Brown 'must fiddle books to avoid tax rise'

The Government would have to use an accounting fiddle to avoid raising taxes after the next election to fill a £20bn shortfall in public finances, an independent think-tank said.

The chances that Gordon Brown will miss his key fiscal rule that he must balance the books over the business cycle have risen to evens, the National Institute of Economics and Social Research said. Its latest forecasts show a cumulative deficit of £2bn if the economic cycle ends in a year's time. The Treasury's "golden rule" says it must be in balance or surplus.

"There is an evens chance that the golden rule will be breached," Rebecca Riley, a research fellow at the institute, said. Martin Weale, the institute's director, said he was more concerned by the medium-term outlook. He said the next cycle, which would start around the time of a likely 2005 election, would begin with deficits. "If you start the cycle with a deficit it seems to me to be clear that taxes will have to go up at some point," he said.

The institute believes taxes will have to rise by £20bn - equivalent to almost 6p on the basic rate of income tax. Ray Barrell, a senior research fellow, said the distinction between investment - which does not count against the golden rule - and current spending was "an area where things can become blurred". He stressed he was not accusing the Government of cheating but said: "An intelligent civil servant could find a way to massage the figures to shift debt off the balance sheet."