CHANCELLOR Gordon Brown is expected to rekindle his long-term love affair with "Prudence" in his November 27 pre-Budget statement.

Fears of economic slowdown and lower-than-expected tax revenues are expected to prompt the Chancellor to use the word "prudent" even earlier than usual this year.

KPMG's South Coast office has outlined its key predictions for the mini-Budget which is expected to focus predominantly on measures to boost business and cut red tape.

Enterprise Management Incentives (EMI) - the government could double the size of companies that can issue EMI share options from £15 million gross assets to £30 million.

"This proposal would be very popular and the Chancellor is likely to announce that this will feature in next year's Finance Bill," said KPMG's tax partner Nick Caiger.

"The Chancellor may also announce that the gain an employee makes on the exercise of a share option will be an allowable expense for the company."

Encouraging savings - in the last Budget the government announced it would look again at how to help those on low and moderate incomes to save.

Research and development tax credit - the Chancellor has indicated that legislation will definitely be introduced in the 2002 Budget for a new R&D tax credit for larger firms.

Capital gains tax business assets - the Chancellor is likely to re-announce his June 2001 promise that - from April 2002 - 75 per cent of the gain on business assets would be covered by taper relief after two years.

Personal pensions - there may be a discussion of possible increased flexibility in annuities for holders of personal pensions.

"This may include increasing the age at which an annuity must be purchased from 75 to 80. There has been a lot of discussion on the restrictions placed by the current rules."

Tax credit or grant for workplace training - as suggested in June 2001 Treasury document Productivity in the UK, more likely after the scrapping of Individual Learning Accounts.

Changes in employment law have also created tax burdens for recruitment agencies. The Chancellor could attempt to alleviate the cost.

"New regulations giving temporary workers similar rights to employees will result in VAT being due on the full amount charged by the employment agency - including salary and associated costs," said Mr Caiger. "The government is likely to announce that the concession which allows VAT to be charged on the agency's fee only will remain for a further 18 months after the regulations come into force.

"Without the concession, firms which are unable to recover all their input VAT would have a significant VAT cost."