UPDATE: UK Darling: High-Pay Commission Won't Work

UPDATTE: UK Darling: High-Pay Commission Won't Work

(RECASTS lede and UPDATES throughout with further comment, details.)

  By Laurence Norman
  DOW JONES NEWSWIRES

BRIGHTON -(Dow Jones)- The U.K. jobless rate will likely rise into next year, U.K. Chancellor of the Exchequer Alistair Darling said Tuesday.

Speaking at a panel discussion on the sidelines of the governing Labour party conference, Darling was asked when the jobless rate would peak..

"Unemployment will continue to rise this year and it will rise into next year," he said.

The jobless rate stood at 7.9% in the three months to July, its highest level in more than a decade.

Richard Lambert, Director General of U.K. business lobby, the Confederation of British Industry, also said he expects the jobless rate to rise into next year and that growth would likely be too weak in the second half of 2010 to make "a big dent" in the jobless rate.

Speaking at a roundtable discussion hosted by the Labour supporting Fabian Society, Darling also said the government can afford to finance its large budget deficits in coming years.

"Yes, we can service it but that is only possible if we have a credible plan" for reducing the deficit, he said.

Darling said the government's promise to halve the deficit in four years would help convince investors that the public finances were under control.

"We need to get borrowing down," Darling said, noting that a Labour government does not want to end up spending more on debt than public services.

Darling also said the U.K. economy was "coming through" a very deep recession.

The Office for National Statistics on Tuesday revised up its estimate of U.K. output in the second quarter. The ONS said the economy shrunk 0.6% between April and June, up from the original 0.7% decline estimate.

The chancellor was also asked if the Labour government would back a high-pay commission to keep tabs on large salaries.

"No, I don't think so," he said.

Darling said "it's extraordinarily difficult to operate some sort of pay policy," with people easily able to move to other countries if there are limits on pay.

He said there's a "huge social and economic case" for the minimum wage but that pay policies "usually fall apart because they are unenforcable