By Benedict Brogan
It has hurled billions at the banks without managing to get them lending and trimmed VAT with negligible effect on struggling stores.
Now Labour is considering a new tactic to deal with the recession – simply print more money.
With interest rates expected to hit their lowest level in 300 years today, the Government might be forced to create the billions it needs to launch another bank rescue scheme.
Still smiling: The economic crisis is going from bad to worse but Gordon Brown still found something to laugh about as he arrived in Liverpool today
Chancellor Alistair Darling and Bank of England governor Mervyn King were said to be contemplating the remarkable and risky measure used with catastrophic consequences by Robert Mugabe in Zimbabwe.
printing money – emerged after Mr Darling gave a clear sign that the recession will be worse than expected.
it would risk driving down the value of the pound, which is already under intense pressure in the money markets in the face of low interest rates and fears of soaring Government borrowing.
However, rumours it is being considering at the highest levels at the Treasury have been circulating since before Christmas.
Zimbabwe is an example of an economy where reckless printing of money has led to stratospheric levels of inflation, with a loaf of bread costing millions of dollars. Weimar Germany in the 1930s was a similar story.
Printing more money would generate cash which would be used to buy so-called toxic assets – bad loans – from ailing banks,
‘It’s sensible contingency planning, but we are not there yet,’ a Treasury source said last night.
Mr Darling said if interest rates neared zero then the Government would work ‘hand in hand’ with the Bank to agree how much money to print.
Mr Darling hinted that he might be forced to revise the forecast he unveiled barely two months ago for a return to economic growth next summer.
The downturn has accelerated faster than the Treasury expected, with tax revenues ‘falling off a cliff’.
The Chancellor said Britain was ‘far from through’ the recession. ‘This year is going to be difficult. There are going to be some tough calls.’
Today the Cabinet will meet in Liverpool, the third time it has gathered outside London in recent months, to demonstrate what the Prime Minister says is the Government’s willingness to listen to concerns beyond Westminster.
Figures suggest that each regional Cabinet meeting, held previously in Birmingham and Leeds, costs the taxpayer about £200,000.
The pound has weakened steadily against the euro since October as the Bank of England repeatedly slashed interest rates in response to the financial crisis.
Just after Christmas the pound almost fell to parity the euro,
At the same time, this week the euro itself has been falling against other currencies.