The Labour leader, speaking in Inverness at his party's annual Scottish conference, said Norman Lamont's economic strategy 'must tackle the single most important factor which is today holding our economy back'. With the jobless total at 3 million and rising, Mr Smith said unemployment was costing the country pounds 27bn a year, and the equivalent loss of 780 million working days. 'It is economic madness as well as social tragedy.'
On Tuesday, the Government is expected to deliver a programme of measures aimed at reducing unemployment alongside the Budget. These will include unemployment benefit remaining untouched for those increasing formal further education hours.
One senior Labour source said the party would attempt to evaluate in numbers the impact on jobs of both the Budget and the employment package.
Mr Smith predicted that Norman Lamont's Budget would be 'designed to save his own skin rather than rescue the British economy'. If Mr Lamont raises VAT, as is widely expected, the Labour leader said the Conservatives would 'have some explaining to do'.
Mr Smith said the British people would be massively betrayed if VAT was raised after John Major had promised in the election campaign that it would not.
In the first address to the Scottish Labour Party by a Scottish leader since Ramsay Macdonald in 1931, Mr Smith re-affirmed his commitment to setting up a Scottish parliament which, he said, was 'unfinished business'. As Labour nationally are preparing for a re-evaluation of party policy on public ownership, Mr Smith delighted delegates when he said it was 'unthinkable' that water in Scotland would be 'wrenched out of public control'.
A Scottish Parliament, he said, would have the power to return water to the ownership and control of local authorities if it was privatised.
The comment was seen as almost a U-turn on policy following statements by Mr Smith and Tom Clarke, the shadow Secretary of State for Scotland, which in recent weeks had put question marks over the party's commitment to public ownership of the water industry.
The mood of the Scottish conference, expected to be funereal after the general election defeat, was instead reinvigorated by the political faux pas of the three Scottish Nationalist MPs who voted with the Government this week over the Maastricht Bill.
'Mr Major found new friends this week,' Mr Smith said. 'Step forward the SNP.'
Labour now expects the SNP's action to provide an unexpected opportunity to recover lost support, especially on youth membership, a trump card that was played heavily during the conference debates yesterday.Reuse content