Chancellor Alistair Darling is rumoured to be on the verge of announcing a new higher rate of income tax on top earners.

According to reports, Mr Darling will introduce a higher rate of income tax of 45 per cent to be levied on those earning more than £150,000 a year in his Pre-Budget Report (PBR) on Monday.

However the new rate would not be introduced until 2011 - after the next general election.

The strategy would mean the proposal would not come in unless it is endorsed by voters when Gordon Brown goes to the country.

It would form part of the Government's long-term plan to get the British finances back on course after an expected borrowing surge brought about through a reduction in VAT.

Gordon Brown promised that the Government's long-term plans to pay off the debt - predicted to soar above £100 billion - would be laid out for voters "fairly and squarely".

While details of the highly-anticipated PBR were being kept under wraps, its centrepiece is thought be a cut in VAT from 17.5% to 15%.

Such a move would cost £12.5 billion, accounting for much of the £15 to £20 billion cost of the Government's intervention to boost the economy.

Its appeal lies in bringing down the cost of goods to spur consumer spending and get the shrinking economy moving again.

And Lord Mandelson has promised that the PBR will also provided "direct assistance" to small and medium-sized enterprises.

In a speech to the CBI's annual conference, he will say: "It sets out targeted tax cuts that will help company cash flow and put money into people's hands.

"And it is prudent about the need for fiscal discipline in future, once this crisis has passed."

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