30 Aug 2008

Finance minister says UK economy facing huge crisis

4:07 pm on 30 August 2008

Britain is facing its worst economic crisis in 60 years, the country's finance minister Alistair Darling has admitted.

He told the Guardian newspaper the economic downturn would be more "profound and long-lasting" than most people had feared.

The Chancellor acknowledged voters were angry with Labour's handling of the economy.

He admitted the government had "patently" failed to get its message across and that it understood people's concerns about rising living costs and growing job insecurity.

And he didn't hold back on his choice of words, saying voters were "pissed off" with Labour's handling of the economy, a key issue at the next election.

"We have got our work cut out," he said.

"This coming 12 months will be the most difficult 12 months the Labour party has had in a generation, quite frankly."

Ministers are expected to announce a package of measures next week to kick-start the moribund housing market.

The Chancellor has been criticised for sending contradictory signals over possible measures to assist homebuyers.

He also faced a backlash over the abolition of the 10 pence tax rate, which has hit lowest earners most.

Mr Darling hinted at tensions within Prime Minister Gordon Brown's cabinet by saying there were "lots of people who'd like to do my job" and "no doubt, actively doing it".

But he appeared to rule out an autumn cabinet reshuffle as Labour tries to wrest back the political advantage.

"You can't be chopping and changing people that often. I mean, undoubtedly at some stage before the end of parliament he [Gordon Brown] will want to do a reshuffle but I am not expecting one imminently."

The Chancellor's remarks come after a summer of unremittingly bad economic news.

House prices are falling at their fastest rate in 18 years, leading to fears of a wave of repossessions in the upcoming months.

Mortgage lending has slowed dramatically due to the credit crunch while key indicators have suggested that the economy could be poised to go into recession in the near future.

The economy showed no growth in the second quarter of the year while building firms and retailers have laid off thousands of staff in recent weeks amid fears that the economy will deteriorate further.

A member of the Bank of England's Monetary Policy Committee said on Friday that radical action was needed to ensure the crisis did not get worse and warned of a sharp rise in unemployment.