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Treasury sources said the comptroller and auditor general Sir John Bourne had been asked to look at a number of rosy assumptions made

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Treasury sources said the comptroller and auditor general, Sir John Bourne, had been asked to look at a number of "rosy" assumptions made by the former chancellor, Kenneth Clarke.One of the likely changes is a reduction in the estimate for the economy's long-term growth potential from 2.5 to 2.25 per cent a year. The report is likely to recommend two changes to the forecast for growth and the public finances, both of which would push up the expected level of government borrowing. The unprecedented public audit was announced nearly two weeks ago. But the consequence is that setting the wage at that sort of level would be more likely to cost jobs.The ultimate effects on inflation and unemployment would depend on general economic policy. Due to higher labour costs and knock-on effects on differentials up the pay scale, a pounds 3.80 minimum would add more than 1 per cent to the inflation rate, the authors calculate.But if that prompted interest rate rises under a tough anti-inflation policy, there would be additional job losses..

A study of the Treasury's economic forecasts, due to be published in advance of the Budget, is expected to show public borrowing several billion pounds a year higher than predicted in last November's Budget. The figure it recommends is well below the pounds 4.25 - half of full-time male median earnings - urged by some union leaders.The report finds that low pay is so widespread that a pounds 4-an-hour minimum would affect almost 5 million workers, most of them part-time women. Anything higher than this figure, the Employment Policy Institute argues, would threaten jobs.The report has been sponsored by Woolworths to B&Q retail group Kingfisher and written by independent economists leaning to the left of centre. Mr Edmonds pointed out it was possible to appoint the members of the Low Pay Commission this summer and it should be able to make its recommendation by autumn.That would enable the Government to build the calculation into the November Budget and publish a definitive figure "before Christmas" in time for imposition in April.The GMB's stance put it at odds with a report from a leading think-tank, to be published today, which says the national minimum wage should not be set above pounds 3.75 an hour. His appointment, due to be announced today by Margaret Beckett, President of the Board of Trade, was welcomed yesterday by union officials.A spokeswoman for the public sector employees' union Unison said: "It is a very good, balanced appointment as he has credibility with both the unions and the business world."Born in Canada, Professor Bain came to Britain in 1963 to take up a Commonwealth scholarship and fellowship at Oxford University and now holds dual nationality. He earns an estimated pounds 200,000 a year from his post as the principal of the London Business School and a handful of directorships, making him one of the country's best-paid academics.He has previously been called upon to mediate in labour disputes. He also sat on the Senior Salaries' Review Board when he supported a plan by the Conservatives to freeze civil servants' pay.

But he proclaimed his political independence in January this year when he and a team of captains of industry were accused by the then deputy prime minister, Michael Heseltine, of being Labour stooges.Professor Bain said Mr Heseltine's claims about the members of the Commission of Public Policy and British Business, following their support for a minimum wage, were "outrageous".Unions were warned privately by senior Labour politicians before the election that it may not be possible to introduce a lower limit to wages until early 1999 amid assertions by employers that it should be nearer pounds 3.Mr Edmonds said he would be "very disappointed" if workers should not benefit from the new law by spring next year. Today publisher Emap is expected to report year's profits of pounds 120m against pounds 86.5m. Others reporting this week include Railtrack (pounds 305m against pounds 261m) and Vodafone pounds 495m (pounds 467.9m).. The principal of the London Business School will be named today as the new head of the Low Pay Commission. His appointment comes only a day after the Government received an unequivocal call from one of its biggest union backers to accelerate its proposals for a minimum wage. Professor George Bain, 58, will take on the unpaid position against a backdrop of increased debate about an appropriate level for the minimum wage and the timing of its implementation. John Edmonds, leader of the powerful GMB union, called yesterday for a guaranteed wage of at least pounds 4 an hour by next April, while a leading think-tank said anything over pounds 3.75 would threaten jobs. A former member of the Acas arbitration panel, Professor Bain will be called upon to exercise his negotiating skills when he starts the two- days-a-week post.

Perhaps GM's decision to charge more for paper settlement is a tentative sign a dual-level market will eventually emerge.Footsie fell sharply on Friday but still seems to be on course for the 5,000 points so many now predict. Second and third liners, however, remain on the sidelines.The Blair blue chips surge has prompted Legal & General's investment team to lift its 12- month forecast from 4,200 to 4,700. "With a dividend yield sub 3.6 per cent investors should now be adopting a cautious posture just on economic fundamentals, let alone any possible damage inflicted on the corporate sector by Gordon Brown," the team says."However, we are not bearish. Dividend growth of 8 per cent looks to be a sustainable prospect and institutional liquidity remains historically very high.