Gordon Brown was branded "desperate" last night after Westminster sources suggested he was considering the option of printing money in another big gamble to limit the effects of the recession.
Gordon Brown was branded "desperate" last night after Westminster sources suggested he was considering the option of printing money in another big gamble to limit the effects of the recession.
The measure, known as "quantitative easing", is being looked at because if interest rates fall further they will cease to be an effective economic tool.
Today, economists are expecting the Bank of England to cut its base rate yet again from 2% to 1.5% or lower, which would be the lowest level since the Bank was founded in 1694. Some analysts even predict UK rates could this year follow America's and fall close to zero.
The idea of boosting Britain's money supply came as Alistair Darling said the country was "far from through" the recession. This suggested the downturn could extend beyond the summer, as the Treasury has predicted, and that its current 2009 growth forecast of -1.25% to -0.75% might have to be marked downwards once again.
Last night, Shadow Chancellor George Osborne accused the Chancellor of "trying to wriggle out of the economic forecasts he made just weeks ago". He claimed the recession was getting worse, and insisted speculation about printing more money showed the Prime Minister had "led Britain to the brink of bankruptcy".
He said: "Printing money is the last resort of desperate governments when all other policies have failed. It can't be ruled out as a last resort in the fight against deflation but in the end printing money risks losing control of inflation and all the economic problems that high inflation brings."
A senior Treasury source, when asked about quantitative easing, replied: "We are looking at the issues. No decisions have been taken."
In America, where the base rate is effectively zero, Ben Bernanke, Chairman of the Federal Reserve, has already floated the idea of printing money to buy assets, earning him the nickname "helicopter Ben" after the suggested image of the US Government dropping large amounts of cash out of helicopters for the public to spend.
However, quantitative easing is regarded by many economists as potentially dangerous, given that an increased money supply led to hyper-inflation in 1920s Germany and 1970s Argentina and would repeat the desperate attempts by Japan to fight off deflation in the 1990s.
Earlier, Mr Brown began his three-day "listening" tour of England and Wales, insisting the UK Government would do all it could to create more jobs and blunt the impact of the recession.
On his tour in the east Midlands, Mr Brown again conspicuously failed to rule out an early general election this year, saying: "I've got no intention of even thinking about an election ... it's the last thing on my mind.
"The first thing on my mind is that I'm here to help the families and businesses in this country come through this global problem."
