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Chancellor expected to play it safe in last "green" budget

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The Chancellor's rhetoric on tackling climate change will not be matched with measures of any real substance in this week's budget, Peter Penneycard, Tax Partner at PKF Accountants and business advisers has predicted.

Peter believes that Gordon Brown's last Budget as Chancellor will be neutered by his determination not to undermine his popularity before taking over as Prime Minister and that economic and political prudence will outweigh his environmental concern. His announcement at this week's Green Alliance conference contained nothing more that tinkerings at the edge. Specifically, it included no substantive measures on car usage.

In contrast to David Cameron, the Chancellor has said that there have to be more carrots than sticks to encourage the public to act. Taking him at his word, PKF's suggestions for a realistic environmental Budget include:

• tax relief for all energy-efficient home improvements including first-time double glazing, loft insulation and in particular more expensive measures such as solar panels and wind turbines
• extending stamp-duty land tax exemption for zero-carbon homes to all new zero-carbon buildings and linking stamp duty land tax on all properties to their energy efficiency with the introduction of Home Information Packs (HIPs) this summer
• removal of road fund tax on low carbon cars and increased rates for cars with big engines
• reducing corporation tax and business income tax for carbon neutral businesses
• creation of Green Energy Investment Trusts (GEITs) to raise capital to invest in green energy generation projects and give significant tax breaks to investors.

"The tax system is a major force that can change people's behaviour and politicians of all parties have to face up to the fact that the necessary measures to combat climate change are not going to be popular in the short term", Peter says.

"The Chancellor says that he 'knows the British people want to do the right thing' but he can't rely totally on their goodwill and concern for the environment. To show he is serious about the environment, he should introduce measures, such as road pricing, which are designed to discourage damaging practices alongside his tax carrots to encourage people to do the right thing.

"Ultimately, I fear that Gordon Brown will not take decisive action in his last Budget because, while most people express concern over the environment, many voters don't want the measures to hit them in their pockets. "

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Posted March 19, 2007