Battle is joined in blame game over recession

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Indy Politics

Ministers said that Britain will battle through the financial crisis as the country slipped into negative growth and opposition parties warned that consumers would pay the price for the economic downturn.

Gordon Brown, who used the term "recession" for the first time on Wednesday to describe the situation facing the country, said the problem was an international one and would be tackled in partnership with others.

"This is a global financial recession," said the Prime Minister. "And we're fighting it every way we know how, working with other countries, trying to get the banks moving here in Britain, trying to help people with mortgages, at the same time increasing the winter allowance for pensioners, the tax cut of £120 going to basic rate taxpayers."

Alastair Darling, the Chancellor, insisted that Britain would get through the economic downturn, and Labour MPs issued calls for tax and interest-rate cuts to help hard-pressed families cope with the squeeze on credit and consumer price rises.

Conservatives, meanwhile, stepped up their demands for cuts in business taxes and a VAT holiday for small firms. David Cameron, the Conservative leader, declared that yesterday was "the day the recession became real." Nick Clegg, the Liberal Democrat leader, warned that Britain was facing a "winter of discontent" ofeconomic gloom.

Mr Cameron said: "We have had 10 years of a government saying no more boom and bust. We have had 10 years of a government not putting aside money for a rainy day. Well, that rainy day has now come. We will get through this, but we need change. We need change to support small businesses, we need change to bring a more balanced economy."

George Osborne, the shadow Chancellor said: "It is a defining moment in the record of Gordon Brown. The day that we can all see that the central claims he made over 10 years – that he had abolished boom and bust and therefore didn't need to set aside money for a rainy day – have been shown to be completely false.

"Sadly, it will be millions of families, pensioners and companies that will pay the price for Labour's failure to prepare for this moment."

The Liberal Democrats called for a "drastic cut in interest rates" and a package of tax cuts for those on low incomes, as well as a programme for social housing. Nick Clegg, the party's leader, said: "With millions of people worrying about how they will afford to get through the next six months, we may well be on the edge of a new winter of discontent.

"The Government needs to cuttaxes for those on low and middle incomes, while the Bank of England must make a further cut in interest rates to help families struggling to make ends meet."

John McFall, Labour chairman of the Commons Treasury Select Committee, called on ministers to do more to compensate people who lost out from the abolition of the 10p tax rate this year, while Labour left- wingers published a report calling for ministers to embark on a major infrastructure programme to boost the economy, and lift their self-imposed cap on public-sector pay.

Brendan Barber, the TUC general secretary, said: "Urgent action should start with a cut in interest rates by the Bank to below 3 per cent. The newly unemployed should be given more help by reversing cuts in Job Centre Plus staff, increasing statutory redundancy pay and lifting the amount of redundancy pay that can be taken tax free. Recent action to help homeowners facing repossession is welcome, but more will need to be done."

John McDonnell, the Labour MP for Hayes and Harlington, said: "TheGovernment needs to launch aprogramme to recession-proof working people, and provide a major demand stimulus in the economy. This would include increasing the income of those most in need by removing the poorest from tax, paid for by tax on the wealthy, increasing the basic state pension and other benefits and immediately restoring the link with earnings, and by reducing VAT on essential goods."

Mr Darling hinted at moves to give more help to families hit by the slowdown, pledging: "What you need at this time is for government to help people to help businesses in this country, and not only to do it here but to work with other countries so we replicate that effort throughout the world. It will be a difficult period but I'm absolutely confident provided we make the right calls we will get through it."

Senior ministers expressed anger yesterday at the decision by the oil producing cartel Opec to cut production by 1.5 million barrels a day. They said the decision risked sending the international markets into new turmoil.

The Prime Minister's spokesman said Mr Brown was "disappointed". "Opec needs to consider the impact that the decision will have on the world economy," the spokesman said."The current economic crisis affects us all and we should all take responsibility not to undermine efforts that have been made to stabilise the economy."

