Gordon Brown:soon to announce Budget date

Chancellor Urged to Phase Out Mortgage Tax Relief

IoD director general, Tim Melville-Ross, said the housing market was robust enough to cope with the move. The IoD believed the economy was doing extremely well and there needed to be a modest degree of "fiscal tightening".

Housing market "pretty robust"

Speaking on BBC Radio 4's Today programme, Mr Melville-Ross said, "The real prospect we feel is for a modest increase in taxation, probably though some other means than manipulating allowances - in other words phasing out mortgage interest tax-relief. We think that would be a better move than some of the other things that have been talked about, like manipulating pension allowances or, indeed, removing advanced corporation tax privileges."

Melville-Ross: Housing market can take the strain...

"I think the chances of there being a house-price explosion along the lines of what we saw towards the end of the 1980s are pretty remote. Nevertheless, the housing market in some parts of the country is pretty robust. We feel people will continue to buy houses even if mortgage interest tax-relief is phased out," he said

Welfare to work Budget

Gordon Brown to tackle the problem of youth unemployment

The business leaders organisation criticised the government's "Welfare to Work" programme and plans to use the revenues from the new windfall tax to try to tackle the problem of youngsters out of work for just six months. Instead the IoD favoured targeting those who had been out of work for a year or more. The IoD also attacked the lack of any piloting of the individual schemes proposed for creating work.

However Mr Melville-Ross had praise for Mr Brown's start as Chancellor. He approved of greater independence over interest rates for the Bank of England and said the proposals for a new financial regulatory framework had much to recommend them. "So, one way and another, it is quite an impressive start by this new Government," he said.

Confederation of British Industry director general, Adair Turner, has called for a slight increase in taxes in the Budget. "It would limit the extent to which the Bank of England would have to rely solely on interest rates to contain inflation and a rise in interest rates at the moment might have the disadvantage of putting up the exchange rate further to the disadvantage of the export sector," he said.

The date of Mr Brown's "welfare to work budget" is to be announced next week. There are some limitations on dates he can choose, given that it cannot clash with the European Summit in Amsterdam on June 16-17, or the Group of Eight summit in Denver on June 20-22, when Prime Minister Tony Blair will be out of the country.