Trades union leader John Monks has called on Chancellor Gordon Brown to spend an extra £6bn on public services in next month's Budget.

The money should be spent on health, transport, social housing, the regions and to start a campaign against pensioner poverty, the Trades Unions Congress said.

The Chancellor is to unveil the Budget on 21 March. Some observers estimate he could have up to £7bn to give away.

Inflation fears

If the Chancellor does loosen the purse strings, the fear is that the extra spending will stoke inflation.

On Thursday, the Bank of England raised interest rates by 0.25% to 6.0%. There had been growing concern that rising consumer confidence and the steep climb in house prices could indicate rising inflation.

But the TUC says the spending would target regions, where inflation isn't a problem.

"Our proposals, which we believe are well within the the kind of money the Chancellor has got, are for targetted investment in regions where inflation is negligible," Mr Monks said.

He added: "What the Bank of England did yesterday is to try to tackle the the south-east England housing market problem at the expense of manufacturing in the rest of the country."

Business backing

Confederation of British Industry (CBI) director general Digby Jones also called on the Chancellor to loosen the purse strings, to counter the effect of Thursday's rate rise.

"I am with John Monks in calling for more public expenditure on transport, which is far less inflationary than other aspects of spending," he said.



The Chancellor's warchest

Gordon Brown has built up a huge war chest in advance of the next general election.

According to the Green Budget from the influential Institute for Fiscal Studies, the government finances are going so well that the Chancellor could afford to give away up to £7bn in the Budget and still meet his fiscal rules.

The IFS has forecast a budget surplus of £7bn for the current financial year, with an even bigger surplus of £10bn in the following year.

That contrasts with the official forecast of a small surplus this year of around £3bn, and a small deficit in the following years.

The growing surplus has been caused by the fall in the number of people claiming welfare benefits, especially the jobseeker's allowance, as the number of unemployed has fallen to just over 1m, compared to government predictions of 1.4m.