ALISTAIR DARLING is to announce this week that the Treasury will be seeking at least £20 billion of efficiency savings from Whitehall over the next three years. The announcement will come in what is expected to be a highly “political” comprehensive spending review and prebudget report, as speculation about an early election intensifies.

Senior Treasury officials said Darling was determined to demonstrate his commitment to putting “economic stability and sound public finances ahead of short-term or easy options”.

This is in spite of a new economic forecast which the chancellor has already hinted will be revised down as a result of the credit crisis. In the March budget the prediction for 2008 was for 2.5% to 3% growth. Officials remain confident of growth of 2% or above next year.

Even so, the public finances, which have been under pressure, are likely to worsen as a result of slower growth and the loss of previously strong sources of tax revenue, such as the City. The Centre for Economics and Business Research predicts 6,000 City job losses and a 16% drop in bonuses.

Evidence of a slowdown in the economy will come this week from the British Chambers of Commerce. Its quarterly survey of more than 4,700 firms is expected to show a sharp deceleration in the services sector. Manufacturing appears to be holding up well. The survey from the chambers, which have called for a cut in interest rates next month, suggests services have been hit by the effect of the credit crisis and the five recent interest rate hikes.

Officials refused to comment on speculation that Darling will respond to Tory tax pledges last week by announcing his own proposals on inheritance tax, stamp duty and the tax treatment of nondomiciles. But there will be detailed proposals for consultation on the taxation of private equity. The Treasury has been looking at splitting the “carried interest” of private equity between capital and income.

Darling will also announce a significant package of “green” tax proposals, mainly focusing on cars, with either a new “showroom” tax on vehicles with high greenhouse gas emissions or another round of significant increases in road tax for such vehicles.

There are fears in the airline industry that Darling could announce another increase in air-passenger duty, following its doubling last year, but some believe this is unlikely if an election is in the offing. A series of rises in the national minimum wage has made it one of the highest in the world, exceeded only by France and Australia, the CBI said this weekend.

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