The 1.3bn estimate, revealed in new "gures from the Department of Finance, does not include the substantial cost of widening the tax bands to keep people out of the top tax bracket. Raising the point at which people start paying 42% tax from 32,000 to 35,000, an increase that would be in line with last year, would cost the Exchequer 370m a year.

Reform of stamp duty, which can add 9% to the cost of buying a home, is a top priority for the Progressive Democrats. Replacing the current system of tiered rates with a "at tax of 4% would cost the Exchequer more than 850m a year. Switching to a higher 5% rate of stamp duty would cost 674m, while the cost could be kept under 500m if the "at rate was pegged at 6%.

The junior coalition partner also wants cuts to the top rate of income tax. According to the Department of Finance, it would cost 450m a year in lost taxes to pare the top rate to 40% from the current 42%.

As the general election approaches, the government is under pressure to keep as many earners as possible out of the top tax bracket. The proportion of earners paying at the top rate dipped under 32% for the "rst time in three years in 2006, following Cowen's tax giveaways at the last budget.

But without more giveaways this year . . . including a substantial increase in the 32,000 standard rate income band . . . a record 35% of earners will end up paying tax at the top rate in 2007.