Fuel duty scheme for island communities to be introduced next spring

The fuel duty scheme which promises to knock up to five pence off a litre of petrol or diesel will be introduced by next spring.

But renewed concerns have been raised over government plans to increase fuel duty by three pence a litre from January.

Isles MP Alistair Carmichael has announced the much-anticipated discount for remote island communities such as Shetland is due to be approved by Europe.

As well as the Northern Isles it will cover the Western and Clyde islands and the Isles of Scilly.

Mr Carmichael said: “There will be a process that involves first of all the retailers themselves, who will be the people who will have to deliver this 5p reduction.

“That will ensure that they will have the money upfront so that the scheme, when it’s put in place, doesn’t trash their business because of cashflow problems.

“I would be fairly confident, in fact I am confident on the basis of discussions I had with Treasury ministers, that it will be available to everyone by the start of the spring.”

Plans for the discount were agreed in September by the European Commission, but finance ministers must give their approval before it can go ahead.

For years drivers in Shetland have faced eye-watering premiums for fuel compared with their counterparts on the mainland.

Chancellor George Osborne scrapped the annual fuel tax escalator in March’s budget and cut fuel duty by a penny.

But he only postponed a planned inflation-linked duty rise from April 2011 to January next year, and from April 2012 to next August.

At Westminster today MPs are debating a motion calling for the rise in fuel taxes to be stopped.

Labour’s leadership is also calling for the government to reverse January’s VAT rise of 20 per cent.