PRIME Minister Gordon Brown rejected Tory charges of “incompetence and arrogance” as a slew of negative revelations underlined the scale of Britain’s financial crisis.
As unemployment soared to its highest level for a decade, the Governor of the Bank of England warned the country was in “deep recession” and facing an even worse slump than first feared.
The grim forecast came as the former head of HBOS quit as a top City watchdog over allegations – denied – that he sacked a senior executive who warned the bank was heading for problems several years ago.
And while the present heads of the country’s major banks were being grilled by MPs, fraud investigators revealed that they were probing major companies – including banks – linked to the collapse of the financial industry.
“The Government’s economic policy is in disarray,” shadow chancellor George Osborne said.
“One of the Prime Minister’s most senior advisers resigned just before PMQs, the Governor of the Bank of England says the recession is going to be four times worse than the Treasury predicted and almost two million people are paying the price for Labour’s mistakes in the lengthening unemployment queue,” he said.
“The country wants leadership and they’re not getting it at the moment.”
Stark figures showed the jobless total had hit 1.97 million with the number claiming Jobseeker’s Allowance up for the 12th month in a row by 73,800 in January to 1.23 million, the highest since the summer of 1999.
Hundreds more job losses were announced, with business leaders warning unemployment was now on a “relentless rise” towards three million as the Prime Minister hosted the first meeting of a group designed to boost jobs.
He told business leaders he was convinced they could “make a difference to the employment opportunities and success of the economy” – and MPs that every job lost was a cause for “sadness.”
Bank of England Governor Mervyn King further added to the gloom, saying that the UK was in “deep recession” and warning emergency action could be needed soon as interest rate cuts lost their impact.
In its latest quarterly forecast, the Bank made a dramatic downward revision to its growth forecast – predicting that the economy could shrink by as much as 4% in the summer and remain in recession for the bulk of 2009.
Downing Street said simply that the Treasury would revise its own forecasts at the time of the Budget.
But it was the dramatic resignation of Sir James Crosby as deputy chairman of the Financial Services Authority (FSA) that caused the biggest political splash at Westminster as Mr Brown faced question time in the Commons.
Sir James stepped down after Paul Moore, the former head of risk at HBOS, told MPs that he was sacked in 2005 for warning over the bank’s too-rapid growth.