Green measures

The chancellor announced a package of measures designed to show his green credentials.

Motorists are already paying more for petrol after Brown added 1.25p to the price of a litre, taking the average to 88p. Duty on air travel will also rise from February, raising £1 billion for the Treasury in 2007-8.

From February, those flying economy class to Europe will pay passenger duty of £10, up from £5 now. Those flying premium-class will see the cost rise from £10 to £20. On long-haul flights economy passengers will pay £40, up from £20, while premium class flyers will see the duty go up from £40 to £80. The measures will apply to those who have already booked holidays for next year if they fly from February.

Patrick King at MacIntyre Hudson, an accountant, said: “Neither an extra £5 on an Easyjet fare, nor £40 more on a transatlantic flight will stop those who wish to fly. This is a calculated move to raise revenue, rather than to reduce carbon emissions, however much he dresses it up in green rhetoric.”

Brown also said he would tackle emissions from homes, which account for 30% of all emissions. Yvette Cooper, the housing minister, will announce plans this week for all new homes to be zero-carbon within 10 years — meaning they generate enough of their own power from renewable sources so they do not contribute to climate change.

Brown tried to sweeten the pill by saying that most new homes that are zero-carbon will be exempt from stamp duty from 2007, although full details will not be announced until the main budget in March. On closer inspection the exemption was seen largely as a gimmick.

It will apply for only a limited time — probably three years — and only to new-build properties, which account for less than 1% of the country’s housing stock at present.

There are also question marks surrounding the viability of Brown’s target of all new homes being zero-carbon within 10 years — the government admits there are only two dozen such homes at the moment.

The cost of making a house carbon neutral is about £20,000 according to the Home Builders’ Federation. On a £500,000 home, the stamp duty at 4% would also be £20,000, so an exemption would wipe out the costs, but for a house worth £150,000, the stamp duty bill will only be £1,600.

Tax avoidance

Thousands of freelancers who are paid through companies face higher tax bills following the budget. An estimated 100,000 workers, including nurses, IT consultants and construction workers, are paid through so-called managed service companies set up by their agencies. The agency gives them shares in the company and the worker is paid in dividends rather than income, attracting a lower rate of tax. However, Brown said that workers should pay income tax and National Insurance contributions in future. A basic-rate taxpayer on £20,000 faces a bill of £6,600 compared with £3,800 at present.