Brown uses surprise welfare savings for pre-election spree

Gordon Brown is banking on a surprise saving on welfare bills to help pay for a multi-billion-pound splurge before the election.

A senior government source has told the Standard that unemployment is now expected to rise less severely over the next few years than predicted in the official forecast contained in the Budget last spring. The difference between the two forecasts could be worth several billion pounds to the Treasury, by reducing the amount that has to be set aside to support families hit by the recession.

There have been questions over how the Prime Minister would pay for the spree of announcements in his conference speech. The Institute for Fiscal Studies calculated cuts of 18 per cent would be needed in many Whitehall budgets to meet his promises for extra spending on the minimum wage, child tax credits, elderly care, hospitals, schools and police.

Reports today said the Government wants a pay freeze for senior public servants such as judges and NHS managers to squeeze costs, plus efficiency cuts and asset sales of £75 billion.

Most public sector workers will only get minimal rises and big-ticket defence orders could be scrapped.

Unemployment in the UK is 2.5 million and expected to rise above three million. In his Budget, Chancellor Alistair Darling warned it would take a number of years to come down. Now, however, forecasters say that the recession is less deep than they had feared.

Mr Darling will reveal the size of the gap in his pre-Budget report, due next month, at the same time as he explains how he aims to halve the £175 billion deficit over four years.

Mr Brown today said Labour can win the next election because the public would gain confidence that the Government had handled the recession well.

"I think people know that the action we are taking on the recession is still to yield all the results we want — but it will take us through the recession," he told local radio.

The International Monetary Fund today predicted the UK economy will expand by 0.9 per cent next year — well ahead of the 0.2 per cent growth it estimated three months ago.