MPC's Blanchflower demands 'Budget for jobs'

Alistair Darling's first priority in delivering next week's Budget should be jobs, David Blanchflower, the Monetary Policy Committee member who spent much of last year trying to persuade the Bank of England to prepare for a recession, said yesterday.

Mr Blanchflower, who is due to stand down from the MPC in the summer, warned that without significant action by the Chancellor, Britain's unemployment total, which passed 2 million last month, would continue to rise very quickly, and would become the biggest issue at the next general election.

"We need a Budget for jobs," Mr Blanchflower said. "We have a jobs crisis and the Government needs to act quickly."

The economist, who repeatedly found himself in a minority of one on the MPC last year in voting for interest rate cuts ahead of the economic downturn, said unemployment was likely to hit 3 million before the end of the year and that there was a good chance the total would subsequently rise "higher still".

Mervyn King, the Governor of the Bank of England, has already warned the Chancellor off another big fiscal stimulus to the economy amid worries about the public finances, following the £20bn package of tax cuts and spending rises that Mr Darling unveiled in the pre-Budget report in November.

However, Mr Blanchflower said the Government should "immediately increase the number of places for the over-18s in further and higher education" and also called for Mr Darling to "give employers incentives to hire people".

Other measures to combat unemployment might include temporary assistance for employers to help them avoid laying off workers, and increased public funding for projects that can be started straight away, Mr Blanchflower said. Without action, unemployment could haunt Labour politicians, with an election having to be called by the middle of next year, he added. "It is probably going to be the biggest issue in the next election," he said.

Unemployment is at its highest levels since Labour came to power in 1997, but ministers are preparing themselves for a substantial rise in the jobless figures over the next few months. A lack of jobs for school leavers and university graduates could see levels of unemployment spiral upwards very quickly in the early summer.