Follow FT.com’s live blog on the Budget today at 12.30pm BST

A £1bn mass job creation programme is the centrepiece of the jobs package in today’s Budget. Alistair Darling is determined to avoid writing off a generation of young people and repeating the mistakes of past recessions. The irony is that he has opted to revamp a (relatively successful) Thatcherite scheme to do so.

The new programme will be called “Jobs for the Future”. Local authorities will bid for funds to set up youth employment schemes. Central government will effectively pay for part time jobs in the community. About 150,000 under-25 year olds will be taken off the dole and put to work by councils. Ministers want to create an additional 100,000 jobs in the private sector, by providing an employment subsidy for sectors such as social care.

This is eerily similar to Margaret Thatcher’s “Community Programme”, which at its peak put 230,000 people to work clearing ditches, filling potholes, and working for voluntary groups like the National Trust. It was basic, low-skilled work, but it kept people in the habit of working. One of its beneficiaries was Paddy Ashdown, the former Liberal Democrat leader.

The new twist from Darling and James Purnell is that the jobs will be focussed on Britain’s future economic needs. So while there will be some loft lagging and road fixing, the emphasis will be more on creative industries, the arts, sports coaching and green jobs. A typical scheme would see scores of young people working as handymen and gardeners for the elderly. The Local Government Association have been lobbying hard for it for months.

Supporters of such schemes see it as genuinely forward looking. It is a way to keep young people gainfully employed and close to the Labour market, without crowding out the private sector. The problem with the old scheme was that people were often doing simulated work that didn’t properly prepare them up for the real economy jobs. Let’s see if Purnell — and the local authorities running the scheme — can make sure it is more relevant this time.

Some grim developments on the public finances front. Alistair Darling prepares to acknowledge the biggest forecasting error ever made by a British chancellor (he takes the crown from Denis Healey). The IFS calculates that we’ll have to find £39bn a year in extra taxes or spending cuts till 2016, just to plug the fiscal black hole. And, perhaps scariest of all, one of the most powerful UK hedge fund managers warns that the “only policy option left” for Darling is to print lots more money.

This is not a cheap audition to be the next George Soros. Mike Platt, co-founder and chief executive of BlueCrest, Europe’s fifth-largest hedge fund, is a serious figure who usually shuns the limelight.

He predicted quantitative easing would be required six months before the Bank of England fired up the presses. Now he and other hedge funds are betting that Britain will have no choice but to print its way into an inflationary spiral.

This is the key quote from his interview with James Macintosh:

“The easiest way for the system to be saved is to print money. It is the only policy option left.”

We predicted in October that the government could suffer an uncovered gilt auction within months because it was trying to raise such a vast amount of money from the bond markets.

From Bloomberg a few minutes ago:

UK government bonds slumped, extending three days of losses, after an auction of 40-year gilts failed to meet the amount of debt the Treasury offered. Investors bid for 1.63 billion pounds ($2.4 billion) of
notes, lower than the 1.75 billion pounds of 4.25 percent notes the Treasury had slated to sell, the UK Debt Management Office said today.

“Basically it’s the first failed auction,” said John Wraith, head of sterling interest-rate strategy at RBC Capital Markets in London. “They didn’t receive enough to cover it all so the market’s obviously sold off extremely heavily.”

UK bonds fell, pushing the yield on the 10-year gilt 10 basis points higher to 3.43 percent by 11:02 a.m. in London.

It may be too early to gauge how bad this is for the government. The man in charge of gilt issuance told MPs last year there had been no uncovered auctions for seven years; but one wouldn’t be the end of the world. A “series” of uncovered auctions would be much more disturbing.

The news will add to the discomfort following Mervyn King’s warning yesterday on another fiscal stimulus package in the Budget.

Steven Major, head of global fixed income research at HSBC, said: “The bond markets are increasingly worried about the large amounts of debt the UK is taking on, while poor inflation numbers added to worries about the economy.”

UPDATE

A fresh gilt auction on Thursday has gone well, easily covered by investors - proving that one swallow doesn’t make a summer, etc. Attention will still be focused on the next round of auctions, however.

Jean-Claude Trichet, president of the European Central Bank, warned on Monday that governments should stop concocting new stimulus measures and just get on with the ones they’ve already announced.

And now Mervyn King (pictured) has weighed in with comments which will not be welcomed fulsomely in 10 Downing Street.

King, governor of the Bank of England, made what can only be described as a surprise intervention this morning when he told MPs the recession was ”bound to lead to higher fiscal deficits and it doesn’t make sense to try to offset that”.

