Will Darling pull a rabbit or a rat out of his hat?

Next week's pre-Budget Report takes place against the backdrop of spiralling public debt and a fast-approaching General Election, prompting fears that Chancellor Alistair Darling may be set to further squeeze high earners until their pips squeak.

In particular, there is anticipation of a potential move against Childcare Vouchers, a hike in Capital Gains Tax and the extension of changes announced at the Budget to taper relief on pension contributions for people earning more than £150,000 down to those earning over £100,000. Such measures, combined with the introduction of a 50% rate of income tax for the highest earnings next year, could prove popular even though some forecasters question whether they will make a material impact on the public finances.

"The days of pre-Budget purdah, where absolute silence was maintained on financial policy ahead of such statements, have long since been replaced by 'kite-flying' leaks to test reaction to potential new measures," said Jason Hollands, Director, F&C Investments. "Right now, hitting the wealthy - particularly those working in the City - is a dog whistle to parts of the Government's traditional core voter base who are angered by tales of excessive bonuses.

"However, such kite flying can also be a tactic to manage down expectations so that when actual announcements are made, the surprises are more on the upside," he added. "For example, despite the limited room for manoeuvre and the overall push towards higher taxes in the last Budget, the increase in the ISA allowance was welcome news for savers."

Hollands believes that one area which could deliver a surprise is a temporary restoration of some of the levels of tax relief available on Venture Capital Trusts until a couple of years ago, combined with a relaxation of some of the investment restrictions for such vehicles. VCTs were introduced in 1995 to help bridge the financing gap for small UK companies by offering investors a package of tax incentives to mitigate some of the risks of investing in such firms.

"In 2007, a year before the credit crisis, the level of reliefs on VCTs was slashed and the size of company eligible for VCT investment materially reduced. This has resulted in sharp fall in VCT financing," said Hollands. "Right now the UK needs to encourage entrepreneurs in order to climb its way out of recession. Given the continued tough lending climate for individuals and small businesses, there is a compelling case for providing a boost to VCTs by restoring higher rate relief on new subscriptions and broadening the universe of companies eligible for this form of financing.

"With major tax hikes for high earnings on the way, restrictions on sheltering this through pension contributions and a possible increase in CGT, enhanced VCT income tax reliefs, combined with their CGT-free status, would be particularly attractive for many high earners and at the same time positive news for small businesses."