Alistair Darling faces fresh accusations of failing to recognise the danger to Britain’s economy from the deepening financial crisis here and abroad.

With the Chancellor under growing pressure over the scrapping of the 10p income tax band, the Commons Treasury Committee is due to turn up the heat on him today over his handling of the global credit squeeze and its worsening toll of Britain’s prospects.

In a tough report, the cross-party committee charges the Chancellor with complacency over the scale of the threat. It warns him that Britain could be far more vulnerable to the financial turmoil than he has admitted.

The report labels “unreasonable” Gordon Brown’s decision to scrap the 10p starting rate, which was made in his last Budget as Chancellor last year. It says that those below the age of 65 with an income under £18,500 who are in childless households are worst hit.

It says: “We accept that there are benefits in tax simplification and that there are merits to focus on both the needs of children and motivation to work, but conclude that the group of main losers from the abolition of the 10p rate of income tax seem an unreasonable target for raising additional tax revenues to fund these and other initiatives.”

It says that the move may discourage people from entering work. “We are concerned by the poor take-up rate of working tax credit among eligible families without children, especially given that working tax credits are intended to mitigate for low-income households the effect of the removal of the 10p starting rate of income tax.

“We recommend that the Treasury commission research into whether the withdrawal of the 10p income tax band and high marginal deduction rates are creating disincentives that could frustrate the Government’s welfare to work objectives.”

The decision to scrap the rate also appeared to be criticised by Lord Davies of Oldham, the Government’s Deputy Chief Whip in the Lords, who in a debate last week agreed with a suggestion that people were very concerned about the taxation change.

The Treasury Committee’s attack comes after Mr Darling sought to take the initiative this weekend over the response to the crisis from the Group of Seven leading economies, before crucial talks among G7 finance ministers and central bank chiefs in Washington on Friday.

In a letter to his G7 counterparts, the Chancellor told them that it was vital that they demonstrate leadership by committing to a plan of action to address the financial turmoil. G7 ministers are due to consider a report from the Financial Stability Forum (FSF), which will map out moves to quell the crisis and to prevent any repeat.

The head of the International Monetary Fund has said that government intervention at a global level is necessary to tackle the credit crisis. Dominque Strauss-Kahn, the IMF’s managing director, said: “I really think that the need for public intervention is becoming more evident.” In a report, he rejected the idea of the credit crunch being a US problem, saying that it was a global issue.

In its report today, the Commons Treasury Committee says that Mr Darling’s forecasts for the British economy for this year and next are too rosy. It questions his repeated claim that Britain is better placed to weather the storms battering the global economy than other rich nations.

In reality, the MPs conclude, Britain may be under greater threat than rivals, with factors that buoyed growth in the past, such as once-soaring house prices and the former boom in the City, leaving it much more badly exposed as they now turn sour. “We are concerned that the Treasury . . . may have given insufficient weight to the risks of continued financial market turbulence,” the report says.

In the Budget Mr Darling scaled back his forecasts for expected growth this year to between 1.75 and 2.25 per cent from the 2 to 2.5 per cent forecast in last year’s Pre-Budget Report. The bottom end of the new forecast is in line with the average City view, but today’s report suggests that this is still over-optimistic. The Chancellor’s 2009 forecast for growth of 2.25 to 2.75 per cent assumes a swift revival in the economy — a view questioned by the MPs, as well as many City economists.

The Treasury Committee assault on the Chancellor’s assessment of the outlook came as the Bank of England also faced accusations of complacency over the credit crunch from Sushil Wadhwani, a respected former official. With the Bank’s Monetary Policy Committee (MPC) under pressure to deliver a cut in interest rates on Thursday, Dr Wadhwani accused it of “considerable complacency”.

The former MPC member said that Britain could be exposed to the same woes now blighting America, arguing that Britain’s housing market bubble “is at least as large as in the US”.

In his letter to the G7 this weekend, the Chancellor urged agreement on Friday between the biggest economies on “a clear and detailed plan of action”.

He emphasised that global financial conditions had worsened since the G7’s meeting in February in Tokyo, creating “one of the strongest financial shocks for decades”. Ministers needed to act swiftly on the Financial Stability Forum’s recommendations, he argued. “Rapid implementation of the FSF report will not only help to strengthen the global financial system for the longer term, but will help calm market turbulence.”

The FSF is due to set out recommendations for overhauling the global financial regime, including strengthening oversight of banks, and boosting the transparency of the complex financial products being blamed for the crisis.

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