Fuel discounts for remote rural areas 'not in Budget'

Unleaded petrol costs more than £1.40 a litre in some remote communities

A planned discount on fuel in remote rural areas will not be in the Budget in March, the BBC understands.

Chief Secretary to the Treasury Danny Alexander announced plans for a pilot scheme in October.

But a Treasury source said "informal discussions" were still taking place between EU and British officials.

The UK needs EU permission to charge different fuel duty rates around the country. Ministers hope to make a formal request after the Budget.

EU law means the UK would need the European Commission to propose the scheme, and the EU's finance ministers to unanimously support the idea at an ECOFIN meeting.

Once the request is made by the UK, it will take three months for the commission to draw up a proposal and several further months for it to be agreed. Only then would a pilot scheme be possible.

On Sunday, Mr Alexander said: "We are already also taking steps, and we are the first government that's done this, to put in place a fuel duty discount scheme for remote communities where the prices are absolutely highest - something previous governments refused to do."

The planned pilot would provide a discount of up to 5p per litre of petrol and diesel in the Inner and Outer Hebrides, the Northern Isles, and the Isles of Scilly.

'Betrayal'

The news is likely to increase the pressure on the government to act on pump prices. It is already facing calls to put in place the fuel duty stabiliser - which would see duty fall when the oil price goes up - suggested by the Prime Minister David Cameron. Duty is due to rise again in April.

A Treasury spokesman said: "While we don't speculate on the content of the Budget, the government has made very clear its commitment to helping those in remote rural areas with fuel costs.

"However, we have also been clear this will require European approval. We are pressing ahead with this and currently making good progress, having held very constructive discussions with the European Commission last week."

But SNP MP Angus MacNeil said the news was "not just disappointing, it is a despicable betrayal by the Tory-Lib Dem government at a time when the country is crying out for action to bring down fuel costs."

And shadow transport minister John Woodcock MP said: "Hard-pressed motorists will be dismayed by the sight of ministers running around like headless chickens when they are the ones who have just imposed a VAT hike hitting everyone at the pump".

The Liberal Democrats pledged to introduce a fuel discount scheme in their general election manifesto. The coalition agreement said the government would investigate measures to help with fuel costs in remote rural areas.