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Gordon Brown bowed to the inevitable and admitted yesterday that Britain was about to go into recession for the first time in 16 years. He did so as he highlighted new plans to persuade mortgage lenders not seek to repossess the homes of borrowers unable to pay their arrears.
In the Commons Brown followed the example of the chairman of the Bank of England, Mervyn King, and said the country had to prepare for recession.
Brown told MPs: "Having taken action on the banking system, we must now take action on the global financial recession."
He said this was likely to cause "recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too".
The Conservative party leader, David Cameron, tried to make Brown shoulder some of the blame for Britain's economic malaise, and pointed out that half of the OECD countries were going into the downturn with budget surpluses, making it possible for them to cut taxes for families.
"He claimed the credit in the boom, why won't he take responsibility in the bust?" Cameron said.
Britain will not formally go into recession when the latest growth figures are published tomorrow because there was zero growth as opposed to negative growth in the previous quarter. A recession is technically defined as two successive quarters of negative growth.
Brown announced that in the wake of the downturn fresh guidance was being issued to judges to try to reduce the 40,000 repossessions forecast for this year. The Treasury announced new court protocols from the Civil Justice Council designed to make repossessions a last resort.
Lenders will now be expected to demonstrate to courts that they have tried to discuss and agree alternatives to repossession when borrowers get into trouble with their mortgage repayments. If a case reaches court, lenders will be required to tell the court precisely what they have done to comply with the protocol.
Lenders, under the new guidance, coming into force on November 19, must explore options to help people stay in their home, such as extending their mortgage term, changing the type of mortgage they have, such as switching people to an interest only one, deferring the payment of interest and adding arrears to the overall loan. One of the toughest lenders in terms of repossession has been Northern Rock, owned by the government.
In addition the government is proposing that companies engaged in sale and rent back schemes, which may target vulnerable homeowners, should be brought under FSA regulation for the first time. The government is following a recommendation from the Office of Fair Trading.
Buoyed by two new opinion polls showing his personal standing is rising, Brown was also complimented by the French president, Nicholas Sarkozy, who proposed that the prime minister be asked to regularly attend meetings of the euro-group of countries over the next year.
Brown will also attend a meeting of world leaders on the economy announced yesterday by President Bush for Washington on November 15, 11 days after the US presidential election.
A fresh poll by Ipsos MORI shows Labour up six points to 30 points and the Conservatives down seven points to 45 points, with the Liberal Democrats on 14 points up two. A separate poll by YouGov for Channel 4 News showed Labour greatly narrowing its deficit in the must-win marginal seats from 13 points to five.
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