GORDON BROWN will present an upbeat assessment of the economy this week, predicting that Britain will grow by 2.75% to 3.25% next year, after this year’s growth of 2.6% — above his budget forecast.

He will also insist the public finances are on track, with no significant revisions to his borrowing projections. The pre-budget report will presage a sharp slowdown in the growth of government spending, which will rise by less than 2% a year over the three years from 2008, compared with well over 4% annually over the past six years.

Treasury officials say the focus of the pre-budget report, the chancellor’s 10th and final one, will be on long-term economic challenges and improving the supply-side.

But a poll of economists carried out by the Taxpayers’ Alliance shows that they believe Brown’s tax and spending policies have damaged the economy. The survey, of 16 economists who contribute to the Treasury’s monthly compilation of independent forecasts, shows that 100% think higher public spending has damaged Britain’s long-run performance, 79% think higher taxes have had a similar effect and 71% say Britain’s corporate tax regime is no longer internationally competitive.

The pre-budget report will have a “green” tinge, and include an increase in air-passenger duty. Andrew Harrison, chief executive of Easyjet, dubbed it “another revenue-generating stealth tax”.

The Institute of Directors (IoD) said that any green taxes should be revenue-neutral and apply equally to consumers and businesses. “There can be good reasons to use environmental taxes,” said the IoD’s Miles Templeman. “But they are only justified if they are designed to do their specific job.”

There have been hints that Brown is aware that the level of business taxes is at a tipping point, and could respond. For the moment, however, firms are concerned that taxes do not rise further.

“In the short term, the best thing the chancellor can do is leave industry well alone and not slip through measures that will add to costs,” said Martin Temple at the Engineering Employers’ Federation.

Business will be looking to Lord Leitch’s review of skills for a sign that the government is getting to grips with the problem of low skills in Britain. It will stress the need to improve skills in the existing workforce — 70% of the 2020 workforce are already of working age — but also among school leavers. Only 4% of jobs by 2020 will be suitable for people without qualifications. Over 5m working-age adults now have no qualifications, one in six lack the literacy standards expected of an 11-year-old, and nearly half are functionally innumerate.

“This is so important for business,” said David Frost of the British Chambers of Commerce. “Everywhere I go firms tell me that they’re getting school leavers who are totally unprepared for the world of work.” oThe Bank of England’s monetary policy committee is set to leave Bank rate on hold at 5% this week. The “shadow” MPC, which meets under the auspices of the Institute of Economic Affairs, has voted 7-2 for the rate to be left unchanged.

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