Chancellor Alistair Darling's second pre-budget report will be vastly different from his first, focusing on economic forecast and projections for government finances, KPMG predicts.

'As tax revenues decline and rising unemployment boosts spending, the chancellor is being forced to re-write the fiscal rules to accommodate higher annual deficits and raise the ceiling on total public debt,' Andrew Smith, KPMG chief economist in the UK, said.

'He will be treading a fine line between building-in enough leeway to ameliorate the worst effects of the downturn, while reassuring the markets that the public finances will be brought back onto an even keel once the economy stabilises.'

Sue Bonney, KPMG Europe head of tax, said: 'The corporate tax world is waiting for the next development on the changes to the way that foreign profits are taxed and we’d expect to see something on this in the pre-budget report... new restrictions on interest expense are likely before the end of the year and could be unveiled in the pre-budget report.'

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