Tony Blair and Tory leader William Hague have clashed angrily in the Commons over the state of the British economy.

In some of the most personally abusive exchanges seen between the two men, Mr Hague charged the prime minister with displaying "extraordinary complacency".

William Hague: "If he thinks there is not a serious economic problem, he is not living in the real world"

And he accused him of echoing his predecessor Jim Callaghan's infamous words at the height of the 1970s' economic problems - "crisis, what crisis?"

Mr Blair hit back, claiming Mr Hague was peddling "idiotic hysteria" about the state of the economy.

And he later turned on Tory claims that there was a "black hole" at the centre of the government's figures, declaring: "The great black hole is the space where the Conservative party's brain used to be."

'Grossly offensive'

The bitter exchanges came amid fears that Rover's Longbridge plant in Birmingham may be forced to close after 2,500 job losses were announced.

And they followed alleged comments by Bank of England governor Eddie George that northern unemployment was a price worth paying for curbing inflation elsewhere.

Former Labour minister David Clark claimed the remark had been "grossly offensive" to workers in the region but Mr Blair claimed they had been taken out of context.

Earlier in the day the prime minister had tried to steady the nerves of his own MPs by insisting if they stuck to their economic guns, things would come right in the next two or three years.

Mr Blair has come under intense pressure to make an emergency Commons statement on the state of the economy and the row boiled over during the first question time since MPs returned from their summer break.

Hague demands action on economy

Mr Hague waded in immediately, demanding to know what the government was going to do to stop growing job losses and the economic slowdown.

When the prime minister pointed out the number of jobs created by the government, Mr Hague rounded on him declaring: "That is a statement of extraordinary complacency from a member of parliament who saw 600 jobs cut in his own constituency a few weeks ago."

Sharpen act

Mr Hague added: "If the prime minister thinks there is not a serious economic problem then he is not living in the real world.

"We even had the trade secretary, who is getting very gaffe prone now he has to speak for himself, telling the workers at Rover this morning to sharpen up their act.

"I think the workers at Rover would tell the prime minister and the chancellor and the trade secretary - none of whom have ever worked in a business in their lives - that they should sharpen up their act."

Mr Blair said it was clear from Mr Hague's response that he would cut the government's £40bn spending programme on schools and hospitals to answer the country's economic problems.

"If the Conservative response to this economic situation is that they would cancel the spending on schools and hospitals I believe they are wrong economically, wrong socially and they will pay a very heavy price politically," he said.

Turning to Rover, he added: "I agree there is a problem at Rover Longbridge and we have to tackle it but it is not helped by the type of idiotic hysteria he has just exhibited."

That led to another angry response from Mr Hague who declared: "Not for the first time we have a Labour prime minister who comes here and says 'what crisis'.

"He inherited a golden legacy and in 18 months he has squandered it. The last Labour government had a winter of discontent, and this Labour government have had a summer of complacency and are now facing an autumn of rising unemployment."

Job losses

Mandelson: Rover's future in own hands

Later, before Rover unions announced the job losses, Trade Secretary Peter Mandelson warned the firm its future lay in its own hands.

"Ultimately it is for the company to rise to the challenge and to ensure that Rover continues to thrive in the global marketplace.

"Without question, everyone will have to share in the burden of finding this solution - shareholders, management, workforce and suppliers," he said.

But shadow spokesman John Redwood accused him of making a statement that was "as patronising as it was complacent".