Brown caves in to business pressure over 'green tax'

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The Independent Online

Gordon Brown will bow to pressure from big business today by announcing a climbdown over his plans to impose a "green" tax on industry.

Gordon Brown will bow to pressure from big business today by announcing a climbdown over his plans to impose a "green" tax on industry.

In his pre-Budget statement, the Chancellor will disappoint the environmental lobby by scaling down the climate change levy after intense lobbying by Britain's bosses, who warned that it would harm productivity and cost jobs.

Mr Brown will announce that he is raising the discount on the levy to more than 50 per cent for heavy users of energy. Under the changes, the £238m bill facing the steel industry will be cut by more than half.

But Mr Brown will seek to allay fears among Labour MPs that the Government is too influenced by big business by announcing £4,000 start-up grants to help people in run-down parts of Britain set up their own businesses. The move reflects concern in the Government about the north-south jobs divide and growing fears that Britain is becoming "two nations".

The Chancellor, who will trail the measures for his next Budget in March, said yesterday that the theme of today's wide-ranging package would be "enterprise open to all". He will balance cuts in capital gains tax for investors by stressing he wants to create an "enterprise economy" on the most deprived estates as well as in more prosperous areas.

However, Mr Brown's boost for the poor will be coupled with a tough message for unemployed people. With one million job vacancies in Britain, Mr Brown will raise the prospect of tougher benefit penalties for jobless people who turn down offers of work or training.

The Chancellor, who came under fire from trades union leaders after announcing tax breaks for entrepreneurial executives last week, will emphasise that he wants all workers to hold shares in their firms. There will be further tax relief for firms which offer them.

Mr Brown is expected to confirm that pensioners will receive an increase of just 75p a week next April because state benefits are uprated in line with inflation, which is low. But Labour MPs hope the Chancellor will soften the blow by announcing measures to help the poorest of the elderly.

Leaders of the Confederation of British Industry will welcome Mr Brown's retreat over the climate change levy he announced a year ago. Its leaders have pressed for the discounts to be raised to 90 per cent. The Chancellor is expected to announce that he will exclude renewable sources of energy, such as wind power, from the climate change levy, which will be seen as a victory for environmental campaigners.

Despite the climbdown, John Prescott, the Secretary of State for the Environment, Transport and the Regions, will make it clear tomorrow that the Government is committed to tackling global warming. He will defend the Government's commitment to meeting its targets for reducing greenhouse gases in a hard-hitting speech to the "green" lobby.

The Government has insisted the climate change levy is aimed at reducing carbon emissions which lead to global warming, and will not raise extra revenue. Industry will be given money back from the Treasury through National Insurance contributions to ease the blow from the tax.

The Chancellor may also disappoint motorists hoping he will scrap the fuel escalator which has added six per cent a year in real terms to the cost of petrol - although it may be reviewed.

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