Mr Osborne is due to impose another £2.5billion worth of spending cuts on government departments, with health and education exempt and the savings used to fund big building projects.

The austerity measures that have characterised the Chancellor's budget statements, since his first in 2010, are due to continue with the extra 2% cuts on top of those announced at the end of last year in the autumn spending review.

Labour and the SNP said Mr Osborne's plan is not working and have called for a switch to promote growth.

Margaret Curran, Glasgow East MP, and Shadow Scottish Secretary called for a cut in VAT to help families who are struggling with rising costs and reduced incomes.

She said: "Scots know that the Chancellor's economic policies are failing and we can't afford to carry on with more of the same.

"We need to see the Chancellor give real help to hard working families across Scotland.

"We need a temporary cut in VAT to give a boost to our economy and to help people who are struggling to make ends meet.

"A jobs guarantee to get our young people back to work. And the reintroduction of the 10p tax rate to help over 2 million basic rate taxpayers in Scotland.

"Last year, we had the omnishambles budget. This year we can't afford more of the same."

The SNP said austerity was not working and wants a boost for capital spending.

Stewart Hosie, SNP Westminster Treasury spokesman "The Government should listen to all those voices from all sides of industry who are urging the Chancellor for a direct boost to the economy from capital expenditure and increased investment.

"And, of course, the Chancellor must get the banks lending. Businesses are still finding access to funding very difficult.

"Plan A has failed. It's time to go for growth."

Business leaders and trade unions also called for action to stimulate growth

Frances O'Grady General secretary of the TUC, said: "With the economy stagnating, the pressure is on the Chancellor to deliver a pro-growth Budget.

"But spending just £2.5 billion a year more on infrastructure projects will boost growth by a measly 0.06%.

"Worse still, funding it through departmental spending cuts will mean further reductions in public services.

"With interest rates negative in real terms, the Chancellor has the perfect opportunity to invest in Britain's future, rather than raiding departmental budgets to cover his failed economic strategy."

John Cridland, the CBI Director-General, said: "To boost the construction sector, we are calling for 50,000 new affordable homes to be built, incentives for refurbishing empty homes and the housing guarantee scheme to be extended to all types of housing.

"The CBI is also calling on the Government to bring forward its road spending and repair programme."