Budget delay as Chancellor weighs options

Gordon Brown's first Budget is not now expected before 1 July as speculation mounts about the extent of the package the new Chancellor intends to put before Parliament. Treasury sources yesterday dismissed reports that the Budget timing had been delayed by problems with the windfall tax the Government is committed to introduce.

But it is possible that some of the delay is being caused by debate about the Budget's scale and scope and whether it should go beyond the windfall tax and the reduction of VAT on domestic fuel to take in changes in personal and corporate tax allowances which could net more revenue for the Treasury.

Mr Brown is thought to have planned originally on a 10 June Budget although no date was ever confirmed by the Treasury.

Sir Leon Brittan, vice president of the European Commission, yesterday gave a strong indication that getting the detail of the windfall tax right was causing at least some of the delay in the Budget timing.

Asked whether a challenge to the windfall tax could succeed in the European Court of Justice, he told GMTV's Sunday programme yesterday: "I myself think it depends entirely on how the tax is phrased and how it's couched. And it may be that some of the delays and hesitations in announcing the Budget date are precisely because people are trying to work out a way of doing it which won't fall foul of European law, so it does depend on the small print."

No delay will be caused by the audit of the Treasury books by Sir John Bourn, head of the National Audit Office. The NAO has been asked to check assumptions and forecasts made by the Treasury under Kenneth Clarke, the Conservative Chancellor of the Exchequer, on issues such as growth and unemployment.

Because the current parliamentary session will not be broken in the autumn there would be no time constraint on a heavy budgetary Finance Bill requiring a limited number of measures. However, there is Whitehall speculation that while Mr Brown is ambitious to cram as much as possible into his early Budget, getting any painful tax increases out of the way early, Tony Blair is hostile to any tax increases at all.

The Institute of Directors yesterday gave its backing to the phased abolition of mortgage interest tax relief. In its summer Budget submission the IoD called for a modest fiscal tightening to "fine tune" growth but said the Chancellor should resist a large increase in taxes.