Will Gordon give way?

Or, will Mr Brown, the Chancellor, resist the temptation to appease the fuel protesters and all the other special-interest groups in his last Pre-Budget Report before the next General Election? John Willcock lists the options.

Next Tuesday, against a backdrop of controversy and expectation, the Chancellor will deliver his fourth annual Pre-Budget Report (PBR) outlining the Government's tax and spending proposals, to be confirmed in the following spring's Budget. (The PBR is commonly known as the "Green Budget" as it is similar to a Government Green Paper. It has nothing to do with being "organic".)

Next Tuesday, against a backdrop of controversy and expectation, the Chancellor will deliver his fourth annual Pre-Budget Report (PBR) outlining the Government's tax and spending proposals, to be confirmed in the following spring's Budget. (The PBR is commonly known as the "Green Budget" as it is similar to a Government Green Paper. It has nothing to do with being "organic".)

Here is The Independent's guide to what Mr Brown is likely to come up with, in association with KPMG.

Fuel duty cut

Everyone is waiting to see what the Government will do to appease the fuel protesters, who are threatening another national blockade if duties are not cut. It seems unlikely the Chancellor will cut rates on diesel - both for environmental reasons and because it does not address the fuel protesters' key grievance.

Also, he is unlikely to extend the use of rebated diesel (very difficult to administer). He may possibly introduce grants for costs of conversion from diesel to liquid petroleum gas (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. This would help appease the hauliers, but would be an embarrassing reversal of very recent initiatives. On fuel duty, 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.

Income tax relief for charitable donations

The Government launched a promotional campaign in September to publicise the Payroll Giving scheme and increase take-up. The Inland Revenue published new, comprehensive guidance notes. The Chancellor may well make reference to this but further action seems unlikely.

Personal taxes

While the Chancellor referred in his party conference speech to targeted tax cuts in the March Budget, we do not expect much movement in the Green Budget.

The ISA regime is too new for any perceived abuses to have sprung up requiring anti-avoidance measures, while making it more generous might endanger the popularity of the Stakeholder pension regime, being introduced in April. But it is possible that the Chancellor could indicate whether the £7,000 investment limit, which has been in place for the first two years of the regime, will be made permanent, or whether, as originally planned, it will be cut to £5,000.

Integration of tax and benefits

In the long term, the Government aims to extend the principle of the Working Families Tax Credit to working families without children, through an Employment Tax Credit paid through wage packets. Also to integrate the children's tax credit, which was introduced by this year's Finance Act, with the child elements of the Working Families Tax Credit and Income Support into "a single child credit paid direct to the main carer, building on the foundation of universal child benefit". The Government is keen to avoid more accusations of burdening employers but may try to act in the Green Budget.

Share options

It is rumoured that the Treasury will substantially raise the £30,000 limit on the value of shares on which options may be granted under an Inland Revenue approved scheme. Currently businesses are limited to granting such options to a maximum of 15 employees. This limit may be scrapped.

Landfill tax escalator

In the 1999 Budget, 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 likely in the PBR, the Chancellor will clearly want to raise both revenues and his green credentials in other ways - this is one.

Urban White Paper

As has been well-trailed, the government is considering taking action to increase or redirect investment into 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. But the Chancellor will no doubt be wary of repeating the experiment of 100 per cent capital allowances for enterprise zones, which was introduced by the previous government to little obvious effect.

Betting duty

Customs & Excise has been consulting on reforming general betting duty affecting the gambling and racing industries in the internet age. Main options are: requiring the bookmaker to account for duty based on the location of the punter placing the bet; and basing duty on the gross profits of a bookmaking business.

An announcement of action to implement the Government's preferred option is likely in the Green Budget.

Reform of the tax treatment of intellectual property, goodwill and other intangibles

Changes to this area, including additional relief, have been scheduled to appear in next year's Finance Bill and therefore should be mentioned in the Green Budget. The Chancellor can use this as an illustration of his determination to make the UK a centre of business excellence.

Capital Gains rollover relief for disposal of significant shareholdings

As with the above point, this was scheduled as one part of the package of measures on company taxation announced in the 2000 Budget which would help compensate for the double tax relief crackdown, which was the most contentious part of that Budget.

Stamp duty anti-avoidance

The Stamp Office is not happy with companies avoiding stamp duty by selling companies which have been set up to hold a single asset, rather than selling the asset itself. In addition, provisions aimed at "land-rich companies" are a long-expected measure. Reference may well be made in the Green Budget.

Double tax relief

After the furore caused by the legislation in the last Budget, the Government partially backtracked, but slight tinkering or loophole closing ahead of the introduction date of March 2001 is possible. The Green Budget might prove to be a good chance to initiate these moves.

Corporate tax self-assessment

The legal powers available to Inland Revenue officers when visiting employers to check their records have been reviewed. Detailed proposals may form part of the Green Budget.

Sustainability Fund

The Government has been consulting on how the new Sustainability Fund [which will be notionally funded from the aggregates levy, which comes into effect from 1 April 2002] can best be used to deliver local environmental benefits. Action is likely in the Green Budget.