Chancellor Gordon Brown should set aside fears for the housing market and move to phase out mortgage interest tax relief, according to the Institute of Directors.

IoD director-general Tim Melville-Ross said the housing market was robust enough to cope with the move.

His comments come amid reports that the Budget might not take place until July.

The IoD believed the economy was doing extremely well and there needed to be a modest degree of ''fiscal tightening'', Mr Melville-Ross said.

The chances of this coming through cuts to public expenditure were pretty remote at the moment, he said.

''The real prospect we feel is for a modest increase in taxation, probably though some other means than manipulating allowances - in other words phasing out mortgage interest tax-relief.

''We think that that would be a better move than some of the other things that have been talked about, like manipulating pension allowances or, indeed, removing advanced corporation tax privileges,'' Mr Melville-Ross said.

He added: ''I think the chances of there being a house price explosion along the lines of what we saw towards the end of the 1980s are pretty remote.

''Nevertheless, the housing market in some parts of the country is pretty robust. We feel people will continue to buy houses even if mortgage interest tax-relief is phased out.''

Mr Melville-Ross said another tremendous advantage of the approach is that it would end the distortion in Britain against the private rented sector - which was peculiarly small.

He praised the Government's intention to use the windfall tax to create jobs, but he attacked it in principle and in its detail.

The proposal was ''arbitrary, retrospective and ... difficult to calculate''.

He warned against plans to use the revenues to try to tackle the problem of youngsters out of work for just six months.

There was a risk of running up a ''deadweight cost'' because many unemployed youngsters found work after between six and 12 months on the dole and it would be better to target those out of work for one year or more.

He also attacked the lack of any piloting of the individual schemes proposed for creating work.

But Mr Melville-Ross had praise for Mr Brown's start as Chancellor.

''I think some of the measures have been very far-reaching and they have been broadly right,'' he said.

He praised greater independence over interest rates for the Bank of England, and said the proposals for a new financial regulatory framework had much to recommend them.

''So, it is quite an impressive start by this new Government,'' he said.

Confederation of British Industry director-general Adair Turner called for a slight increase in taxes in the Budget.

''It would limit the extent to which the Bank of England would have to rely solely on interest rates to contain inflation and a rise in interest rates at the moment might have the disadvantage of putting up the exchange rate further to the disadvantage of the export sector,'' he said.

The comments from the business organisations come amid signs that the Budget will now be held later this month or perhaps even in early July.

A Treasury department spokesman has rejected reports that the date has been put back from June 10 because of confusion over proposed tax reforms.

''The Chancellor has a date in mind for the Budget and it will be announced to Parliament in the normal democratic way,'' he said.

There are also some limitations on dates which Chancellor Brown can choose for his welfare-to-work Budget, given that it cannot clash with the European Summit in Amsterdam on June 16-17, or the Group of Eight summit in Denver on June 20-22, when Prime Minister Tony Blair will be out of the country.

There is nothing to prevent Mr Brown from breaking with tradition and announcing his Budget on a day other than the traditional Tuesday.

Around 10 million homeowners are currently helped by mortgage interest tax-relief (Miras), and phasing it out could save the Government over #2billion.

A recent survey by the Royal Institute of Chartered Surveyors warned against ending Miras. It said such a move would hit hardest homeowners in the north of England, where prices are considerably lower.

If Miras is phased out, it is expected to be a gradual process, first removing the allowance from new

mortgages.