By Sumeet Desai
LONDON, March 26 (Reuters) - British finance minister Alistair Darling said on Thursday spending was needed to fight unemployment and that Bank of England Governor Mervyn King agrees everything possible should be done to support growth.
King said this week that massive government borrowing deficit meant it would have to be cautious about any more fiscal stimulus to boost the recession-hit economy, causing a political storm ahead of next month's G20 summit and budget.
Asked repeatedly in parliament by opposition politicians in parliament on whether he agreed with King that more fiscal stimulus was unaffordable, Darling chose to point to the fact that the governor said targeted measures may be needed.
"(King) made the point that he thought measures to help people get back into work were a good thing and ought to be supported," Darling told parliament.
"And the point I'm making and I'll make it to him as well: if we're going to help people get back into work ... it does mean spending money."
The government announced a 20 billion pound stimulus package in November and that together with the cost of bailing out the banks, collapsing tax revenues and soaring unemployment has sent public debt soaring.
Darling also predicted in November that government borrowing could hit 8 percent of GDP in the coming fiscal year. Since then the economy has shrunk much faster than expected, raising the possibility of an even bigger deficit and cutting the scope for any more stimulus to boost the economy.
Prime Minister Gordon Brown, however, is hosting a summit of G20 leaders where he, together with President Barack Obama, is calling on all countries to do more to support growth.
But the Anglo-American calls for more fiscal action are falling on deaf ears in continental Europe where politicians are bristling at having to pay more for a crisis they argue started in the United States.
"Nobody is saying that they need to turn up next Wednesday with a budget on the table. What we saying is that if countries act together then the effect will be far greater," Darling said about the summit next week.
The finance minister will present his own budget on April 22 and aides say he has not ruled out any more fiscal stimulus.
Darling said that he had seen proposals made by BoE Monetary Policy Committee member David Blanchflower arguing for more spending to help unemployed youth.
"I have indeed seen Professor (David) Danny Blanchflower's suggestions and indeed I have spoken to him as well," he said. "It's necessary especially with young people to ensure that they get back into the workplace as quickly as they possibly can.
"But I repeat the point that does mean at some stage you have got to be prepared to spend the money to back that up."
(Additional reporting by Avril Orsmby, Fiona Shaikh and Keith Weir)