Gordon Brown's plans for taxation and spending over the next few years have given the business community little to cheer about.

But experts at the Gatwick office of accountancy firm PricewaterhouseCoopers (PwC) said the Chancellor was justified in increasing public borrowing.

In his pre-Budget report, Mr Brown increased significantly his short-term forecasts for public borrowing but remained optimistic the budget deficit would fall back again to previously-projected levels after the present cyclical downturn is complete.

Analysis by PwC economists and tax experts suggested the Chancellor was right in allowing borrowing to rise in the short-term.

But the analysis also suggested long-term public finance forecasts were over-optimistic and could lead to an need for tax rises or a significant slowdown in public spending growth.

Head of macroeconomics John Hawksworth said: "The Chancellor has enough room to manoeuvre to avoid immediate tax increases but the crunch will come in the 2004 Budget and Spending Review when he will have to make a choice between turning off the spending taps or announcing further tax increases.

"He has bought himself some time by making relatively optimistic longer-term forecasts for the public finances but these tough decisions cannot be put off forever."

Corporate tax partner Derek Jenkins said: "There was a degree of disappointment that increased borrowing levels might lead to higher interest rates which would put UK plc at a competitive disadvantage.

"However, if the Chancellor's predictions for future economic growth and borrowing levels are fulfilled, this should be merely a short-term effect and the UK may be able to retain its position as one of the world's strongest economies in the longer-term.

"Although the statement will not have huge impact for the majority of UK corporates, there were detailed tax provisions which would have an adverse impact on the construction industry and electrical retailers.

"In addition, there was confirmation the new tax regime for UK branches of foreign companies would go ahead with very few changes from the original proposals in the April 2002 Budget. This will be expensive for overseas banks operating in Britain."

Environmental tax expert Barbara Bell said the Government's proposed £3 a ton landfill tax would be cautiously welcomed by environmentalists and some sectors of the waste management industry who were keen to ensure the "polluter pays" objective continued.

She said: "While some waste management companies will feel the Chancellor has not gone far enough, the proposed increase, ultimately to £35 a ton, will hit industry hard.

Even the greenest companies inevitably produce waste and many may feel they bear a disproportionate part of the tax burden.

"The complex climate change levy seems set to remain, despite calls from the Royal Society, among others, to create a true carbon tax which would apply to domestic and transport users. Again, industry will continue to bear the cost. The consultation on encouraging the reuse of aggregates is a welcome development, particularly for the building and civil engineering sectors."

PwC said statutory tax relief would be available for share plans where employees were subject to UK income tax on shares. It also gave the relief where employees were exempt from income tax under an Inland Revenue-approved plan or enterprise management Incentives.

This relief would be comparable to that currently available in the United States but more generous.

This move would benefit companies, particularly smaller ones.