'We're teetering on the brink, but the banks aren't helping'

The Entrepreneurs

Anita Pemberton, 38, met her partner Stuart Punter, 24, in Iraq where they both served in the RAF. They left 18 months ago and sunk their savings into opening a restaurant, The Manor Cottage, in Exmouth, Devon.

Ms Pemberton said: "We sold our house in Cornwall, our car and our motorbike in order to get together some cash. We took out a £300,000 mortgage with Commercial First but also had to pay £10,000 stamp duty and at least £6,000 in set-up fees. The property we bought had originally been a private members' club and because we didn't want to upset the locals we decided to keep it that way. But we soon worked out that as a business model it wasn't going to work so after three months we went public and opened our doors to everyone. The first thing that happened was that the council put our commercial rates up from £134 a month to £500. That hit us hard. For a small business struggling to get started finding an extra £400 a month is not easy.

The three months of operating as a private members' club, meanwhile, hadn't been profitable and we were right on the limit of our £10,000 overdraft with Lloyds. Since then we've doubled our takings and the business is really picking up. But when we went to the bank to ask for a larger overdraft to see us through the first year they said no straight away. We also tried asking the mortgage company for some help – either a holiday or reduction in what we pay – and they said no as well. So in the end we're really struggling, we're teetering on the brink. We've had to close in the afternoons to save on energy bills and I also had to lay off two full-time staff because we simply couldn't afford them. Now there's just me, Stuart and another full-time chef. I'm convinced that with a little bit of help from our bank we have a more than viable business."

'£1 meals have worked a treat'

The Publican

Tony Rabbitts, 48, runs the Four Crosses Inn pub in Cannock, Staffordshire, with his wife, Kay. They live at the pub with their son, Ben, and daughter, Jessica. The pub nearly closed earlier this year, forcing the family out of their home but then the Rabbitts family hit upon a plan involving a mince deal with a local butcher.

"Two years ago our quarterly fuel bills were about £700, now they are at least £1,450. We've just been told by the energy company that, come November, the bills are going up again. It's getting ridiculous. We've already bought a couple of generators and have told customers that we'll be using them and candlelight a lot of the time to cut down on costs.

"Then there's council tax, which has gone from £900 to £1,200 since 2006. In August, the brewery also put our rent up by £450 a week. Our overheads are up somewhere in the region of £3,500 a month compared to two years ago. Of course, the customer has less to spend and since the smoking ban they're more likely to get a Chinese takeout than head down to their local pub for some food.

"We decided to try doing pub meals for £1 and it has worked a treat. For lunch today, we had 420 people in and on average we probably serve 250-300 lunches a day now. If that's what gets bums on seats then so be it."

'Big companies are paying later'

The Small Business

Jamie Thompson, of MTA International, a training consultancy, has found that some of his larger clients are suddenly changing their pay deals.

"During times of economic difficulty companies often rely on outside firms like us to do training. That can cut costs, so there's no reason why we should be too badly affected. But some of our larger clients have tried to change how they pay our invoices. Boots Alliance wrote to tell us that their payments to us would come 75 days after the invoice date, rather than 30. They also introduced a 2.5 per cent 'settlement fee' – a discount they force you to pay. We were not happy so we went to the Federation of Small Businesses and kicked up a fuss. If all the big companies that we deal with treated us in the same way I'd soon be out of business. It's got to the point where we have to be very aggressive to ensure that we get paid. Once the banks stop giving the big companies credit they pass on that problem to the smaller businesses by delaying vital payments. It's basically a form of bullying and small businesses have to stand up to it."

Recession Watch

2. End of the road

*During an economic boom, Europe's companies need lots of new lorries to deliver their wares to grateful customers. When times look tougher, on the other hand, new trucks aren't so useful. Worrying news, then, from Volvo. In 2007, the Swedish motoring giant sold 41,970 lorries to European customers in the third quarter. In the same quarter a year on, the total was precisely 115, Volvo said yesterday. Businesses are delaying ordering new transport and many are struggling to persuade banks to lend them the money.