Chancellor Promises Radical Budget

Interviewed in today's Observer, Mr Brown says he has already started a fundamental review of public spending. It will be finished in time for him to implement a three-year plan, starting in 1998 allowing increased spending in priority areas.

£5 billion for housing, no increase in income tax

He also hinted at immediate changes to capital gains tax and corporation tax to encourage more long-term share ownership and higher investment. There will also be tax changes to encourage investment.

Mr Brown also suggested that the controversial plans for a windfall tax on the profits of privatised utilities will include British Telecom.

The tax will form the centrepiece of the Chancellor's plans and will fund a three billion pound programme to get a quarter of a million young people off benefits and back to work.

On personal taxation, he has already ruled out any increase in the rates of income tax, though there is plenty of scope for raising extra money through changes in allowances and thresholds.

There has been speculation that tax relief on mortgage interest could be scrapped, and that relief on pension contributions restricted to the basic rate of tax.

The date of his first budget is expected to be announced next week.

Predecessor says it's "dangerous"

Clarke criticises budget plans

Speaking on BBC Radio's The World This Weekend, he said: "To start playing about with corporate taxation and taxation on investment, as he is proposing, is very dangerous indeed."

Mr Clarke said he wondered why Mr Brown seemed to be in such a rush,and added that pushing up the tax burden would slow the economy down.

"The trouble is he is in a tearing hurry. He has surrounded himself with too many politicos, he is being bounced I think by some of the advice he is getting into trying to speed up getting down the deficit, and all this is something we could regret very considerably over the next year or two if he goes into a Budget of this kind."