rural areas in May 2015. I raised a petition to make west Cornwall one of those areas. It got 2,500 signatures, and I presented it to Parliament in December 2013, but unfortunately the Government did not agree to do that in August 2014, which was a pity. I do hope the Government will look at an extension.

There is still a cost difference between the Isles of Scilly and the mainland in excess of 30p per litre. It is a very difficult administrative scheme to follow through. It does create some administrative pressures on the small businesses that operate it, but I hope the Minister will accept the request to review both the amount of the discount and the geography on the basis of evidence of need.

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[The Exchequer Secretary to the Treasury (Dan Tomlinson)]

It is a pleasure to speak under your chairship, Ms Furniss. I am grateful to the hon. Member for North Devon (Ian Roome) for securing this debate and speaking so passionately in support of rural communities and the people in his constituency, who I know he has much honour in representing. I thank him for securing the debate and giving Members on both sides of the House the chance to contribute on this very important topic.

This Government recognise the importance of rural areas for the UK economy, and will continue to consider how they can best support those who live and work rurally. Although my Barnet constituency, which is in the very north of London, lacks the beaches and moors of the hon. Gentleman’s, it does contain 14 farms and have some rural areas, because of the large bit of green belt that extends into north London. Like all Ministers, I am fully committed to ensuring that the tax system works for everyone, whether they are in rural or more urban parts of the country.

Fuel duty is an important source of Government revenue and provides vital funding for public services and infrastructure. It raised £24.4 billion in 2024-25; as has been mentioned, fuel duty rates have been frozen since 2011, with a further, temporary 5p cut introduced in 2022. Fuel duty rates are therefore now, in real terms, about 40% lower than they were in 2011. Pump prices are at their lowest level since 2021, before Russia’s illegal invasion of Ukraine led to soaring prices and the introduction of the temporary 5p cut.

At the Budget, therefore, the Chancellor announced that the 5p cut would first be extended until the end of August, with rates then rising gradually, returning to March 2022 levels by March 2027. As well as that extension to the freeze, the planned increase in line with inflation for the coming financial year will not take place. Those decisions on fuel duty will save the average car driver across the country £49 in the coming financial year, compared with previous plans.

The Government also recognise the importance of competition between retailers in the road fuels market. Liberal Democrat Members, including the hon. Members for North Cornwall (Ben Maguire) and for Newton Abbot (Martin Wrigley) and others, mentioned a pumpwatch scheme. Sadly, that reveals that we need to communicate even better about some of the ideas put forward by Government: at the Budget, the Chancellor confirmed that from spring 2026, UK consumers will be able to compare prices more easily through the Government’s new open-data fuel finder scheme, which I believe will achieve aims similar to those of the pumpwatch proposal. It will help to encourage competitive pricing among retailers and is expected to result in further savings for drivers of potentially up to £40 a year.

The Government, however, are well aware that fuel costs can be higher in certain more remote areas, so the rural fuel duty relief scheme provides a 5p per litre reduction to benefit motorists buying fuel in those areas. The areas included in the scheme demonstrate certain characteristics, such as pump prices being much higher than the UK average, remoteness leading to high fuel transport costs from refinery to filling station, and relatively low sales meaning that retailers cannot benefit from bulk discounts.

As mentioned by many Members, the scheme provides about £5 million in support per year, with about 165 fuel retailers registered with His Majesty’s Revenue and Customs to claim the relief. The hon. Member for St Ives (Andrew George) mentioned the administrative costs, and I am interested to hear more from him and from any businesses that have ideas about how I, as Minister with responsibility for HMRC, can seek to reduce any of the administrative burdens that those 165 retailers may face.

One area included in the scheme is the EX35 postcode, which is part of Exmoor national park and in the constituency of the hon. Member for North Devon, who secured the debate. I confirm that the scheme in fact covers not just 11 or 12 constituencies, but 16—some of the postcodes sneakily cross over constituency boundaries, so that 16 Members of the House of Commons represent constituencies of which at least some elements are covered by the relief.

[Andrew George]

The Minister raised the issue of the administrative burden. I was referring to an occasion when an operator of the scheme was late in his submission to HMRC, in which case he was refused the rebate, which he had been taking. In such circumstances, he had to appeal. I was simply demonstrating the rigidity and lack of humour, as it were, in the system. We are talking about extremely small businesses that find the additional administrative burden quite onerous.

[Dan Tomlinson]

I note, as I am sure others in the Chamber will, just how forensic is the hon. Member’s understanding of some of the small businesses in his constituency. That is to be very much commended. If he would like to write to me on that point, I would certainly like to raise it with HMRC. Of course, it is not appropriate for me as a tax Minister to get involved in individual tax affairs. That said, the general point is about administration, and the extent to which we are getting the balance right between ensuring that we stick to the rules as set out, and having an appropriate level of flexibility. That is something that I would happily raise with the Department, if he were willing to write to me.

