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Gordon Brown’s economic rescue package was overshadowed by a warning yesterday that Britain is plunging into recession.
Mr Brown announced a year-long suspension of stamp duty for homes under £175,000, as he began his political fightback with a package aimed at first-time buyers and homeowners.
Questions about how the measure will be funded and a forecast that Britain will be the only leading economy in recession by the end of the year threatened to derail Mr Brown’s relaunch. Alistair Darling was unable to answer questions on how he will pay for the £600 million stamp duty holiday as he endured another awkward day of speculation over his future.
Suspicions that Mr Brown forced his Chancellor to bring forward the stamp duty measure grew, as it emerged that the final decision was only taken at the weekend.
Treasury sources said that the Chancellor was “not persuaded” by the need for a suspension late last week. Caroline Flint, the Housing Minister, said last month that the Government would not be “bumped into” announcing any measures on stamp duty before the PreBudget Report in the autumn.
Mr Brown got his way after the fall-out from Mr Darling’s claim at the weekend that Britain was facing the worst economic conditions in 60 years. The Chancellor sought to repair the damage yesterday and said that he was optimistic that Britain could weather the storm owing to its high employment levels and low interest rates.
His efforts to restore confidence were badly undermined by a forecast from the Organisation for Economic Cooperation and Development (OECD) that Britain’s economy will shrink in the final two quarters of the year. In its latest outlook for the G7 group of leading industrialised nations, the OECD said that Japan, Italy, France and Germany, which recorded shrinking output in the second quarter of the year, would recover sufficiently to record some growth this year. It also revised its forecast for US growth this year from 1.2 per cent to 1.8 per cent.
In contrast, the British economy is set to slump further after nearly 16 years of consecutive growth was broken in the second quarter of this year. It is expected to shrink by 0.3 per cent between July and the end of September and by 0.4 per cent in the final three months of the year. The OECD has also cut its its annual growth forecast from 1.8 per cent to 1.2 per cent.
Jorgen Elmeskov, the OECD’s acting head of economics, said that the extent of the disruption to the leading economies from the the US sub-prime crisis was still uncertain. “Potential further losses on housing and construction finance are one source of concern,” he said.
The Treasury is expected during the Pre-Budget Report to reduce its forecasts for growth of between 1.75 per cent and 2.25 per cent in 2008 and 2.25 per cent and 2.75 per cent in 2009.
George Osborne, the Shadow Chancellor, said that the forecasts highlighted Mr Brown’s “weak and dysfunctional” leadership. “Gordon Brown is more focused on his own short-term survival than on the long-term recovery of the economy that he has led to the brink of recession,” he said.
The unions stepped up the pressure on the Prime Minister, with Derek Simpson, the joint general secretary of the union Unite, saying that support for Labour among its members had “probably halved”. In an interview with Channel 4 News, Mr Simpson added: “I think, however, that the half is in the undecided camp.”
He said he believed that Labour was still capable of winning the next election. “The key is, will Gordon have the nous to deliver the kind of message that would reconnect with those disillusioned Labour supporters?”
Asked if Mr Brown was a help or hindrance, he replied: “He is capable of being both.”
The second stage of the economic rescue package is expected to be announced on Monday and to include measures to help poorer families with fuel bills. An aide to John Hutton, the Business Secretary, played down speculation that a number of the energy companies, including npower, EDF and E.ON, were refusing to sign up to Mr Brown’s main revenue-raising measure, in which the Government hopes to raise £160 million by selling permits under the EU carbon-trading scheme.
Not a makeover – just downsizing
When Gordon Brown appeared at an emergency EU summit on Monday, the Prime Minister’s weight loss was seized on by Nicolas Sarkozy, who took pleasure in drawing it to the attention of fellow European leaders. A summer of jogging and long walks in Suffolk had clearly done the Prime Minister good, allowing Sarah Brown to boast on the trip to China about her husband’s weight loss. While he was on holiday in Southwold, he hired a personal trainer, Millie Dobie, for £50 an hour. She would arrive before breakfast and take him on a brisk run through woods and fields, while police bodyguards jogged along behind. He was clearly a more rounded politician, right , before this regime . Back at No 10 he “regularly” uses a running machine, according to his spokesman. But Downing Street denies he has had any makeover. They empasise, for instance, that he does not have a new tailor – he still mainly wears suits from Gieves & Hawkes.
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Enjoy your pension BROWN because you stole ours!!!
Dave Bridge, Southport, UK
Is Gordon just fading away?
albert hall, hove, england
For God's sake Brown - just go. What's it going to take to convince you and noolabour that your government is bad for the UK?
John, Harrow, UK
Next time our super PM goes jogging - can't he just continue and not head back? Seeing the back of him would do wonders for our morale. We would know the worst is over.
Richard, London, UK
What people don't seem to have grasped yet is that inflation is not the worry. Deflation is. Soon you are going to be so relatively poor that you will not be able to afford much and the prices of EVERYTHING will drop drastically. Sorry to tell you house prices will fall 80 - 90 percent. Good luck.
Jon, Bath,
Gordon Brown and his puppet Darling have been telling us for months that the UK economy is the BEST placed to weather the global economic slowdown!
The OECD is telling us that the UK is WORST placed!
How can you tell a NuLab commissar is lying! When their mouths start moving1
Stephanie King, larnaca, Cyprus
Can we afford any more of Mr Browns right decisions. Look at some, Paid over 13 years £156 billion to EU when he knew 95% is unnacounted for, sold half our gold at less than one third the value, smashed a £100billion pensions industry. Borrowed up to £300billion from banks to pay banks + 40billions
Jas, Alders, UK
Gerry Watts,
this is funny considering that many of the UK's sectors have notoriously horrible service.
