The shadow chancellor has warned that this week's Budget will attempt to cover-up a black hole which could lead to billions of pounds in tax increases.

Speaking to GMTV Oliver Letwin said the chancellor's finances were seriously imbalanced and warned of tax rises to come.

In an interview for the GMTV Sunday Programme, Letwin said Brown would have to resort to "magic" to meet his spending pledges while not breaking his golden rules on borrowing.

"If he could engage in magic it would present everybody else with a terrible problem but he can’t engage in magic," he said.

"He will be setting out a programme that will leave him with what almost every independent commentator, the International Monetary Fund, the Organisation for Economic Corporation Development, the Institute for Fiscal Studies, I could go on and on and on, all regard as a black hole in his finances."

Waste

Letwin called for a renewed assault on waste in the public services in order to avoid a new round of tax increases.

"There is at least now a consensus that £15 billion a year could be saved by not doing things so badly inside government, not least because the government has been adding hugely to the waste over the last few years," he said.

And following criticism from the prime minister, the shadow chancellor flatly denied that the Tories would cut spending on schools and hospitals.

He said the spending freeze, outlined last month, would not apply to "front line" services.

Labour attack

But Labour kept up the pressure on the Conservatives over their spending plans.

Labour's chairman Ian McCartney said: "Oliver Letwin wants to spend less on public services, less on hospitals, less on schools, less on police forces, less on transport.

"He wants to turn the clock back to recession. As well as taking out baseline money, he then goes to his patient passport to take £2 billion out of the frontline NHS services to subsidise private medical care."

"The British people do not want to go back to boom and bust cuts in public expenditure.

"They want a government with a stable economy, that will invest in public services and invest over a sustained period of time."