The hon. Member for North Devon and many others have suggested that the Government should increase the rural fuel duty relief in line with inflation. As I set out earlier, since the relief’s introduction, it has remained at 5p, but the main fuel duty rate has also remained at the same level—or, more recently, has fallen. I am aware that there are differences across the country, and there may have been differentials in the increase in fuel prices in some areas. However, the fuel costs are broadly the same as they were in 2011, if not slightly higher; it was roughly 130p for a litre then, compared with around 135p now.

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[Andrew George]

Will the Minister give way one more time?

[Dan Tomlinson]

I will happily do so, although I am sure that hon. Members would like me to make some progress, too.

[Andrew George]

On the question of geographical coverage, and given the Minister’s comment that he has not received representations about further areas for inclusion, I urge the Government to review the scheme and to take an objective measure themselves of where else it might extend to, rather than inviting us to form an orderly queue in pleading for our own areas, which could result in a system based not on need, but on political advantage.

[Dan Tomlinson]

I am always glad to take interventions. The hon. Member’s point is noted and I acknowledge his request. I ask Members to get in touch if they believe that an area meets the criteria. As the hon. Member has noted, there are not hard and fast rules here—there are not specific criteria within each of the categories that are considered in the round—and the Government do not intend to change to having hard and fast rules. I would be worried that that might lead to more complexity and change within the system, meaning that if one area’s prices tipped slightly above or below, we might get into contestation of whether the additional costs of transporting fuel to certain places tips over or above the threshold. I hope that Members who have views on where relief should be extended to will bear with the current, less-rigid process.

I was going to say, in a slightly light-hearted way, that the hon. Member for Witney (Charlie Maynard) suffers somewhat in tax policy debates, in that I know his constituency well, having been born and brought up in west Oxfordshire. As part of my joyful travelling to and from seeing my family there, I often fill up in his constituency, which is often cheaper than doing so in north London. I noted that the hon. Member was magnanimous in calling for the scheme to be extended not to west Oxfordshire, but instead to other areas represented by his Liberal Democrat colleagues.

I should mention the important speech made by my hon. Friend the Member for Na h-Eileanan an Iar (Torcuil Crichton)—he will have to teach me how to pronounce his constituency, as that was the first time I have said it. His is one of the constituencies that does benefit from the relief. I am glad to hear Labour Members talking clearly about the benefits that the relief provides for constituents in some of the most rural parts of the whole country.

Again, I commend the hon. Member for St Ives for his engagement with businesses. We heard about the garage on the Isles of Scilly and how it gets petrol to and from. I think I have covered most of the points raised. If Members have a burning desire to ask me to clarify something, I will, but I am sure we all want to make some progress.

Let me make a couple of further points before I conclude. The fuel duty system supports rural areas in other ways as well. Households and non-commercial premises are entitled to use red diesel for heating and electricity generation, which includes off-grid homes in remote and rural locations that have limited alternatives. Red diesel is subject to fuel duty, which is 10.18p per litre compared with the 52.95p for diesel used on roads. Farmers also retain the entitlement to use red diesel in machinery and vehicles used for agricultural purposes after that was withdrawn from most sectors under the previous Government in 2022.

Several Members discussed the need to ensure that public transport maintains a level of affordability. At the end of the last year, the Government confirmed a long-term investment of over £3 billion over the next three years to support local leaders and bus operators across the country to improve bus services for millions of passengers. That includes multi-year allocations for local authorities under the local authority bus grant. From 2026-27, we have revised the formula to include a rurality element for the first time to ensure that the additional challenges of running bus services in rural areas are taken into account.

I was surprised that there was no mention of potholes in a debate about transport, but I know that they are of particular concern to those in rural areas that are more prone to frost, meaning that ice gets inside the tarmac and the road breaks up. By 2029-30, the Government will have committed more than £2 billion annually for local authorities to repair, renew and fix potholes on their roads. That doubling of funding since we took office will mean that we can exceed our manifesto commitment to fix an additional 1 million potholes a year by the end of this Parliament.

The Opposition spokesperson mentioned the electric vehicle decision that the Government announced at the Budget. We remain fully committed to the electric vehicle transition, which will drive growth and help the country to meet its climate change objectives. Our public charging network is growing rapidly. We had more than 87,000 public charge points as of December last year, and, in the year ending 1 October 2025, the number of charging devices in rural areas had increased by 26%. In addition, the Government announced at Budget 2025 the immediate roll-out of a package of support worth £3.6 billion to help motorists to switch to cleaner and greener cars, to support the automotive sector through the transition to EVs, and to bolster British industry.

The Government are dedicated to supporting and promoting rural areas, particularly by providing support for transport costs, such as through the rural fuel duty relief scheme. I very much look forward to further discussions—perhaps even further correspondence—over the course of the Parliament about how we can continue to do that. I thank the hon. Member for North Devon for securing the debate and all Members in the Chamber for their contributions.