Alex, London, england
Things can only get ...errrrrr....WORSE !!!!!!!!!!!!!!!!!
ian payne, walsall,
Yet more millions being wasted in a pitiful attempt to buy votes. The cupboard is well and truly bare. Will the last Nulabour supporter kindly turn off the lights and shut the door.
Roger, Surrey.,
I doubt that Gieves&Hawkes will be happy with that
sort of publicity.It seems they are responsible for the
worst dressed man on the planet.His clothes fit him as
badly as he fits the position of Prime Minister ie they
fit him nowhere.
john Vestey, porto Ercole, Italy
I just think it is a terrrible pity that we all have to endure a further 18 months of this truly awful government.
They are going to hang on and hang on.
Just you wait-Nothing will come up, nothing will change for the better and things will get much worse .
WILLIAM GRIERSON, KIMPTON, UK
£50 an hour for a trainer? Who's paying for this?
tris, dundee,
There should be a new meaning for" Inheritance Tax": a tax on future generations by this Government,paying for their incompetence. If only brown could carrying on walking, and take his borrowing with him. Do go rapidly into that political goodnight-the country just can't afford you any more.
A Walton, Leicester, England
Gordon Brown has hit the UK economy by his offensive, ineffectiveness and is now again tinkering at the edges because he lacks the courage to take radical measures.
Your dogma has damaged us Gordon and you really must resign.
A.M. Williams, Stafford,
ours will be the only leading econonmy in recession because its based purely on house prices and people borrowing huge sums of money on the back of it and spend spend spend.well the bubble had to burst sometime and that time is now
pat, solihull, uk
Offensive? Yes, I find New Labour to be very offensive.
Now that's decided, can we get on with coming up with sensible policies to deal with recession?
Paul, London,
Can we have the same trainers who slimmed down Gordon have a crack at Public Spending? I daresay they'll be a heck of a lot better than the Treasury.
Paul, London,
He wasnt elected; we cant get rid of him, three cheers for the Dictatorship.
Mike, Berlin,
Shouldn't this read? ..."Brown IS offensive and WE are going to be hit by recession"
judy, Liverpool, England
Our first "lollipop head" world leader ... and it's a bloke ... we must be so proud as a nation .....
susan, glasgow,
Now if Gordon could also slim the State, slim the taxes, slim the number of quangos, and slim the red tape from Brussels, as well as he has slimmed himself, he might yet have some impact.
Paul Freeman, London, England
The headline should read. Browns autumn offensive is hit by his own taxation policy.
He has no one to blame but himeself and we are all paying the price, some should buy him a dictionary for Xmas so he can understand the meaning of prudence. Old Labour ideas rebranded New Labour.
steve tea, Manchester, cheshire
More trouble for poor Gordon....there is more round the corner too if he doesn't come off of the Atkins diet - no fruit/bread/milk is a suicide step to ill-health...get tucked in to the eggs and bacon mate - you know it makes sense!
Derek Clifton, Andover, Hampshire, England
He looks so old and worn and even more unpleasant than before.
Delphine, Oxford,
I am very grateful that the government has done something, no matter how small it is. I am excited to see what will happen to the market as it will certainly affect my family's ability to sell our property and finally move up the market.
Alex, Chichester, UK
Not that long ago we were told again and again by NuLab.,that immigration is wonderful for our economy.So how is it we end up as the only leading country facing a recession ? It looks to me like we've got the worst of both worlds,as you can bet they'll all be entitled to unemployment benefits.
Mike, Dunstable, England
How can we have gone from GBs proud boast that we were one of the world's leading economies with one of the fastest growth rates, into recessiion so quickly? Why did GB go against Tony Blair's advice that we should have joined the Euro. Please step down GB and let someone else do the job..
Michael Bowden, Christchurch, England
GBrown Jan07 'Masterplan to Change The World'.
He was proposing to reorganise IMF, WB, UN, EU, G8, ETC ETC - are the MIGS (Men In Grey Suits) making him suffer, and consequently us.
Or is this a sinister Masterplan to equalise the world's populations?
Where is TBlair and what is his roll ?
John, colchester, uk
Is Gordy jogging to keep warm as he can't afford the heating, and has he lost weight because he can't afford to eat properly?
Sue, Barnsley, UK
Now we know where all the taxes are going.
Gieves and Hawkes suits and personal trainers for GORDO.
How many million suits has he got?
How many billion £50 per hour training sessions?
Is all this expense justified and does it meet targets?
It's our money.
The nation needs to know.
David Nammory, Liverpool,
The damage has been done now. It's just a case of putting measures in place so that we don't allow house prices to rocket again, inevitably leading to the crash we are about to see. Brown claimed the credit for the boom and must take the longest walk for the bust.
Mike, Bristol,
This superficial market tinkering has only one effect: It convinces the market that Brown is soft on inflation, crashes the currency and so drives rates higher. As ever, meddling makes it worse.
A statue would do better.
Pat, Coromandel, NZ
To Paul, down the road in Singapore; the ending for your comment should be "off a short pier".
Bill Peter, Kuala Lumpur, Malaysia
With two fools like brown & darling what do you expect......
John, London, Uk
He should take another long walk.... and keep going.
Paul, Singapore,
Hardly surprising when the UK years ago decided that a "services economy" was the way to go, basically abandoning manufacturing anything, and forgetting that other countries are just as capable of providing 'sevices' ,and much more cheaply. A case of all your eggs in one tatty basket?
Gerry Watts, Hobart Tasmania, Australia
The Emperor's New Suit plus a lot of smoke and mirrors and no answers to simple questions!
Methinks this charade is a cover up for the more sinister rogue of inflation via the huge hikes in food, fuel and energy costs!
Mike O Connor, Plymouth,