Darling '£15bn spending cuts due'

Mr Darling delivers his second Budget on Wednesday

Alistair Darling is set to announce £15bn of Whitehall spending cuts over the next few years in his Budget.

Treasury sources said the chancellor would unveil £10bn of annual Whitehall efficiency savings from 2011/12, on top of £5bn already pledged from 2010/11.

The Tories said this would only save a fraction of the money needed and he should "be honest" about tax rises.

Mr Darling will also on Wednesday reveal the extent of this year's public borrowing rise, possibly up to £160bn.

Experts expect predictions for the economy to be revised down to make it the worst recession since 1945.

Treasury sources said the extra £10bn in spending cuts would not mean reductions in services and personnel.

'Day of reckoning'

They added that Mr Darling believed such efficiency savings should be possible in the context of overall government spending of more than £500bn.

We don't think the chancellor has got room for a big fiscal boost Richard Lambert, CBI Lib Dems proposing £700 tax cut Recession an opportunity, says PM

But shadow chancellor George Osborne said the £15bn spending cuts would not go far enough, amid predictions the government may need to find an extra £39bn a year by 2016 to bring borrowing under control.

"I just think you're getting, at the beginning of the budget week, lots of spin to distract attention from the day of reckoning: the day when we see just how bad the economic figures are and we also see that the government aren't prepared to make the difficult decisions needed to lead the recovery out of this mess," Mr Osborne told the BBC.

Shadow chief secretary to the Treasury, Phillip Hammond, said if efficiency savings would amount to £10bn, it had to be assumed that the other £30bn to "close that black hole" would come from tax rises.

"I would hope on Wednesday he's going to at least be honest with the British people about that," he said.

In last autumn's pre-Budget report, the chancellor forecast the economy would contract by between 0.75% and 1.25% in 2009.

'Unsustainable'

Experts believe he could now revise this to a projected drop of between 3% and 3.5% - which would be the worst recession since 1945.

However, Mr Darling is expected to say the economy will return to growth next year and gain further strength in 2011.

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A decision on including a car scrappage scheme - aimed at helping the ailing automobile industry - in the Budget has still not been finalised by the Treasury.

This could see motorists receive a payment of £2,000 to trade in cars that are more than a certain number of years old.

Officials are still studying the detail of how such a scheme might work, but it is expected that a plan of some description will feature in Wednesday's announcement.

The prime minister said the UK had to "build on our inherent strengths" including its open, free-trade economy as well as its scientific, cultural and intellectual "genius".

"We have difficulties that we are overcoming, but we have also got enormous opportunities and challenges ahead," he said.

"I would say the Budget on Wednesday will show that we are going to grow our way out of this downturn. We are going to invest our way out of this downturn. It is important that we don't make the mistakes of the past."

Liberal Democrat leader Nick Clegg meanwhile unveiled a shake-up of his party's tax plans, including raising the income tax threshold to earnings of £10,000 a year.

This would represent an annual saving of £705 for most workers, he added.

Mr Clegg said it was "nonsense" to say tax cuts could not be brought in during a recession because a "tax switch" was affordable", he said.

Jobs market

The Confederation of British Industry predicted a "slow and fragile" return to growth in spring next year.

Director-general Richard Lambert told BBC Radio 4's Today programme he thought the chancellor should do very little in the short term.

He said: "We don't think he's got room for a big fiscal boost. We think he should be doing things to help jobs, particularly [for] young people, who face a tough jobs market in the next year."

Mr Lambert added: "The big question is what's he going to say about the medium term and how are we going to plug this big borrowing gap that's now building up?"

Meanwhile, the Ernst & Young Item Club predicted that the UK economy would shrink by 3.5% this year, but only by 0.1% in 2010.