GEORGE Osborne is expected to pull at least one rabbit out of the hat when he delivers his fifth Budget today amid a backdrop of improving economic figures.

The Chancellor is tipped to raise the tax-free personal allowance level from £10,000, which comes into effect next month, to £10,500; but he could surprise people by raising it further to £11,000.

As Mr Osborne comes under fire from his Conservative colleagues for dragging millions of more people into the higher 40p tax band than he originally intended, he could seek to reduce the rate: a cut of a penny to 39p would cost only £1.2bn, according to Treasury figures. But he might leave such a move for his last Budget just before the May 2015 General Election.

With growth figures expected to be uprated yet again, the Chancellor will insist he is determined to build a resilient economy and embed the recovery for the long term. While things are moving forward, he will argue, more difficult decisions will need to be taken: the austerity programme is due to continue to 2018.

Alex Salmond warned Mr Osborne against making short-term promises as they would not compensate for the "impact of decades of mismanagement of our economy by the UK Government". The First Minister again urged the Chancellor to make additional capital investment available to boost Scotland's recovery.

More calls, for example from the Scottish Council for Development and Industry, were made for Mr Osborne to scrap the duty escalator, which each year guarantees a hike in the cost of a bottle of whisky, and to devolve air passenger duty. It is thought, in the last economic statement before September's independence referendum, he is more likely to do the former rather than the latter in a "Budget for the Union".

Yesterday, David Cameron and Nick Clegg defended their decision to expand a tax-free childcare provision, insisting it would be a huge help to millions of families.

From autumn 2015, it will mean working couples could receive £2000 per child to help with their childcare, up from the £1200 set out in the last Budget. Plus, it will not just apply to children under five as first planned but children under 12. Neither the Prime Minister nor the Deputy Prime Minister will benefit from the new policy. No 10 refused to be drawn on the reason, but it is thought it is because both men and their spouses jointly earn above the £300,000 eligibilty threshold.

Defending the policy, Mr Cameron said he wanted to help people, who perhaps worked two or three days a week and wanted to work more but who were restricted by childcare costs.

The PM also responded to the argument that the new benefit discriminated against stay-at-home mums, saying: "In terms of parents at home, we help them through child benefit, we help them through the new married couple's allowance, [and] we help them through the 15 hours of free national education for all three and four-year-olds."