Black Wednesday looms for Chancellor

Treasury committee and Institute for Fiscal Studies pour scorn on Gordon Brown's figures

Gordon Brown faces a personal black Wednesday, with a Com-mons committee and an influential think-tank both set to pour scorn on his public finance projections on the same day.

The Treasury Select Committee, in assessing December's pre-Budget report (PBR), will rubbish the Chancellor's assertion that he can save £21bn over four years from the public sector spending review led by former GEC boss Sir Peter Gershon.

The Institute for Fiscal Studies is expected to say that the Chancellor will have to further increase taxes even if he achieves the £8.5bn he has said he will cut from spending this year.

Measures introduced in the last Budget and the PBR have already raised taxes by £3bn a year, mostly through changes aimed at companies, but the IFS believes more is needed. The IFS is also expected to argue that the public spending savings that Mr Brown has promised are not consistent with the Government's pledges on health and education spending, overseas development and poverty reduction.

The Chief Secretary to the Treasury, Des Browne, has just launched the Comprehensive Spending Review, which is aimed at setting the long-term spending targets for all departments, to come into effect next year.

Much of this is based on the findings of the Gershon review, which the Chancellor says has already identified £4.7bn of efficiency savings.

The Treasury Select Committee's PBR assessment will seriously undermine the estimates of savings from Gershon and call into question whether the Chancellor can meet his public finance targets.

Earlier this month, the Office for National Statistics questioned Mr Brown's PBR statement that 25,300 civil service jobs had been axed as a result of the Gershon review, putting the figure at more like 2,000.

The Ernst & Young Item Club, which uses the Treasury's own forecasting models, will say today that the Chancellor is heading for a £3bn hole in his public finances this year, as against his PBR projections, and this black hole will grow to £7bn next year.

Peter Spencer, an economic adviser to the Item Club, says that tax revenues have dropped off since a bullish forecast by the Chancellor in December.

Professor Spencer says the Chancellor will have to revise his estimates again.

"If he were the chief executive of a public company, eyebrows would be raised as he has had eight profits warnings and is coming up for his ninth, yet he still expects to be promoted to chairman," he said.