Gordon Brown will need to cut the equivalent of a penny off income tax in his budget to reduce Britain's tax burden and fend off the main Conservative attack on his handling of the economy, reports The Guardian.

The Institute for Fiscal Studies (IFS) and Goldman Sachs said the chancellor would need to give away £2bn in the March budget, just to hold the tax burden steady - and £3bn to put it on a downward trend. The report, called the green budget, predicted that the government was in the enviable position of being able both to cut taxes and respond to demands for higher public spending from its core supporters. In addition, Brown will be able to meet his stringent rules for borrowing and help the Bank of England's monetary policy committee to keep the lid on interest rates.