Chancellor To Seek ‘Safe Haven’ In Green Budget, According To PKF

by Amanda Banks, for LawAndTax-News.com, London

04 March 2008

UK Chancellor Alistair Darling’s Budget may be designed to deliver ‘green headlines’ and distract attention from the controversial measures on CGT and non-domiciles which have drawn massive criticism from the business community, tax experts at accountants PKF have predicted.

PKF National Tax Director Lisa Macpherson believes that such a course is even more likely following criticism in the media by CBI Chairman Martin Broughton of Treasury ‘back of a fag packet’ policies, and the recent announcement of a Conservative plan for a Green Environmental Market to sit alongside the Alternative Investment Market (AIM).

Ms Mcpherson suggested that: “Following the furore around the Pre-Budget Report, the Chancellor will want to deliver a Budget that does not draw further protest from the business community. He currently has to address a number of outstanding issues on non-domiciles and CGT as well as the new entrepreneurs’ relief and it is likely he’ll want to divert attention from these if he can."

She continued:

“Measures with an environmental focus are difficult to attack and easy to defend so it is likely that they will form a central plank of the Budget speech. The Conservatives may have got wind of Government plans in this direction and their announcement could be something of a spoiling tactic for proposals the Government already has in the pipeline. I would be surprised if some sort of green investment initiative linked to environmental businesses is not introduced.”

According to PKF, environmental measures contained in the forthcoming budget might include:

• New reliefs for investment in carbon capture and storage technology. While the move would be likely to involve a windfall tax on oil and energy companies, the industry’s profits would make this politically acceptable.
• Delays to fuel duty increases, which would be popular, will depend on whether the Chancellor has been able to balance his Budget.
• An airplane tax on every flight replacing air passenger duty is likely to be confirmed along with additional taxes on vehicles with high CO2 emissions.
• Stamp duty land tax for residential property could be linked to its energy efficiency. Energy ratings for Home Information Packs make this possible, however, it would be a controversial move.
• New tax incentives for investing in green energy generation may be announced following the Chancellor’s remarks in recent months over energy security and renewable energy.
• A plastic bag tax now seems more politically acceptable following recent comments by the Prime Minister and initiatives by major retailers.

“Given the wave of protest following the Pre-Budget Report, Alistair Darling is likely to be seeking shelter from the storm with this Budget. Green measures could provide the safe haven he is looking for without costing the Treasury significant amounts at a time when balancing the Budget is proving difficult,” Mcpherson concluded.

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