Business unimpressed by UK chancellor Alistair Darling

BUSINESS leaders accused Alistair Darling of talking Britain into a recession as the pound fell to a record low against the euro.

The Chancellor’s warning that Britain is facing its biggest economic challenge for 60 years was described as a “self-fulfilling prophesy”.

His words threaten to overshadow the first day of Gordon Brown’s long-awaited political fightback.

In a further setback for Mr Brown, a Populus poll for The Times suggests that most voters do not believe that his rescue plan can protect them from an economic downturn.

The Prime Minister will announce measures to help first-time buyers and homeowners facing repossession. A second set of initiatives on fuel is expected within a week. The poll shows that a large majority of voters do not believe they will benefit. While most of the expected proposals are popular, few think that they will make a significant difference to their own situations.

The findings deal a serious blow to Mr Brown, who has staked his future on proving to voters he can shield them from the downturn.

The Conservatives, who remain 16 points ahead in polls, are expected to oppose many of today’s measures and to accuse Labour of mortgaging Britain’s long-term future for the sake of Mr Brown’s political survival.

David Cameron accused Mr Darling of triggering a crisis of confidence with his remark during an interview that Britain was facing the biggest economic challenge in 60 years.

The Chancellor insisted later that he had meant that the country faced a global challenge, and Downing Street has sought to dampen speculation that Mr Darling would be sacked.

The markets reacted to both the interview and the speculation over the Chancellor’s future.

Richard Lambert, Director-General of the CBI, said that the remarks were a surprise. “Chancellors usually talk up the economy,” he said.

Steve Radley, chief economist at EEF, the manufacturers’ organisation, said that Mr Darling’s comments were “in danger of becoming a self-fulfilling prophecy” because of their impact on confidence.

Martin Weale, director of the National Institute of Economic and Social Reform, mocked Mr Darling’s assertion, saying: “Maybe in the October (pre-Budget report) he will implement rationing.”

The euro rose to 81.37p in early trading as investors took fright – the highest level since the single currency was introduced in 1999. It fell back slightly in late trading.

Sterling is now the worst-performing of the ten leading currencies this year, having fallen by more than 9 per cent against the euro since January amid mounting expectations that the Bank of England would cut interest rates. The pound has also plummeted against the US dollar in recent months and fell to a two-year low of $US1.7996 last night.

Mr Brown’s attempt to regain the political initiative was undermined further when Ed Balls, the Schools Secretary, warned David Miliband that a leadership challenge would be “crazy, destructive and divisive”.

Asked whether Mr Miliband, the Foreign Secretary, was preparing a leadership bid, Mr Balls said: “I know that he is a sensible, rational, sane politician and a good guy, and I don’t think that he would ever do anything so crazy, destructive and divisive, and that is why I am totally confident that’s not what he was doing.”