News on 27 October 2000
In less than two weeks the Chancellor will deliver his fourth annual
pre-Budget report (November 8). Professional services firm KPMG suggests
Gordon Brown might make announcements on fuel, urban development and landfill
tax.
Fuel duty cut.
The real issue the Chancellor has to address is the amount of indirect
tax paid by haulage firms, the largest part of which is the duty on diesel.
But it seems unlikely he will introduce a significant general cut in duty
rates on diesel - both for environmental reasons and because it would
not just benefit the haulage firms. Ordinary motorists with diesel cars
(a large proportion of diesel sales) would also gain.
He is also unlikely to extend the use of rebated diesel, as it is very
difficult to administer. He may possibly introduce grants for costs of
conversion from diesel to LPG. LPG is much more widely used on the continent,
but one of the factors holding back its spread in the UK is the high cost
of converting existing vehicles.
Possibly, the Chancellor may reduce Vehicle Excise Duty on lorries. In
contrast to a diesel duty reduction, cutting VED would be well focused
because there are different rates for different types of vehicle. This
would address the real problem (the haulage firms), but would be an embarrassing
reversal of very recent initiatives. On fuel duty rates, targeted action
aimed to help rural drivers allied to a small cut in the general duty
might be politically sufficient, but the practical problems of identifying
rural users would be significant and might alienate non-beneficiaries.
Urban White Paper.
As has been well trailed, the government is considering taking action
to increase or redirect investment into deprived inner-city areas. This
may involve fiscal measures to support sustainable development in cities,
such as favourable capital allowances, business rates or stamp duty measures
or some other form of tax credit to encourage business start-ups. However,
the Chancellor will no doubt be wary of repeating the experiment of 100%
capital allowances for enterprise zones, introduced by the previous government
to little obvious effect.
Landfill tax escalator.
In Budget 99, the Chancellor announced a five year landfill tax "escalator"
which will increase the standard rate of tax to £15 per tonne by
2004.' With cuts in fuel duty possible in the PBR, the Chancellor will
clearly want to raise both revenues and his green credentials in other
ways - this is one.
