Brown hoping for £4bn windfall

Treasury coffers are in line for a £4billion windfall as a result of a clampdown on tax avoidance, Gordon Brown is expected to announce in his Budget next week.

The Chancellor believes the tough anti-fraud measures announced three years ago are finally paying dividends. By closing the tax loopholes the Treasury could receive at least £4 billion in 2006/07.

Buoyed by the success of the schemes, Mr Brown is expected to announce further tax-avoidance measures next week. The additional money comes at a crucial time for the Chancellor with the Conservatives warning that he faces a £10 billion hole in his figures. However some tax advisers have questioned whether the tax avoidance crackdown will raise as much as ?4 billion.

"I don't think there is any doubt that these numbers are an over-estimate," Bill Dodwell, a partner with Deloitte, told the Financial Times.

The Treasury can point to its success in reducing VAT fraud. The VAT gap - the difference between the amount the Treasury should receive and the amount actually paid - has fallen from 15.8 per cent in 2002-03 to 12.9 per cent in 2003-04. This has seen the Chancellor reap £1.7billion in additional receipts.

Despite the extra income, the Chancellor has made clear he will put Labour's record for economic stability before any pre-election giveaways. What little he has to spend is likely to go towards investment in education and science. Pensioners may also benefit to counter Tory and Liberal Democrat attempts to court the grey vote.