Unemployment: Billions pledged to create jobs

As unemployment climbs to 2.1 million, scheme will offer work to those on dole

A £3.1bn programme to help the jobless back into work was one of the few big spending commitments.

The Budget came on the day when official figures showed that unemployment rose 177,000 between December and February to 2.1 million, its highest level since Labour came to power in 1997. Unemployment among 18 to 24-year-olds was 631,000 in the latest quarter, up by 17,000 from the three months to November. The number of people claiming jobless benefits rose by a smaller than expected 73,700 last month to 1.46 million.

Alistair Darling said the Government would spend £1bn on cutting youth unemployment. Every 18 to 24 year-old who has been out of work for 12 months will be guaranteed an offer of paid work or a training place for which they will receive £20 a week more than their state benefits.

As part of this the Government will directly fund up to 250,000 jobs in the public and private sector, including 150,000 through a "Future Jobs Fund". This will enable local authorities and voluntary groups to submit bids for jobs that would make Britain "a better place" or "improve the local community". A further 100,000 job opportunities will be created in the "industrial sectors of the future".

The Chancellor claimed his measures would help to ensure that, "short-term job loss does not turn into a lifetime on benefits".

In attempt to tackle unemployment across all ages £1.7bn will be spent to enhance the Jobcentre Plus programme and the Flexible New Deal, which gives people out of work for more than a year intensive help through private or voluntary providers.

Mr Darling also announced that statutory redundancy pay would rise from £350 to £380 a week, following a campaign by Labour MPs and trade unions.

In Commons exchanges, Mr Cameron said the unemployment figures were "a reminder of the human tragedy" of the recession.

Mr Brown said there were nearly one million more young people in work or training since 1997 and insisted that the Government was, "prepared to take the action necessary" to help homeowners and businesses.

But last night the Tories seized on the small print of the Budget, which suggested that unemployment could rise to 2.44 million next year. Treasury officials said this was not a forecast but based on an average of predictions by independent forecasters.

Theresa May, the shadow Work and Pensions Secretary, said: "Behind these statistics are the shattered lives of millions. Labour have reached another grim milestone with unemployment now higher than when they came to power. This Government is sleepwalking through this unemployment crisis, recklessly casting millions of people adrift."

Brendan Barber, the TUC's general secretary, welcomed the help for the young jobless. "The rate of unemployment amongst young people has been rising rapidly since the end of 2007, long before the rest of the population was affected by this recession," he said.

"But the timescale is not urgent enough. It needs to start this year – not 2010 – so that it can help the tens of thousands of young people who are unemployed now."

David Kern, the chief economist of the British Chambers of Commerce, said the latest jobless figures confirmed a worsening situation in the labour market and were consistent with its forecast that unemployment was set to peak at 3.2m next year.

Graeme Leach, the chief economist at the Institute of Directors, said the figures were "awful".

He added: "The 177,000 increase stamps on any discussion of green shoots and suggests there will be no recovery this year."

The figures also showed the level of growth in average earnings was the lowest since records began in 1991. This was mainly due to the drop in bonuses in the financial sector.

Case Study: 'This Budget will help our customers'

Anna Richey, 30, Businesswoman

Miss Richey, 30, pictured right, set up her firm with business partner Alla Chapples in November 2005. With only two staff they supply free-range, liquid egg white to Ocado and selected Waitrose, Sainsbury's, and Booths stores across Britain.

"Any support for consumers is good for us, and the best thing the Government could have done is cut income tax for our target audience of low earners to boost their spending. Looking at the figures overall, the state of the economy is obviously desperate, but on the headline borrowing figure of £175bn, well, I see that as a necessary evil. Better to borrow now and keep the money in the economy than do nothing. Simply letting the economy slide is not the answer: I'd rather we took action now to keep things stimulated. My business partner and I backed the Government's huge earlier fiscal stimulus for similar reasons.

As a small business, we were most interested in the extension of help for loss-making companies. Obviously this is very positive for us. I would have liked to see more from the Chancellor about the Government securing bank loans for small businesses, and also guaranteeing credit insurance. Those would have helped with our margins. I worry about taxes rising on everyday things like alcohol or tobacco because I want my customers to have spending power. But then I guess the Government's got to raise money somehow."

Voted Labour in 2005, but unsure who to vote for this time.