On 22 June, George Osborne will present his first Budget as Chancellor. The scale of the problem he faces is horrific. In 1999 the public sector debt was £353 billion. It is now £776 billion and the March 2010 Budget Red Book predicted that it would be a staggering £1,406 billion by 2014-15.

Trying to guess what a chancellor might say is always a dangerous game, but there are some clues in the agreements reached between the Conservative and Liberal Democrat negotiators on 11 May.

Firstly, there is to be a "substantial" increase in the income tax personal allowance, focused on those with lower and middle incomes. While the allowance will not rise immediately to £10,000 as proposed by the Liberal Democrats that will be the longer term aim. It will be funded partly by increasing employees’ national insurance as originally proposed by Labour and partly by an increase in capital gains tax on non business assets. The Conservatives proposed inheritance tax cuts have been shelved.

I suspect that as "generous exemptions for entrepreneurial business" have been promised, the capital gains tax legislation will take time to draft and that the change is therefore most likely to happen next April. But while it would be unusual for the rate of capital gains tax to be increased part way through a tax year, the possibility cannot be ruled out.

These proposed measures will not even begin to solve the problem. An increase in the rate of VAT from 17.5% to 20% (or more) is widely expected and this could easily happen on Budget Day. The range of things on which VAT is charged could also be extended.

Labour restricted the amount of tax relief given on pension premiums paid by people earning (broadly) in excess of £130,000 per annum. Some commentators think that higher rate relief for pension premiums could be scrapped entirely and this again could happen with effect from Budget Day.

The Conservatives had proposed significant reductions in capital allowances for the acquisition of plant, machinery and certain fixtures in buildings by businesses, to fund a reduced rate of tax for companies. This still remains a possibility.

More detailed announcements on tax policy were expected as this week’s Gazette went to print. As news emerges – and speculation develops – I will put updates on A C Mole & Sons website at www.acmole.co.uk.

Paul Aplin OBE is a tax partner with A C Mole & Sons and a former chairman of the Institute of Chartered Accountants in England & Wales Tax Faculty. He can be contacted on 01823 624450, email paulaplin@acmole.co.uk. Bridgwater based tax partner Paul Kingdom can be contacted on 01278 446088, email paulkingdom@acmole.co.uk.