Page last updated at 17:33 GMT, Sunday, 4 January 2009

PM defends handling of downturn

The prime minister says he does not intend being defeatist

Gordon Brown has defended his handling of the economic downturn, saying the government "must play its role".

Speaking on the BBC's Andrew Marr Show, the prime minister said 2009 would be "challenging and difficult".

But he insisted he was right to use fiscal policy to secure the economy - his priority this year.

Mr Brown also said he was not thinking about calling an election. The Conservatives have accused the government of "headline grabbing".

The prime minister said he wanted to see a return to banks doing what they should be - "lending" - and did not rule out the need for further bank bail-outs in the future.

But he said: "I don't think that's the first thing anybody would think about at the moment."

That comment was echoed later by the chancellor, who told BBC Radio 4 that further re-capitalisation would not be his "first port of call".

Alistair Darling said talks were continuing with the banks about steps to encourage more lending.

In October, the government announced that it would inject 37bn into three of the UK's biggest names - Royal Bank of Scotland, Lloyds TSB and HBOS - to secure their futures.

Job creation

Mr Brown was asked about government plans to bring forward 10bn of spending on public works, digital technology and environmental projects.

He said the programme would create 100,000 jobs, helping to curb rising unemployment and enabling the economy to stabilise.

We are going to make sure that through this downturn, people will be protected
Gordon Brown

"We are not going to do what happened in previous recessions and allow people to go under," he said.

Some 30,000 jobs are to be created in school repairs in an attempt to help private construction firms who have suffered in the economic downturn.

When pressed about whether a general election could be called in 2009, Mr Brown said: "It is the furthest thing from my mind. My duty in these circumstances is to do everything I can to help people now.

"We are going to make sure that through this downturn, people will be protected."

No 'defeatism'

Defending his intervention in the economy, the prime minister said: "If the monetary system is not working as well as it should; if there's no likelihood of huge inflation in the next period of time; if you are not crowding-out private investment then government must play its role."

He urged voters to give his policies time to take effect, saying: "I do not think you can judge the success of recapitalisation by what happened in one month.

"You have got to judge it as a necessary means by which, by saving the banks - and saving is the right word - we restore the ability to fund businesses and mortgages."

He said the length of the current crisis would depend on the amount of international co-operation and he had high hopes for the forthcoming G20 summit in London.

Insisting he would not accept "defeatism", he added: "Things are going to go right because we are going to take the action that is necessary."

As a nation we have run out of cash
Chris Grayling
Shadow work and pensions secretary

Asked whether that action could include cutting interest rates down to 0% in a bid to stimulate the economy, Mr Brown said that was a matter for the Governor of the Bank of England.

However, he did say that falling interest rates helped to drive up inflation, something he wanted to avoid.

Last month, the US Federal Reserve slashed its interest rates to 0% in an attempt to revive the American economy.

'Little substance'

The Conservatives have criticised the government's approach to tackling the downturn and the cut in VAT to boost spending.

HAVE YOUR SAY
We need to concentrate on supporting the wealth creating private sector
Benny, London

Shadow work and pensions secretary Chris Grayling said he was extremely sceptical about the announcements which were "headline grabbing" with "very little substance".

"As a nation we have run out of cash, we've got a debt crisis and the things the government said it would do to try to tackle these difficulties are just not working," he told the BBC.

"The reality is it's only a month since the government delayed its biggest public works project - the project to build new aircraft carriers - because it said it had run out of money," he added.

The Liberal Democrat's treasury spokesman Vincent Cable said Mr Brown's proposals were similar to their own but he was not convinced they would be implemented properly.

He also said the plan to create 100,000 jobs was coming as perhaps a million were going to be lost.

"The key point is to make sure the banks are lending again," he said.

"The problems are in part because of a paralysis with decision making because they are being set contradictory objectives."

The prime minister is to tour the country this week before a jobs summit involving government, business and unions.

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