The chancellor is breaking his own economic rules, a report has claimed.

The Centre for Policy Studies has suggested Gordon Brown has squandered a sound economic legacy by creating an atmosphere of boom and bust.

In a pamphlet published on Monday the right-leaning think tank said Brown will be forced to increase taxes and borrowing.

"The prime minister, as well as other Cabinet ministers, have all hinted recently that taxes will have to go up again,'' said author Keith Marsden.

"Surely under these circumstances business investment can only decline further, productivity growth be jeopardised, and Britain's competitiveness substantially undermined?"

Marsden contrasted Brown's actions with his own "golden rules" on borrowing.

"The evidence suggests that much of the golden economic legacy that Gordon Brown inherited in 1997 is in danger of being frittered away,'' said Marsden.

"Growth is down - at a cost of income foregone of nearly £2000 per household per year. Taxes are up - another £4000 per household per year.

"Savings, investment and productivity growth are all down. Regulations are damaging business, with the rate of start-ups now at a worryingly low level.

"The balance of payments is deep in the red. Deflation is a real threat.''

And the report dismissed Treasury claims that the UK's economy has been hit by world events.

"The blame for this record cannot legitimately be put at the feet of a global downturn'', Marsden said.

"Not every country has fared as poorly as the UK.

"The stock markets have clearly marked down Britain's competitiveness, with the FTSE-100 down eight per cent from the level of May 1, 1997.

"In comparison, the Dow Jones is up by 31 per cent over the same period, the CAC-40 up by 21 per cent, while the DAX is at the same level it was six years ago."

The shadow chancellor described the report as a "devastating indictment" of Brown's record.

"The government was pretending that despite its increase in national insurance contributions, its tax on jobs and pay, income has increased in the year to April," Michael Howard said.

"We now know through these latest figures which were buried on the website of the Office of National Statistics ... that incomes actually fell on average in the year to April.

"The truth is if you look at what this report has shown and take into account these latest figures we have a devastating indictment of the chancellor."

But the Treasury said the report was "grossly misleading" as it compares the current period of relative stability with the period of recovery from recession before Labour came to power.

"The comparisons ignore the fact that in 1992 the economy was coming out of the most deep and painful recession since the war," a spokesman said.

"It is fairly obvious that the economy has more scope for growth after the sharp fall in output of the early 1990s.

"That's exactly the sort of boom and bust economics that the government was trying to avoid in 1997.

"There has been a difficult global environment, since 2001 particularly, but the UK is now in a better position to see through these uncertainties than before.

"The UK and US led the G7 countries in growth in 2002 and outside forecasters expect that to be the case this year and next."

The report came as Iain Duncan Smith accused ministers of attempting to hide data which reveals that take-home pay has fallen as a result of Labour's tax rises.

He said the figures - which find that the £8 billion increase in National Insurance has bitten much deeper than previously thought - had been "pushed out quietly" by the government.