Darling and Brown at odds over Budget

Chancellor wants to give markets more details about how the Government will tackle deficit

Alistair Darling is said to be at odds with Gordon Brown over next month's Budget as he wants to set out a "credible" medium-term plan to reduce the deficit and calm financial markets.

Leading City and government officials suggest that the Chancellor – who is determined, in order to maintain investor support and avoid a run on sterling, to present a radical plan which gives far more detail than that provided in the pre-Budget report – is in conflict with the Prime Minister's pre-election claims.

After news of January's big deficit, the Chancellor is even more determined that his Budget, expected on 24 March, will provide enough detail to allay bond investors who fear that the Government is not serious about cutting the deficit.

But the Prime Minister, who is to unveil Labour's election plans this weekend, threw down the gauntlet on Friday by claiming that voters will chose between Labour's spending on growth, and Conservative cuts, which would risk recession were they to win.

The Downing Street row comes after a public war of words between economists over economic policy, with one group of 20 supporting George Osborne's call for deep cuts and another list of 67 backing Mr Darling's plan for delay.

But one senior official said: "This cross-fire of letters between economists is odd because everyone agrees on pretty much everything. They are splitting hairs; the only difference is who tells the truth about the timing.

"We also know that the Government is already undertaking massive cuts and so is being disingenuous about its attacks on the Conservatives. Everyone also agrees that there will have to be a tightening of fiscal policy. Whoever is in power, the next few years are going to see cuts far, far worse than anything we saw in the 1980s."

In two letters to the Financial Times last week, 67 economists backed Mr Darling's plan to delay cuts in spending until 2011, arguing that any shock cuts would upset the recovery and push the country back into recession.

Their missive was sent in response to a letter from 20 economists, published in last week's Sunday Times, which called for a detailed "credible" plan to reduce the structural budget deficit more quickly than set out in the 2009 pre-Budget report, which forecast borrowing this year of £178bn or 12.6 per cent of GDP, falling to 5.5 per cent over four years.

Led by Tim Besley, a former member of the Bank of England's Monetary Policy Committee, they warned that the absence of such a plan risked "a loss of confidence in the UK's economic policy framework that will contribute to higher long-term interest rates and/or currency instability, which could undermine the recovery".

Yields on 10-year gilts rose by seven basis points after news of the £4.3bn deficit for last month while sterling slipped Friday on news that the US Federal Reserve had raised its rate for emergency loans to banks.