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Last Updated: Monday, 19 March 2007, 15:11 GMT
Budget 'to hit gas guzzlers hard'
Chancellor Gordon Brown

Gordon Brown is expected to raise taxes substantially on larger-engined cars in Wednesday's Budget.

Some reports suggest that road tax on the least fuel-efficient cars will double to about 400 a year.

At the same time, business groups have urged Mr Brown not to introduce more company taxes.

Businesses are paying almost 12bn more in tax in 2008/9 than they were when Labour came to power, the Engineering Employers' Federation said.

Surging taxes have hit manufacturer profitability hard and turned many companies away from the UK, it added.

A guide to the British economy under Gordon Brown

The Budget's green measures may fall short of those demanded by environmental lobbyists, some of whom have called for road tax to be raised to more than 1,000 for the worst polluting vehicles.

Friends of the Earth called for substantial measures to tackle climate change if Mr Brown was to leave a "green legacy as chancellor".

Good news, bad news

Consultants Ernst & Young believe Gordon Brown is unlikely to introduce any business tax cuts, despite calls from groups such as the CBI.

"The best we can hope for is a programme of reduction over the course of the next five years, but we are far more likely to see no action at all," it said in a pre-Budget report.

It also predicted there would be little on offer to be welcomed by individual taxpayers.

Anyone thinking that the chancellor will use his last Budget to reduce the tax burden is likely to be disappointed
Patrick Stevens, Ernst & Young

"The good news is that there are unlikely to be any significant tax increases for individuals," said personal tax partner Patrick Stevens.

"The bad news is that anyone thinking that the chancellor will use his last Budget to reduce the tax burden is likely to be disappointed."

Mr Brown is widely expected to tighten the rules on inheritance tax in this, his 11th Budget. And with property prices continuing to rise, many believe he will act on the issue of stamp duty. Currently, buyers have to pay the duty on properties priced above 125,000.

He may also offer a few concessions to property owners who are prepared to "go green".

Ernst & Young predicts the chancellor will set out more details on the stamp duty land tax exemption for the purchase of so-called "zero-carbon" homes, first mooted in his pre-Budget report.

There is also speculation that he will offer tax incentives to encourage people to install solar panels, wind turbines and other carbon-free sources of energy in their homes.

Tory tax pledge

With Mr Brown under pressure to reduce the tax burden on business, the Tories have revealed they will cut corporation tax by 3p in the pound if they win the next election.

Shadow Chancellor George Osborne
We are confident we can achieve this as part of a major reform of corporation tax
George Osborne, Shadow Chancellor

Shadow chancellor George Osborne said the headline rate of tax would fall from 30% to 27% and the 4.5bn measure would be fully funded by eliminating current capital tax reliefs.

"We are confident we can achieve this as part of a major reform of corporation tax," he told the Financial Times.

The proposals brought a mixed response from business groups.

The CBI "welcomed" the broad thrust of the proposals but said the removal of tax reliefs "inferred" that the overall tax burden on business would not fall.

"The Conservative proposals are clearly still a work in progress," said CBI director-general Richard Lambert. "However, they send the right message out to business."

Widespread belief that this will be Mr Brown's final Budget has sparked a series of appraisals of his time at the helm of the UK's finances.

Former Tory chancellor Kenneth Clarke said Mr Brown had "got the public finances into a quite dreadful mess".

But a leading economist said the economy had ended 2006 "strongly" and future growth projections were healthy.

"Mr Brown will once again undoubtedly talk up the extended strength and stability of the economy under his stewardship," said Howard Archer, chief economist at Global Insight.

Why the Budget is expected to target 'gas guzzlers'

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