HOWZAT

June figures for the Government’s finances, out today, are set to confirm a severe toll on tax revenues from the economic slowdown.

The Times understands that the shortfall in tax revenue will force Mr Darling to borrow more this year and next than he had forecast in March.

It is thought that today’s numbers will reveal that stamp duty receipts are being hit especially hard. The downturn means not only that house prices are falling but also that far fewer homes are changing hands.

As the housing slump deepens, well-placed sources have said that the Treasury fears that it could end up with a shortfall as much as £5 billion of the £13.5 billion that the Chancellor had hoped to rake in from stamp duty in the current financial year.

It is understood that other key sources of tax revenue are also being badly hit by the downturn.

Income tax payments are expected to be cut as financial turmoil in the City leads to big reductions in the bonuses paid to bankers, traders and analysts. The impact on corporation tax revenues, too, is expected to be underlined by the June data.

In what is a key month for companies’ tax payments, the revenues are expected to be hit as profits fall and businesses take steps to limit their tax bills and prepare for difficult times.

VAT receipts will also be squeezed as consumers curb their spending.

Senior Whitehall figures said that the Treasury was bracing itself for rising unemployment, which would send welfare payments to people out of work spiralling upwards.

The Chancellor is benefiting from windfall revenues from the North Sea and on garage forecourts as oil prices keep rising, but this week he was forced to freeze fuel duty until next April, at an initial cost of £550million.

Mr Brown’s fiscal rule has come under huge pressure since the start of the year because of the rise in government borrowing to pay for the nationalisation of Northern Rock and the £2.7 billion tax cut - announced in May to defuse the 10p tax issue.

A Conservative Party spokesman said: “If this is true, it puts the final nail in the coffin of Gordon Brown’s reputation for economic competence. He repeatedly staked that reputation on his fiscal rules, and now we’re told that the Treasury is having to rewrite the rules because the Government has lost control of the public finances.”

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