Gordon Brown is facing calls from businesses to commit to lowering taxation.

In its submission to the Pre-Budget Report, the Institute of Directors urged the chancellor to adopt a third "golden rule" of economic management pledging a decrease in taxation over the economic cycle.

His first rules are to limit borrowing to investment needs and keep the debt burden at no higher than 40 per cent of GDP.

The business leaders have argued that by the year 2005/06, taxation will be 3.5 per cent higher than when Labour came to power in 1997.

Speaking on Monday, chief economist Graeme Leach argued that a similar pledge from the government would not require major reductions.

"But a long-term commitment would be a good additional discipline, would prevent any negative impact [of taxes] on growth, and would send a good signal to foreign investors," he said.