Money: Place your bets for the Budget

Clifford German surveys the runners in this year's big race

LIKE horse-racing, second-guessing the Chancellor is usually a mug's game. But the temptation is too great to resist, especially if, like accountants Coopers & Lybrand, you treat it as a genuine gambling opportunity, complete with bookmaker's odds. So try your luck on the Budget book. There are valuable prizes to be won, not from the Independent on Sunday or even Coopers & Lybrand but from the Treasury, for punters willing to act on the latest "information".

The safest bet surely is that in the Environment Protection Stakes petrol and cigarettes will go up faster than the rate of inflation, so no prudent bookmaker will offer odds. Even-money favourites include a rise in vehicle excise duty, and increased penalties on company cars and company parking spaces.

Some of the oldest races in the Budget meeting - the Drinks Duty, Betting Duty and VAT Duty Stakes - may not be run this year. But plenty of interest will be be generated by the Anti-Avoidance Handicap, which the Chancellor himself regards as the richest and most important race of the afternoon. The odds-on favourite, says Coopers & Lybrand, is the abolition of tax relief on lifetime gifts. These are currently exempt from inheritance tax if the donor lives for a further seven years.

If they are abolished, or at least severely restricted, the reduction in the ceiling of pounds 215,000 on assets taxable on death might have to be replaced as a runner by an increase in the ceiling; otherwise the combination of tax on lifetime gifts and on death would have a severe impact on the owners of quite modest homes now worth more than pounds 215,000.

Presumably some easing of the current tax rules allowing annual gifts of up to pounds 3,000 - so that parents could at least give their children some tax-free help - would have to run as a second string. Abolition of indexation relief on capital gains is an even money bet, says Coopers & Lybrand, followed by a two-tier rate for long and short-term gains on which the accountants offer a generous 9-1. Punters are evenly divided over whether the annual exemption from capital gains tax should go up or down, and the final decision will depend on the conditions.

Keen students of form think the odds on the Chancellor restricting tax relief on pension contributions to the basic rate of tax only are fairly priced at 2-1. However, specialist advisers such as Liberty International's Pension Store say this would not only reduce incentives to contribute but discriminate against top-rate taxpayers with personal pension plans relative to members of occupational schemes who pay no tax on the employer's contributions. The taxation of the lump sum that pensioners receive on retirement is a regular runner on Budget Day, but the going this year is unsuitable so it rates as a long shot at 33-1.

Personally, I would put a small bet on some of the darker horses, including moves to stop the transfer of assets between spouses specifically to reduce tax liabilities. In recent years people have been encouraged to transfer assets to poorer partners, and especially to non-working wives, to take advantage of their personal tax-free allowances.

Wealthier spouses have also been transferring assets to secure double relief from capital gains tax and reclaiming the proceeds, and some may have been shifting assets around to minimise inheritance tax liability. The easy option is to reintroduce joint taxation of husbands and wives and risk the wrath of the feminist lobby. Some method of taxing the actual transfers might be more politically correct even if it is less efficient. It is worth a bet at 12-1.

Next up is the Tax-free Investment Stakes, in which a relaxation of the lifetime limits on the new Individual Savings Accounts has been the beneficiary of some knowledgeable bets in the last 10 days and is now seen as odds-on. The ring-fencing of all existing holdings of personal equity plans is a strong second favourite, on the grounds that any requirement to transfer PEPs into ISAs will be too complex administratively .

I would venture a little wager on the Chancellor limiting the damage to his strategy by restricting investments in PEPs to pounds 5,000 in the coming tax year, in line with the proposed annual limits on ISAs. It is a pretty safe bet that the proposed annual limit of pounds 1,000 on the amount of cash that can be invested in an ISA will be increased, and tax-free investments in life-assurance linked products might be liberated from the limit altogether. Venture capital trusts are also likely to survive the Budget substantially unchanged.

Traditionally, the last race on the card is the Personal Taxation Handicap, and those perennial favourites with the popular enclosures, the reductions to the basic and top rates of income tax, have been ruled out this year and the for next three by the race organisers. A new 10p rate of tax is popular with the punters and would benefit low-paid and part-time workers. But its inevitable stable mate - an adjustment in the starting point for the higher rate of tax to recoup the benefits of the lower rate from the higher paid - would be less popular. Course experts think the 10p rate won't run now but could be a winner in 1999.

An increase in the starting point for National Insurance contributions, to help price the lower paid into work, is guaranteed a walk-over. But compensating increases in the ceiling for National Insurance payments will accompany it. A further reduction in the rate of mortgage tax relief and the abolition of the married couples' tax allowance are also short- priced runners at about 5-2.

The phasing out of all remaining untaxed benefits in kind is also likely to be among the finishers.