A decade to balance the books, admits Darling

Unveiling a big increase in borrowing in the short term, the Chancellor will warn that it will take longer to balance the books than he had hoped.

But pledging a return to sound finances in the long term, Mr Darling will also announce efficiency savings to trim £15 billion off Whitehall's planned spending growth, spread over four years.

He is also expected to confirm his recent optimistic forecasts that the economy will start to grow again at the end of this year, marking the end of the worst recession in a generation.

Unveiling his second Budget under the theme Investing in the Recovery, the Chancellor will attempt to rebuild public faith in the Government's ability to run the economy by promising about £500 million for job-creating investment in environmental improvements, plus a series of measures to invest in "future industries" such as green technology.

With borrowing set to surge to some £170 billion this year ­­— up £50 billion from the figure in the pre-Budget report last autumn — Mr Darling
will have to amend his PBR forecast that the books will be back in balance by 2015/16. It will take a year or two longer, delaying the date when debts can begin to be repaid until about 2017 or 2018.

After a fortnight of political disasters for Labour, Cabinet ministers are pinning their hopes on a reassuring performance by the calm Mr Darling to steady the markets, increase optimism among voters and, ultimately, start rebuilding Labour's election hopes.

However, Mr Darling will admit that the downturn has been far sharper and deeper than he expected just a few months ago.

In addition, he will concede that taxpayers are likely to be left with £60 billion losses for money used to bail out the banks that is never going to be recouped.

A big investment in green initiatives, with targeted action to shore up low-carbon industries stricken by the recession, will be at the heart of Mr Darling's recovery package.

The aim is to secure tens of thousands of jobs that are under threat while retaining industries that are expected to be of growing importance to the economy in the next decades. An extra £100 million to pay for council and social housing to be better insulated will be announced, along with some £200 million to promote schemes to harness wind and wave power and other clean-energy technologies.

Officials believe the UK's low-carbon sector can grow by almost a half, £150 billion, and employ 1.3 million people by 2015.

North Sea oil firms will get tax incentives to explore and develop new fields in hard-to-reach areas.

There is a rising expectation of a "scrappage" scheme which will pay motorists about £2,000 for their old car if they invest in a clean new vehicle. Details are still being thrashed out, however, and officials say no final decision has yet been taken.

Shadow chancellor George Osborne said the Budget would be a "day of reckoning" for Labour and see a government admission of the worst recession since the Second World War and the worst public finances in the world.