He told the Treasury select committee: ”We are going to have to accept for the next two or three years very large fiscal deficits. Given how big those deficits are, I think it is sensible to be cautious about going further in using discretionary measures to expand those deficits.”

This is music to the ears of the Tory party, whose initial caution towards fiscal stimuli - late last year - made them look temporarily isolated.

My colleague Chris Giles (FT economics editor) notes that King is “sailing very close to the constitutional line in providing advice to government.”

UPDATE

10 Downing Street hit back this afternoon by citing Barack Obama’s call for other nations to help “jump start” the global economy. BO writes in today’s International Herald Tribune calling for other G20 partners to take actions to “amplify” the actions of the US.

You may not have noticed, but bank shares have more than doubled from their recent lows as sentiment warms - temporarily or otherwise - to the sector in the wake of government rescue plans on both sides of the Atlantic.

This has repercussions, not least for Lloyds; which is already 43 per cent owned by taxpayers. To participate in the British government’s insurance scheme that figure could rise to 63 per cent (or higher in economic terms).

Or maybe not. Robert Peston makes the point today that Lloyds Banking Group shareholders could still retain more than 50 per cent of the troubled bank.

Unless there’s a sudden and unexpected reversal in Lloyds’ share price, the new shares it is selling may not after all end up being dumped on taxpayers: they may be bought by mainstream, private-sector investors and the state could yet remain with a stake in Lloyds of less than 50%.

Archie Kane, a board member* of LBG, made the same point at the Scotland select committee last week.

“If the preferences shares are converted it could end up with 63 per cent. Even that’s not a certainty…depending on the price of the shares in the market, existing shareholders have the right to buy the shares. It is unclear what the government ownership will be,” he said.

“At this point in time the strike price of these shares is lower than the actual price…that would be reasonable to assume that some of the shareholders will require those shares. It is (still) unclear as to what the final position will be.”

* Group executive director for Scotland

His allies admit it will have to happen. Ministers just think he should just get on with it. The Tories, meanwhile, are licking their lips at the prospect of Gordon Brown stubbornly refusing to give way. The longer he holds out, they say, the more painful the eventual capitulation will be. The pressure is building. At some point, Brown may be forced to break the unspoken golden rule of his political career and say sorry.

It is unlikely to be straightforward. When it comes he will probably admit that mistakes were made, or some suitably unspecific formulation. But it will be the gesture of “humility” that even the Alistair Darling now says is required. In his interview with the Daily Telegraph, the chancellor takes the significant step of acknowledging that everyone — even his predecessor — must accept some responsibility for what went wrong. Blaming the US, subprime bankers, global forces or shirt-sleeved speculators will no longer wash with the public.

The chancellor seems to be playing the unlikely role of cabinet outrider, by daring to speak uncomfortable truths. After his last big interview with a feature writer in late August, Darling was pilloried for suggesting the world economy was in bad shape. He is now, perhaps, pre-empting the blast of public anger that could soon target under-achieving politicians instead of overpaid bankers.

Will Brown eventually admit to mistakes? His speech to Congress would have been a good point to do it, given that he would be surrounded by lawmakers who are arguably more culpable than him. But there are still no signs of him giving in. Brown today told aides that an apology would just bring a hammering from the Tories. This may be true. The danger is that Brown will look increasingly out of touch as he stands alone waving a ‘no surrender’ flag.

Here are the key Darling quotes:

There are a lot of lessons to be learnt by regulators, governments, all of us. The key thing that went wrong was a culture was allowed to develop over the last 15 years or so where the relationship between what people did and what they got went out of alignment, especially at the top end.

If there is a fault, it is our collective responsibility. All of us have to have the humility to accept that over the last few years, things got out of alignment.

“There are some very hard questions to be asked about the regulatory model we have operated for the last few years. The model of us saying to [the bankers] ‘you say it’s OK to us and we’ll go along with it’ has failed…financial services have to be properly run and supervised.”

I’m sure there’s a mixed metaphor to be had here re a big fish across the pond.

But the RBS director with an equally impressive pension - according to RBS’s 2007 accounts - is one Larry (Lawrence) Fish, chair of the bank’s US operations. His pension pot was $24m at that point.

Fish was previously chief executive of Citizens, an RBS subsidiary in the US. Now a non-executive, he is set to quit the company before April.

Incidentally his pay in 2006 (£6.59m) was more than Fred the Shred (£3.99m).