ISLANDERS will receive a 5p per litre reduction in fuel duty from 1 March next year, the UK government confirmed on Friday morning.

Chief secretary to the Treasury Danny Alexander announced that the European Union had granted final approval to the derogation scheme for all the Scottish islands and the Isles of Scilly.

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To ensure retailers do not suffer cash flow problems passing on the price cut from March, they will be able to start claiming the rebate from HM Revenue and Customs from 1 January.

Mr Alexander said: “As well as securing EU clearance, we have produced a scheme designed to protect the cash flow of local retailers.

“We have also delivered on a promise to help address the persistent unfairness of some of the lowest income communities in the country paying among the highest pump prices.”

Northern isles MP Alistair Carmichael welcomed the announcement, but said there was more work to be done to help reduce island motorists’ fuel bills.

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He said: “This duty cut, which is the largest of its kind in the EU, will go some way towards providing local motorists with relief from high prices.

“It remains the case however that we will still be paying substantially more for our petrol and diesel. I still want the competition authorities to explain why our market fails and to sort it.”

He also pointed out that the rebate had been gained within 18 months thanks to the efforts of the Liberal Democrats within the coalition government.

“The Labour party in government came up with ridiculous excuses about why this could not be done and the Conservatives did not support a scheme of this sort in opposition. The coalition is doing this because Liberal Democrats are a part of it,” he said.