Britain's opposition Conservatives suggested the government give the Bank of England more power to tackle asset bubbles and offer banks a collateral-swap for mortgage bonds.
With house prices dropping and the economy headed for its smallest expansion in 16 years, the Conservatives' economic spokesman George Osborne used a speech given in London today to lay blame for those woes at Brown's doorstep and explain how he would manage the economy differently if his party wins office in the next election.
``After a decade of worldwide growth we have ended up with a housing boom followed by bust, spending followed by debt and a country finding it more and more difficult to compete,'' Osborne said. ``Gordon Brown has been found out. His economic reputation is in tatters.''
Prime Minister Gordon Brown is trying to quell unrest among his own lawmakers as the economy slows and his poll ratings sink. Last week, 26 Labour lawmakers backed a motion contradicting government policy, and a YouGov Plc poll published yesterday showed support for their party had dropped to 28 percent, the lowest since Brown took power in June. The Conservatives had the backing of 44 percent of those surveyed.
Brown, who faces local elections on May 1, will meet banking executives in London tomorrow before heading to the U.S., where he will raise concerns about the world economy with executives and President George W. Bush.
``We're going to continue to do everything in our power to keep the economy going and to listen to concerns,'' Brown said at an appearance in east London today. ``Every day that I wake up is about keeping this eco moving forward.''
Mortgage lenders are raising interest rates and pulling loans, refusing to pass on three interest-rate cuts by the Bank of England since December. The average rate on popular home loans fixed for two years rose to the highest since June 2000 last month, the central bank said April 9. The number of mortgage products on offer dropped by a fifth in the two weeks through April 4, according to Moneyfacts, a consumer Web site.
Osborne said today that the government should consider offering banks a collateral swap in which they could exchange mortgage-backed securities for government bonds to improve liquidity.
``The immediate priority must be to ease the credit crunch and re-open the market in mortgage backed securities,'' he said. ``A broader swap program supported by the Treasury could help.''
Longer-term, Osborne is pressing for the Bank of England's mandate to be expanded to include the emergence of asset bubbles, Osborne said.
``We have seen how the build up of a bubble in asset prices and debt can damage millions of people,'' he said. ``We must try to construct our monetary policy framework so that it will never again ignore an unsustainable build up of debt.''
The speech to the Policy Exchange think tank in London also included a repeat of the Conservative's pledge to slow the growth in government spending to less than that of the economy.
``This is the alternative to the failed policies of Gordon Brown,'' Osborne said.
With the backing of 44 percent of voters, the Conservatives now have more support than at any time since 1992. The YouGov survey of 1,755 voters was conducted April 10 and 11. No margin of error was given. Brown can request an election any time between now and mid-2010, when the mandate of the current Parliament expires.
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