Gordon Brown is set to announce a reduction in the role played by the Inland Revenue and Customs and Excise in deciding tax policy.

The decision will be made by the chancellor in next month's pre-Budget report.

It follows a report commissioned by Brown after a series of embarrassing failures in administration and legislation.

It is believed that permanent secretary to the Treasury, Gus O'Donnell, is considering a merger of the excise and revenue departments, based on a similar move by Canada in 1993.