Brown targets families hit by economic downturn

Prime Minister Gordon Brown, seeking to reverse a slump in popularity, offered help yesterday for Britain's troubled housing market and for families hit by an economic downturn.

Opponents called Mr Brown's move a desperate bid for survival after support for his ruling Labour Party hit a record low. Opinion polls suggest the opposition Conservative Party would win power with a big majority if an election were held now.

"Our immediate priority - at a time when food and fuel bills are rising and mortgages more difficult to obtain - is to help family finances," Mr Brown told Parliament as he unveiled a draft legislative agenda for 2008-2009.

The Bank of England yesterday delivered its bleakest economic forecasts since Labour came to power in 1997, predicting accelerating inflation, slowing growth and further house price falls.

Mr Brown proposed a national savings scheme for low earners to which the government would contribute.

He announced reforms to banking regulations, whose failings were exposed last year when Britain suffered its first run on a major bank in more than a century. There were also reforms to education, policing and immigration.

The Conservative Party said the plans were another relaunch to save Mr Brown's political skin.

Labour slumped to its worst share of the vote on record in May 1 local council elections amid mounting living costs, concern about a potential house price crash and fatigue with Labour after 11 years in power.

The drubbing sparked mutterings in the Labour Party about Mr Brown's suitability to lead it into a parliamentary election due by May 2010.

"This... has nothing to do with the long-term needs of the country and everything to do with the short-term political survival of the prime minister," said Conservative leader David Cameron.

"It is another relaunch. His ideas have run out of steam."

Mr Brown promised more measures in coming weeks to shore up an economy being buffeted by a global crisis, showing signs of slowing growth, rising inflation and unemployment.

The Bank of England said Britain's economy could shrink for a quarter or two and inflation may near four per cent this year, dampening expectations of interest rate cuts that would help the flagging property sector.

To support the housing market, Mr Brown announced £300 million of new schemes.

The banking reform bill will allow the Bank of England to keep secret loans it makes to banks that are in difficulties.

The government was forced to nationalise mortgage lender Northern Rock this year after it became the biggest British casualty of the global credit crisis.

Mr Brown began his fight back on Tuesday with an unexpected income tax cut for 22 million people to try to defuse a row over earlier tax changes that left some five million people worse off.

The government will be forced to borrow £2.7 billion to pay for it, swelling its big budget deficit.

The Conservatives accused the government of seeking to buy votes ahead of an election for a single parliamentary seat next week that the opposition could win.