Treasury chief executive Danny Alexander’s planned pilot of a 5ppl duty rebate for the Scottish Islands has been approved in principle by the European Commission but rural retailers in Scotland have branded the scheme "a joke".

The government’s initial proposal for a distributor-based sales scheme, which would see distributors submit a monthly claim to HM Revenue & Customs (HMRC) and reduce their selling price to retailers in eligible areas by 5ppl, is likely to be replaced by a retailer-based scheme.

This new proposal will have retailers in all islands in the Inner and Outer Hebrides, the Northern Isles, the islands in the Clyde and the Isles of Scilly, register for the scheme with Revenue & Customs and reduce their selling prices of diesel and petrol by 5ppl. Retailers then claim a 5ppl rebate on the fuel they purchase by submitting a monthly claim.

HMRC promises to refund them within 30 days and retailers will be required to retain records showing purchases of fuel made. To ease initial cash-flow problems an issue raised by RMI Petrol at its first meeting with the Treasury on July 28 the government proposes that retailers be allowed to claim a refund on purchases in the first two months without passing on the discount to customers.

But at RMI Petrol’s regional meeting in Inverness on September 21, those Scottish retailers in attendance vehemently voiced concerns about how the government would track and monitor whether retailers were passing the 5ppl to each motorist, when the wholesale costs and therefore pump prices are showing such volatility.

One delegate said: "You’re going to have a huge price discrepancy across the islands because nobody sells at the same price anyway so how are you going to prove it? You’re not. So then you’re going to have more trouble than it’s worth. And, anyway, this 5p on average is worth about £2 a week to the consumer. It’s a load of nonsense. They’re better off giving them free road tax. That would solve the problem."

Retailers were also worried that if newspapers reported the pilot’s go-ahead before the end of the two-month grace period, they would be left dealing with disappointed motorists expecting a 5ppl discount straight away. One retailer said: "It’s already been on the front page of the local paper and it’s not even been approved by the EU yet."

For some other retailers it’s a case of the scheme being ’better than nothing’. John MacPhie, who runs Atholl Filling Station in Dunvegan on the Isle of Skye, said: "A 5ppl reduction in price will still make us 5ppl more expensive than mainland Scotland. We’d prefer 10ppl rebate but it’s got to start somewhere. There’s a Co-op site in Broadford in the south of Skye that pushes fuel prices down and runs promotions that we can’t compete with. I’m waiting for more information about when the scheme will start and what we have to do."

In a meeting with the Treasury on September 26, Brian Madderson, chairman of RMI Petrol, presented further concerns about the scheme. He pointed out that retailers are unlikely to benefit from any volume uplifts because island demand is relatively static, but they will be financially penalised by the burden of additional red tape.

Madderson also raised the issue of some mainland sites on the main A87 trunk road to and from the Isle of Skye, potentially being adversely affected by loss of year-round HGV/van trade and seasonal tourist trade. He questioned if the Treasury has considered possible legal action by those retailers and/or their distributors against the government for encouraging ’predatory pricing’ by enabling their competition to offer a 5ppl duty discount. He also said that should such a scheme be introduced later this year or early next, the benefit to the consumer would be swamped by the January 1 duty ’escalator’ of 1ppl, which equates to 4ppl at the pump, and that there must be evidence to the consumer that they are receiving a rebate.

Speaking to delegates in Inverness, Madderson said: "What we have said to the government is that this is a lose-lose situation for the retailer because we don’t see that, in these islands, it’s going to generate any more fuel volume through their sites and they’re going to have a lot more cost administering the scheme.

"That’s not great for the retailers and if you don’t have retailers surviving on these islands then that’s no good either so what are you going to do to help the retailers on the islands as well as the consumers? At this present time Danny Alexander doesn’t seem to have an answer to that."

Since the September meeting, Madderson has also asked for clarification on whether the retailers will have to make financial provision to return the two months upfront rebate should the scheme be abandoned. At the same time, he asked if residents of a number of small islands off the Argyll coast Gigha, Lismore, Seil, Great Cumbrae, Kerera and Luing where there are no longer any filling stations, would benefit from the rebate if they brought fuel over from the mainland in cans.

Islanders fill cans and store them for later use with Gunns of Appin on the mainland, shipping cans by special boat because by maritime law it is understood that bulk fuel cannot be shipped even in jerry cans by passenger ferry services, said Madderson.

However, some islands with car ferry links appear to flout this law with a blind eye possibly being turned by local authorities, he added.

RMI Petrol is now awaiting response from the Treasury but it is understood that the UK government expects the scheme to be introduced by the start of next year once EU finance ministers have given their approval.


RMI Petrol’s regional meeting at the Thistle Hotel in Inverness last month attracted retailers from across Scotland, including the Isle of Skye, Cumbrae, Dumfries, Dingwall and Glencoe.

A presentation by Erik MacEachern, project manager of the Scottish Environmental Protection Agency (SEPA), tackled the upcoming Stage 2 Vapour Recovery legislation.

He told delegates that Scottish retailers with a petrol volume of more than 3.5mlpa are required to have Stage 2 fitted and will need to have a permit from SEPA in place by February 28, 2012.

This date has been extended from January 1.

In addition, any new-build sites where retailers expect to sell more than 500,000mlpa must have Stage 2 installed from the same date.

By 2018 the volume threshhold will reduce to 3mlpa.

There were also supplier presentations from Steve Hand, director of business development at Santander; Paul Henry, national account manager at Bank Machine; and Mike Skinner, sales manager at Harvest Energy.