Strategy & Operations » Governance » Brown’s budget is off colour

In spite of much speculation about a green Budget before his speech, Gordon
Brown didn’t go far enough to combat climate change. Instead, he used his 11th
Budget for political “headline grabbing” according to experts.

As his last Budget as Chancellor, and with the certainty that he is to be the
next prime minister, Brown missed the opportunity to encourage businesses to
become greener.

According to John Manning, a tax partner and head of environmental tax at
PricewaterhouseCoopers, the incentive for companies to become more
environmentally friendly is “frankly miniscule”.

Manning believes that “environmental taxes do not engage the finance
director”. He believes that companies crave long-term consistency, and that they
only like making investments if they feel confident that the rules are not going
to change further down the line.

The Chancellor said that his latest Budget was a response to the
and, with businesses accounting for 40% of emissions, he believes the
objective should be to make British companies not only the most economically
competitive, but also the most environmentally sustainable.

However, Peter Pennycard, a tax partner at accountancy firm PKF, thinks that
while “the budget has a sprinkling of green measures throughout”, the Chancellor
has again failed to take any political risks by announcing measures that might
actually benefit the environment. He says that 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.

Sleight of hand
Andrew Tiplady, another PKF partner, called the speech “the Budget sleight of
hand” – more about moving money around than investing in environmental issues.
This was illustrated by Manning, who points out that while the Exchequer will
gain £2.7bn from environmental taxes such as fuel duty and landfill taxes,
corporation tax was reduced by a total of £2.2bn.

Manning claims that businesses are not overly concerned about the price of
climate change, but that the government needs to put a price on carbon for the
long term and not let it vary wildly over the coming years.

Not enough
Overall, the Budget didn’t go far enough to actually incentivise companies to
become greener.

“If Gordon Brown had wanted to send a stronger message to the country, he
should have laid out a timetable for the introduction of road pricing or made
public transport more attractive,” says Pennycard. He also could have “extended
stamp duty land exemption to all zero-carbon buildings”.

• An increase in fuel duty rates of 2p per litre from 1 October 2007 and for the
next two years
• A rise in climate change levy rates from 1 April 2008 in line with inflation

• £800m for the Environmental Transformation Fund to finance overseas
development that deliver environmental benefits in developing countries
• 1 April 2008 increase in landfill tax by £8 a tonne per year until at least
2010/11 and lower-rate landfill tax rise by 50 pence per tonne per year
• 2% company car tax discount for E85 company cars (which run on high blends of
biofuels) to be introduced in April 2008

Go to
and search for ‘Financial Statement and Budget Report 2007’ for a breakdown of
the Budget