Prison sentences of up to ten years for the organised gangs that pirate films and music from the original creators, depriving the industries of the equivalent of 20 per cent of their turnover, will be backed today by Gordon Brown.

The Chancellor’s tenth and last Pre-Budget Report will be dominated by his efforts to put education and skills at the top of his personal agenda, with big extra spending promised on the the refurbishment of thousands of schools.

However, Mr Brown will also announce plans to reduce the abuse of copyright and intellectual property aimed at catching both petty and serious criminals.

His targets will range from people who sell counterfeit CDs and DVDs at car-boot sales to the pirates who set up websites and sell stolen films and songs downloaded from the internet.

He will announce that he is implementing the proposals from Andrew Gowers, a former newspaper editor, for tougher action against abuse, while allowing a limited liberalisation of the copyright laws to assist creative developments.

Mr Brown will announce an extra £5 million for Trading Standards officers next year to begin taking action against copyright infringement. At present they can act only against trademark infringement. That means that officers can at present take action against people selling counterfeit CDs if they have photocopied the front cover, but not if they have scribbled on the title with a marker pen.

This is regarded as an absurd anomaly as the costs to the industries whose work is being stolen is exactly the same. The penalty for online infringement of copyright is two years in prison. The report proposes that it should go up to ten years, with intellectual property crime now becoming a recognised area for police action.

The Gowers report argued that effective enforcement is critical to the protection of creativity and that counterfeiting and piracy are “perhaps the single biggest challenge facing the intellectual property system”.

Mr Brown will also announce a wider reform of the patent and copyright system to ensure that it is accessible for British know-how. He will promise to change the law to make it easier for libraries to copy works on to a different format, including many thousands of decaying films, photographs and sound recordings.

The Chancellor is expected to point out that 25 years ago the market value of top British companies was no more than the value of their physical assets. Now it is five times their physical value because of the advantage that flows from knowledge, ideas and creative products.

While getting tough on infringement of the rules, the report also proposes a liberalisation to help the creative industries, arguing that at least two of the exciting developments in the American music and business world might have happened in Britain.

The report suggests that exemptions to copyright law should be allowed for “transformative works”. This would permit the use of copyright material in new and creative ways, so long as it did not detract from the value of that material or offend artistic integrity. It calls on the EU to amend the law to allow for that exception.

It would allow “rappers” and other creators to rework old material. The rise of hip-hop in the US has been attributed to that relaxation.

Similarly, the existence of the exemption in America was cited by Google to the Gowers report as one of the reasons that search engines started there rather than in Britain. It allowed them to “cache” the content of other websites without breaching copyright.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive