The motor industry breathed a sigh of relief and then began looking at the implications of the “small print”.
The unexpected 30 per cent cut in road tax on small vehicles with “clean” engines and low emissions will lead to marketing efforts to stimulate the small car sector. Although several sources were still seeking a definition of a “clean” engine when Brown sat down.
A budget of 500m will be pumped into unnamed public transport initiatives over the next three years; 50m has been set aside for a rural transport system and petrol prices have risen to encourage use of more environmentally friendly fuels.
The car industry had anticipated being the butt of the Government’s much vaunted green taxes and had been preparing for an attack, through a restructuring of tax, on company cars.
Instead the Society of Motor Manufacturers & Traders’ (SMMT) acting chief executive Roger King was able to say: “All in all we are relieved that the budget did not extract from the motorist some of the dire forecasts predicted.”
But a spokesman for Friends of the Earth condemned the Government: “It missed a great opportunity to reintroduce green taxes. The Government had promised to put green issues into the budget, and by and large we are very disappointed.”
The supermarkets, post offices, banks and other providers of Individual Savings Accounts (ISAs) were overjoyed that the Chancellor removed the 50,000 limit on tax relief initially placed on the transfer of money from existing Peps and Tessas to the new ISAs when they are introduced in 12 months’ time.
The Conservative frontbench screamed “U-turn” but the financial services community had a more diplomatic, view.
“The Government came up with the plan, consulted the industry and listened to what we had to say,” says Richard South, an ISA specialist and director of Midland Unit Trust Management. “It introduced the consultation process and should be congratulated for listening.”
Brown also gave a ten-year guarantee that savings of up to 5,000 a year can be invested with all existing tax reliefs. It was an attempt to give the ISAs, Labour’s plan to encourage savings among the more than 50 per cent of the population with savings of less than 200, credibility and more appeal.
The Tobacco Manufacturers Association claims that its lobbying of Government to cut taxes has fallen on deaf ears. But it is a familiar refrain and the TMA cannot be surprised at another 20p tax hike on a packet of 20 cigarettes.
Brown is already committed to increasing tobacco excise duty by five per cent above inflation. And although he made a sympathetic reference to clamping down on smuggling and fraud, the TMA argues that increased taxes only serve to encourage tobacco smuggling.
“It’s as though we have been talking in a vacuum,” says TMA executive director trade affairs Chris Ogden.
But anti-smoking group Action on Smoking & Health (ASH) was satisfied with the 20p rise, although it had lobbied for a 24p increase.
“While there are big differences in tax rates between the UK and other countries, I think the way of tackling this is by getting other countries to increase rates in line with us,” says Amanda Sandford, spokeswoman for ASH. “It makes more sense to have money put into Customs & Excise.”
The Budget is good news for fans of the Asti Spumante sparkling wine range – the Chancellor slashed 40p off a bottle of sparkling wine, usually priced at about 7. The move comes after pressure from the Wine & Spirits Association to cut sparkling wine duty, which is at the same level as champagne. Brown obliged, cutting the excise by 20 per cent.
But the WSA failed to stop a 4p rise on a bottle of wine. WSA director Barry Sutton says: “We’re really dismayed by the increase on wine, which is fiscally irresponsible. At the same time there are 10 million cases of cheap foreign wine imported a year.”
Brown pegged increases in duty on spirits, which the industry welcomed. John Walter, director of trade and industry affairs at Allied Domecq, sees it as a step to removing discrimination against spirits in the excise regime. He points out that half a pint of beer now attracts 16.2p in duty, 125ml of wine attracts 18.5p while 35ml of whisky attracts 27.4p. Each measure contains one unit of alcohol.
Walter says: “We are calling for a review of the whole way that excise is levelled on alcohol.” The 1p on a pint of beer drew a predictable response from Bass, the UK’s second largest brewer, which calls it “an increased tax on enjoyment”.