Intruder breaches Budget security

There were red faces at the Treasury last night after the disclosure that an intruder had wandered around the building at the weekend, breaking strict Budget security.

The intruder, who is homeless, broke into the Treasury at around 4.40am on Sunday by climbing over the front gates in King Charles Street, off Whitehall. He remained inside the building until 10.20am and tried to access information on computers, but is not believed to have stolen any Budget secrets. Treasury officials said there was no evidence that confidentiality had been compromised.

The Budget package is highly market sensitive and it is the second time in two years that the Treasury has suffered a security lapse at Budget time.

Last year, the entire contents of Kenneth Clarke's Budget, including a 1p cut in the basic rate of income tax, were leaked. Gordon Brown, his Labour successor, is widely expected to be ready to cut mortgage-interest tax relief, worth pounds 30 a week to those on average earnings, in a pounds 2-3bn tax raid on the middle classes, to damp down inflation. Ministers said the Budget would be less harsh than many were predicting, and that the Chancellor would produce a balanced package.

The pain will be offset by the schemes to help the unemployed back to work, with the prospect of a 10p in the pound starting rate of income tax for the low-paid.

Peter Lilley, the shadow Chancellor, said the "nods and winks" about the impact of the Budget on the middle classes were "testing the water for a betrayal of trust" by the Government. He said Mr Brown had stated before the election that there were "no public expenditure commitments which require extra taxes" but there are clear signs at Westminster that Mr Brown was preparing to blame Mr Clarke for leaving a "black hole" in the accounts.

Mr Brown's wide-ranging package will hit drivers, smokers, and but the underlying concern is over the rising value of the pound, driven by the speculation surrounding the creation of a single currency with a soft euro.

There are fears that the Bank of England may increase interest rates next week, threatening a further rise in the pound, unless Mr Brown convinces the City in his Budget that he will reduce the inflationary pressures through personal tax increases, in addition to the pounds 5bn windfall tax to pay for the welfare-to-work package.

Iain Duncan Smith, the Tory spokesman on social security, claimed last night that ministers had been warned that social security fraud with a welfare-to-work programme estimated pounds 300m could blow a hole in the Chancellor's calculations.

Mr Brown will announce that pounds 750m is to be spent over four years on welfare- to-work schemes, but Mr Duncan Smith claimed ministers had been told the system of paying employers to take on young unemployed people was open to fraud.

He wrote to Frank Field, the social security minister, challenging him over the figures after he brushed aside the claims in the Commons. "Employer subsidies offer a clear opportunity for collusion and fraud," said Mr Duncan Smith.

He also raised doubts that Mr Brown will be able to secure the pounds 4.7bn savings on social security fraud that Kenneth Clarke, the former chancellor, included in his Budget figures to balance the books.

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