Gordon Brown will headhunt a "captain of industry" to head up the merged revenue department. The executive chairman of the merged Inland Revenue and Customs and Excise will be responsible for almost 100,000 staff.

The chancellor also rejected claims that his Budget had been aimed at boosting Labour's general election chances.

Charles Clarke said that funding announced in the Budget would deliver a "major and stable advance at every level of education" yesterday.

Speaking at the opening of the debate on the Finance Bill yesterday, the education secretary challenged the Tories to "come clean" on their education spending plans.

Defence secretary Geoff Hoon has denied that budget pressures will lead to the cancellation of new weapons programmes. 

 "I don't think at the moment that I judge any major programme needs to go. There are some items ... that are no longer useful," he said.

Official figures released yesterday showed that there has been an increase in tax receipts. There was a £1.1 billion surplus in February, which was above expectations.

Ministers admitted yesterday that the civil service may have to cut up to 90,000 jobs if it is to meet Brown's target of saving 2.5 per cent in administration costs.

A YouGov poll for the Telegraph finds the majority of voters think gaps in public finances will have to be covered by tax rises after Labour has won a third term.