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PBR: A green tinge but only a light one. By Dan Martin

6th Dec 2006
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Gordon Brown attempted to cement his green credentials in his tenth and almost certainly last pre-budget report on Wednesday by announcing a series of measures aimed at benefiting the environment.

Ahead of Wednesday's announcement in the House of Commons, experts had predicted the PBR would be delivered with a hint of green. Their forecasts were proved right to some extent although many commentators suggested his announcements will not go far in making the public go greener.

"Those expecting Gordon Brown to wear the green mantle of environmental policy will arguably be disappointed", said Francesca Lagerberg, tax partner at accountants Grant Thornton. "While touching on many areas including fuel duty, air passenger duty and planning policy, none of the measures announced can be deemed truly radical or likely to seriously influence the public's 'green' behaviour. One of the hottest issues of the years to come has been acknowledged but left for a future budget report to tackle head on".

Following the Stern report’s gloomy painting of the future and the subsequent call from environmentalists for the government to take action, it was inevitable that Brown would include such elements. He stopped short however of introducing new green taxes, no doubt leaving that issue to his successor.

“Since the Stern review, 31 countries in the EU & EFTA have signed up to emissions trading,” Brown said. “Our aim is to make London the world's leading centre for carbon trading.”

After trumpeting the fact that 31 countries in the EU the chancellor added that because aircraft emissions are exempt from emissions trading, it is up for individual governments to act domestically to reduce them. From February 1, Brown revealed, air passenger duties will be doubled. For the majority of flights, this will mean an increase from £5 to £10. The move, which is expected to raise £1bn for the Treasury’s coffers, will be used to fund investments in areas such public transport, the environment and education.

Turning to fuel duties, Brown halted a three-year freeze by announcing a 1.25p rise from midnight on 6 December. He stopped short however of restoring the fuel duty escalator.

In addition, Brown unveiled plans to make every new home in the UK carbon free within a decade. The newest, he said, will be exempt from stamp duty. This measure was meant with scepticism by some experts. Kevin Griffith, tax director at Ernst & Young, said: “The proposal to scrap stamp duty land tax on purchase of "zero" carbon homes is not likely to advance the government's green agenda very far. For the average new home the saving will be 1 per cent or 3 per cent of the price, the additional construction costs to meet a "zero" carbon standard will surely be far greater than this.

“It is likely that substantially greater incentives will have to be offered to persuade the construction industry to make the necessary changes. Meanwhile, this relief will probably be consigned to the dustbin of tax history as was the ill-fated disadvantaged areas relief before it."

One green element however which could be seen as a surprise is a measure included in the full budget report but not mentioned during Brown's speech. In a move akin to those selling vegetables at the bottom of their garden was details of legislation meaning that householders who installing microgeneration technologies and sell back any surplus to the National Grid are not subject to income tax on payments received.

The report said the new regulations, to be included in next year's Finance Act, aimed at reducing the barriers to adoption of technologies such as solar heating and micro-wind. It said the legislation "will put beyond doubt" householders' income tax exemption from selling back surplus to energy suppliers.

The rules will apply to all private householders who use the microgeneration services to power their homes but not to cases where surplus power is sold in the course of a trade.

Another element included in the full report was the extension until of the government's Landlords Enery Savings Allowance (LESA) until 2015 which provides an allowance of up to £1,500 for landlords who invest in cavity wall and loft insulation.

The report said the allowance's application will be per property rather than per building as currently as currently is the case, while floor installation has been included as a qualifying investment. The scheme has also been extended to corporate landlords.


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