Brown to claim recession over as union boss warns of poll disaster

PM will deliver an upbeat assessment of the economy at the TUC conference this week – but Unite's joint leader Derek Simpson predicts 'slaughter' unless he axes Mandelson and Miliband

Gordon Brown will declare this week that Britain is emerging from recession and that the economy is on the "road towards recovery".

The Prime Minister will deliver this extraordinarily upbeat assessment in a speech to union leaders exactly one year on from the collapse of Lehman Brothers, the catalyst for the worldwide financial crisis.

It comes as Mr Brown faces a fresh challenge to his authority from the leader of Britain's biggest union, who today warns the premier that he must "move aside" Peter Mandelson and David Miliband or face "slaughter" at the general election.

In his most outspoken interview yet with The Independent on Sunday, Derek Simpson, the joint general secretary of Unite, escalated the threat of a Labour civil war by describing the Secretary of State for Business and Foreign Secretary as "thick" and "Tories".

The insults threatened to overshadow the start of the TUC conference in Liverpool tomorrow and the month-long conference season, which looks set to be dominated by fresh speculation of a leadership challenge.

Mr Simpson, whose union has two million members and gave Labour £15m last year, also infuriated Ed Balls, who regards himself as the natural successor to the Prime Minister, and Downing Street by tipping Ed Miliband as the heir to Mr Brown.

Mr Simpson said Mr Brown was the "right person to lead the party", but was "shuffling and hesitant" and had overseen "half-measures" and "blandishments" that were "not done with any great enthusiasm or passion".

In his speech on Tuesday, the Prime Minister will send a message to Labour critics that they must focus on the dividing lines between the Government and Tory "isolationism" on the economy, rather than plot his downfall.

Mr Brown will say: "Government and leadership are always about making choices. Not about taking the easy route, or the obvious one, but about setting a course and sticking to it, in the best interests of the country.

"The Government would have made a serious mistake if it had listened to its critics. We would have made the wrong choices. But we faced those critics down, and we have been shown to have been right because today we are on a road towards recovery – but things are still fragile, not automatic, and the recovery needs to be nurtured."

He will repeat his claim – contested by David Cameron – that the Tories are planning to put the recovery at risk by planning huge and immediate cuts to frontline services.

The Tories denied as "complete nonsense" a report yesterday that George Osborne, the shadow Chancellor, had asked Nick Macpherson, permanent secretary to the Treasury, to plan for 30 per cent savings – interpreted by Labour as "cuts" – across all government departments.

But while Mr Brown will say Labour will continue to spend in the short term to stabilise the economy, he will warn union leaders that there will be "tough choices" to be made on public spending in the future.

"People's livelihoods and homes and savings are still hanging in the balance, and so today I say to you: don't put the recovery at risk. Don't risk it with the Tories whose obsessive anti-state ideology means they can't see a role for government in either recession or recovery."

Banks must not risk the recovery by refusing to "do their duty" and lend to families and businesses. But Mr Brown will add: "We have to make tough choices in public spending and we will need the support of the Labour movement in protecting the frontline first... Don't risk your members' jobs or the nation's future with the Tories."

Mr Brown's comments risk being branded as overly optimistic. While there are signs of encouragement in the housing market and the stock market, Lord Mandelson cautioned last week that Britain was facing a "double dip" recession. And the shadow Chancellor George Osborne said: "A strong and honest PM would have told the unions the truth about the need to cut spending in a recovery, as in the end it will be the low-paid who suffer most if we don't deal with the debt crisis. Instead, this weak, isolated Labour leader is telling his election paymasters what they want to hear."

Mr Brown will also say that, at next week's G20 summit in Pittsburgh, he will push a commitment to continue spending and refuse to set out a "premature" exit strategy from the fiscal and monetary stimulus phase.

Suggesting a different approach between London and Washington, last week the US Treasury Secretary, Tim Geithner, said the Obama administration had begun to withdraw emergency support for banks, and that focus should be placed on recovery.

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