Early warning of April's fuel

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This Wednesday, Gordon Brown will deliver his pre-Budget report, a half-term update on the state of the economy forewarning us of likely changes in next April's Budget.

This Wednesday, Gordon Brown will deliver his pre-Budget report, a half-term update on the state of the economy forewarning us of likely changes in next April's Budget.

There are plenty of tax measures expected this time around, with finding a solution to the fuel crisis topping the agenda. This is easier said than done, as fuel protesters are well aware that the UK has the highest level of tax on fuel in Europe, made up of a fixed excise duty per litre plus VAT on the fuel cost, including the duty. So as oil prices rise, the Chancellor's VAT yield from fuel goes up. This means a litre of diesel sold for 83.9p includes 50.2p duty and 12.5p VAT.

The Chancellor could reduce excise duty by a fixed amount per litre or introduce tax credits for road hauliers and farmers. But more likely he will reduce vehicle excise duty for lorries and those living in rural areas.

The financial services industry is hoping that the Chancellor will also address the uncertainty surrounding individual savings accounts (ISAs).

He could indicate whether the £7,000 investment limit, which has been in place for two years, will be made permanent or whether, as originally planned, it is cut back to £5,000. This year we were given no notice of the extended limit until it was announced in the actual Budget, for which the Government was criticised.

The Association of Unit Trusts and Investment Funds (Autif) has called for insurance ISAs to be scrapped because they are not popular and can be confusing. Although it is unlikely that the Government will do this, it would make a lot of sense. As we have been arguing on these pages for months, the rules should be much simpler, with investors allowed to put their full £7,000 into cash or stocks and shares, rather than limiting the cash element to £3,000. Insurance ISAs, were they to be abolished, wouldn't be widely mourned.

Much speculation also surrounds stamp duty, with investors hoping the Chancellor will abolish it on share transactions. He could do this, while limiting the abolition to shares traded on the stock exchange so that companies would still pay stamp duty when shares of a subsidiary were sold.

This would cost anything up to £1bn but would make the UK stock market more competitive compared with European and US exchanges, a sensible move in the long term.

* m.bien@independent.co.uk

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