The treasury has announced that a fuel rebate applying to people living on the Scottish Islands and Scilly Isles could be expanded to include other rural dwellers.

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Introduced in March 2012, the scheme currently grants discount fuel prices to those living in remote island communities. However, if ministers are intending to expand the scheme, they will first need to secure the consent of the EU Commission.

The government is looking at petrol and diesel prices in 35 areas of the UK, which ministers believe could be eligible for discounts of up to 5 pence per litre on fuel. The evidence gathering exercise will include a consultation with fuel retailers and other businesses in a number of target regions and is being carried out ahead of an application to EU executives.

Danny Alexander, the Treasury's Chief Secretary said he is looking for inland regions where high distribution costs lead to higher prices at the pumps. The treasury has acquiesced to the demands of a number of rural MPs who have been calling for a fuel rebate for a number of months. Led by Conservative MP for Thirsk Anne McIntosh, the MPs claim areas other than the Islands are just as badly affected by high fuel costs, which they believe are adding to the 'rural penalty' identified in a number of comparative studies between urban and rural living.  

In December, McIntosh claimed private motorists in her North Yorkshire constituency are "disadvantaged" by fuel prices. MP for St Ives and Lib Dem agriculture spokesperson Andrew George commented, "We do not want to get to a situation where the countryside is a place that is the exclusive preserve of the better off."

Figures from the UK government's Office for National Statistics showed late last year that rural households spend £19 a week more on transport than their urban counterparts. On average, the statistics show, rural living costs £2,714 more per year than living in an urban area.

Danny Alexander said on Thursday, "The island fuel rebate provides much-needed help to keep down fuel prices in areas where costs of transporting fuel mean prices are much higher.

"I know that there are other remote rural areas of the UK with similarly high fuel costs. We will need to prove that there are areas which are similar to the islands in terms of pump prices and distribution costs."

However, sustainable transport charities have argued that the people being unfairly penalised in the countryside are those who cannot afford to drive. Sustrans’ Policy Director Jason Torrance, commented on the Treasury announcement, "By cutting fuel duty instead of investing in providing people with alternatives to driving, this government is condemning millions of people to ongoing debt from car ownership."

He continued, "Mr Alexander says that 'driving is not a choice but a necessity' but that's only because the government has failed to provide rural communities with a choice about how they travel, isolating people from employment opportunities and front line services. If the government really wants to help people living in rural areas they need to make affordable forms of travel like walking, cycling and public transport accessible for everyone.”

In England, the government's evidence gathering will focus on Devon, Herefordshire, Cumbria, Northumberland and North Yorkshire. Alongside much of Scotland and Northern Ireland, Gwynedd, Isle of Anglesey, Monmouthshire and Powys in Wales will also be considered.