Alistair Darling plots Budget giveaway after borrowing rises by 'only' £12.4bn

Published on Thursday 18 March 2010 21:38

ALISTAIR Darling is set to announce additional cash for back-to-work programmes after better-than-expected figures for February gave the Chancellor a surprise windfall ahead of next week's Budget.

• Alistair Darling: Surprise windfall. Picture: TSPL

Despite borrowing ballooning by 12.4 billion last month, it emerged that the overall level of borrowing for the 2009-10 financial year will be below the 178bn forecast.

Revisions announced yesterday have trimmed net borrowing by 2.9bn in the financial year to date.

Allan Monks, economist at JP Morgan Chase, estimated that the full financial year's borrowing will come in at about 164bn, after VAT receipts increased by 30 per cent last month.

Overall tax receipts rose by 3.6 per cent – the largest one-month rise since April 2008.

The news provoked a fresh round of lobbying of the Chancellor by Labour back-benchers, who are desperate to arm themselves with some giveaways to tempt voters to back their party. The Scotsman understands that Labour back-benchers are confident they have persuaded Mr Darling to pump money into the Job Guarantee Scheme.

The scheme currently guarantees training, a job or paid work experience to anybody aged 18 to 24 who has been unemployed for six months.

The idea is that it helps prevent long-term unemployment by breaking the cycle of people picking up their dole cheque and staying at home doing nothing.

Labour back-benchers now believe they have persuaded Mr Darling to extend the scheme to older people.

This was particularly pressed for by Scottish Labour back-benchers after this week's figures revealed that Scotland is the only part of the UK where unemployment is rising.

National statistics showed that 16,000 more people were unemployed in Scotland in the last three months and of the 54,000 jobs that disappeared in the UK, 35,000 of them were in Scotland.

One Scottish Labour back-bencher said: "We have been pushing to have this scheme extended to older years.

"It is very important we break the cycle of unemployment and prevent people from getting trapped in the system.

"We understand the scheme will be extended to older years, but we're not sure how far yet."

Such a move would also please Labour's union backers who have been lobbying hard to prevent massive cuts in the public sector to tackle the national debt.

The STUC said this week it believes the calls for the cuts have come from the financial sector, which is largely responsible for the economic crisis. The STUC has been calling on Mr Darling to concentrate his efforts on creating jobs.

Experts also predicted that the lower than expected level of borrowing might trigger some giveaways in the Budget. ING economist James Huntley said: "This perhaps gives Mr Darling some room to offer something to the electorate at the 24 March Budget. However, with ratings agencies and financial markets eager to see action on the deficit, he is unlikely to offer very much."