The economic downturn is so severe that it would surpass even the Great Depression of the 1930s, Ed Balls said yesterday.

In an extradorinary admission about the extent of the financial crisis, the Schools Secretary and a close ally of the Prime Minister, declared that the downturn was the most serious global recession for "over 100 years".

He said: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years as it will turn out."

He added: "I think this is a financial crisis more extreme and more serious than that of the 1930s."

The comments, which were made at a conference at the weekend, but emerged only last night, were immediately played down by Mr Balls's office.

But they were seized on by the Conservatives as a "worrying admission."

George Osborne, the Shadow Chancellor, said that the comments surpassed Gordon Brown's assessment of the severity of the crisis.

The Government is forecasting that the economy will recover by the second half of the year.

"This is a very worrying admission from a Cabinet minister. We are being told not only that we are facing the worst recession in 100 years, but that it will last for over a decade, far longer than Treasury forecasts predict,'' he said,

Vince Cable, the Liberal Democrats' Treasury spokesman, said: "Instead of giving clear and consistent leadership, Government ministers are oscillating between complacent optimism and this doom-laden picture of Armageddon. Surely, the truth lies between the two?"

Last week the Prime Minister said that the world was in a full-blown economic "depression", but his office quickly declared that comment a slip of the tongue.

Mr Balls, who made the comments in a speech in Yorkshire, was a key economic adviser to Mr Brown while he was Chancellor and is one of his closests confidants.

The two have been closely linked for years, both in Opposition and in Government.

Mr Balls was formerly a chief economic adviser to the Treasury before being appointed to the high-profile role of Secretary of State at the Department for Children, Schools and Families in 2007.

Yesterday the Financial Services Authority gave warning that Britain was at risk of a deeper and longer recession than expected.

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