Press release: February 2007

The publication of The Stern Report may come to be regarded as a watershed so far as environmental or "green" taxes are concerned, according to Paul Mustoe, tax director with LB Group.

Launched to a storm of publicity at the end of last year, the report warns that the environment and life as we have come to know it is under threat unless we mend our ways. Whilst the findings are being debated amongst environmentalists and industrialists, politicians are undoubtedly afraid of being caught unawares and out of step with public opinion.

The environment has rocketed to the top of the political agenda in recent years. The cynical might believe that with a resurgent Conservative party on the offensive about the environment, Gordon Brown will take every opportunity to prove his green credentials. The message is coming across loud and clear that a "Brown" government could also be very "green".

Paul believes that taxes, carefully targeted, are likely to be the way forward. Already Gordon Brown has signalled his intentions with penalties on fuel duty and airport taxes introduced at the start of February. Whether the additional £20 Vehicle Excise Duty imposed on "Chelsea Tractor" owners is sufficient to deter buyers has yet to be seen. However, it signals the future and we should have no doubt as to the direction of the trend.

"Undoubtedly the chancellor has it in mind to meet two objectives," he explained. "The first is to change behaviour so that carbon emissions are reduced. In this he is taking the "stick" approach. These measures are planned to impact on the cost of living and the cost of doing business. He believes that behaviour will change as a result."

Some pundits believe that he may have a plan to tax company travel. With companies recording mileage for tax purposes, it would be simple enough. Or he may look at linking tax to the carbon efficiency of vehicles to deter the worst polluters.

Brown´s second objective is to raise revenue. It is up for debate, of course, whether this will be used to finance new green initiatives.

Increasing tax on fuel is always going to be controversial. With the cost of crude oil now falling, he has flexibility to increase duty and at the same time, convince environmentalists that he is serious about green issues.

New taxes on petrol and other fuels, air travel, road pricing, rubbish collections and any other activities believed to increase carbon emissions are also possibilities. With falling oil prices globally, he may have the opportunity to increase taxes without the public seeing the impact on prices at the petrol pump.

"His major challenge, if and when he moves into No 10, will be to ensure that others, and especially Britain´s competitors, take their responsibilities equally as seriously. If Britain charges for high carbon emissions and other countries do not, then British business becomes less and less competitive in the global market place," said Paul.

Whilst emerging economies and even the US may be harder to convince, it seems likely that Britain´s European neighbours will play their part. In reality, British industry and consumers had better accustom themselves to the idea that they will be faced with higher taxes and costs in the future.

Paul believes that it would be simplistic to suggest that Brown is doing nothing more than penalising the British people for what actually is a global problem. He has also signalled plans to launch a number of groundbreaking green initiatives. Amongst these are plans for Britain´s first carbon-capture plant and a long term plan to curb emissions from homes, which currently account for 30 percent of all emissions.

Also coming up are likely to be zero-carbon homes, something Brown hopes to see introduced within 10 years for every new build. Initially they are likely to be exempted from stamp duty as a short term offer, so as to raise demand.