Unfortunately that's a classic weak spot on mk1 & mk2 golfs as cr@p builds up around the filler neck underneath the wheel arch. You'll need to take the surrounding area back to bare metal, remove the filler neck and get all the rust treated. I would think that the whole panel would need to be painted in order to blend the job in. I'd take the wheel off and give the area up round the filler neck a good clean and get some waxoyl on there quick.
Haven't got a clue on price but a rough guess would be about ?200+