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Tuesday, April 15th, 2008

By Andrew Porter, Robert Winnett and Myra Butterworth

Gordon Brown has been forced to defend his premiership and in particular his economic record as he faced mounting criticism over the credit crisis.

As Britain’s biggest mortgage lenders snubbed his calls to cut the cost of borrowing, the Prime Minister gave a series of interviews to insist he was only “starting” the job.

Amid criticism from opposition politicians and business leaders over his handling of the economy, Mr Brown disclosed that he had turned to his predecessor, Tony Blair, for advice on how to turn around his premiership.

The Prime Minister spoke out following a Downing Street summit with executives from Britain’s top banks ahead of a visit to New York.

His comments came on a day when further evidence emerged of the worsening economic condions facing householders:

Despite Mr Brown’s plea for cheaper home loans, it emerged Halifax and Abbey National - the country’s two biggest mortgage lenders - would be increasing the costs for popular schemes including two-year fixed rate mortgages.

There were fears the price of petrol could rise as the cost of crude oil hit a record high of more than $110 a barrel.

Analysts forecast that as many as 40,000 jobs could be lost in the City as a result of the credit crisis.

Concern is also growing that unemployment figures to be published on Wednesday may reveal an increase in jobless workers in the last month.

Mr Brown faced widespread political criticism over the credit crisis.

 

David Cameron accused the Prime Minister of being arrogant and out of touch and said he had wasted public money on a “gargantuan scale”.

The head of the CBI, Richard Lambert, launched a personal attack on Mr Brown accusing him of jeopardising the country’s entrepreneurial culture.

David Blunkett, the previously loyal former Home Secretary, warned Mr Brown that scrapping the 10p rate of income tax would “crucially” affect lower earners.

And Lord Jones, the trade secretary who is expected to resign before the next election, was forced to pledge his support to the Prime Minister.

Also on Tuesday, the Bank of England released another £15 billion of taxpayer-backed loans for British banks in an attempt to ease the credit crisis.

And ahead of his trip to America - where it is feared he may be overshadowed by a visit from the Pope - the Prime Minister repeatedly tried to show that he was capable of pulling Britain through the economic crisis.

His comments followed a series of poor poll ratings and unrest from some Labour backbenchers about his ability to show clear leadership.

In one interview, he insisted: “I’m starting a job that I mean to continue.”

In another he even admitted that he had spoken to Mr Blair about the problems. He said: “I have worked with Tony for years and we’re very good friends. We talk often about some of these things. I think after ten years of one party in government, you’ve obviously got to be able.”

Following criticism that he was increasingly out of touch with the economic concerns of ordinary people, Mr Brown also used the media appearances to empathise with voters.

He said: “I wake up in the morning thinking what can we do to help homeowners, to help those people who have got small businesses, people looking for jobs, people wanting opportunities so they can have better jobs for the future.”

He added: “And we will do everything in our power to make sure we’re on the side of ordinary hard-working families who need a government on their side, that we will take the action necessary.”

Mr Brown insisted he “recognised” the financial difficulties facing families. But he said he was prepared to risk unpopularity in order to make the right “long-term” decisions for the country.

“What people would not thank me for is taking the wrong long-term decisions,” he said. “The right long-term decisions are to keep inflation low and keep interest rates low.”

The Prime Minister’s comments have been attacked by both his own backbenchers and opposition politicians as they were not accompanied by firm policy initiatives.

Banks, building societies and leading City institutions were summoned to a meeting at Downing Street with Gordon Brown to discuss ways of easing the credit crunch. Mr Brown and Alistair Darling, the chancellor who leaves for China later this week, have called on banks to cut interest rates in a bid to help hard-pressed homeowners.

However, following the meeting, Halifax, the country’s biggest mortgage lender, announced it will increase the cost of its two-year fixed rate mortgages. Abbey will also increase some of its rates.

Melanie Bien, director of independent mortgage broker Savills Private Finance, said ‘The decision by the two biggest lenders to edge up the rates on some of their most popular mortgages less than a week after a reduction in base rate illustrates the pressure on competitive deals. It suggests the two lenders have been inundated with applications. Putting up rates is a way of deterring borrowers while further enhancing their margins.”

At the Downing Street meeting, the Prime Minister was told by the banks that they wanted the Bank of England to offer more assistance and to accept mortgages as collateral for state-backed loans.

The Bank is understood to be considering the request, but the Conservatives accused Mr Brown of failing to adequately address the crisis.

George Osborne, the shadow Chancellor, said: “In typical Gordon Brown style, the only concrete decision that came out of his meeting with bankers was the promise of another meeting - this time with his understudy, Alistair Darling.

“With more gloomy news on housing it is time for the government to stop dithering. We need to unfreeze the mortgage market. That way we can help thousands of families facing higher mortgage bills as a result of the credit crunch.”

See More:Money UK News 

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