In its Budget submission, the institute recommends the changes as it believes Brown's gamble on public services has failed and the countries economic prospects has worsened.

In today's Financial Times, Ruth Lea, head of policy at the IoD, said the cutbacks were required as the large increases in spending on public services has so far failed to offer significant improvements. The IoD also believes that the government's forecasts for public finances are too optimistic.

One of the biggest indicators of a possible gap in the forecasts actual revenues will come on Thursday when January's tax revenue figures, which include self assessment monies, are published.