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Should Brown have seen it coming?

By Cathy Newman

Updated on 14 September 2007

Cathy Newman reports on why the Northern Rock crisis is Gordon Brown's "grey Friday", rather than "Black Wednesday".

Events are a tricky thing when you're prime minister - as Gordon Brown is discovering. He's had rather a lot of them - first floods, then foot and mouth. Now the Northern Rock bail out could land him with an economic headache.

The message coming out of Downing Street is there's no cause for panic. But the US credit crisis has already prompted some high street banks to raise interest rates. If indebted householders struggle to pay their debts that becomes a problem for this householder here.

Voters have rewarded Labour for a decade of economic good times. Now, if the going gets tough, the government shouldn't be surprised if it gets the blame.

The housing market has underpinned the economic boom since Labour came to power. But opposition MPs say the economy's foundations are looking decidedly shaky. They accuse Gordon Brown of allowing householders to run up £1.3 trillion of debt.

Gordon Brown's first act as chancellor in 1997 was to make the Bank of England independent, giving it control over interest rates. But should the government also have allowed the Bank to take into account house price inflation - not just goods and services - when setting interest rates?

No one's saying today is Gordon Brown's Black Wednesday - it's Friday after all.

Rates might then have gone up faster discouraging householders from taking out mortgages worth many times their salaries.

The former governor of the Bank of England admitted earlier this year that his decisions to stave off a recession by slashing interest rates fuelled record house prices and debts.

Black Wednesday taught the Conservatives that when it comes to winning elections, economic competence is all. No one's saying today is Gordon Brown's Black Wednesday - it's Friday after all.

But the prime minister, offering support from the sidelines at a community football project in north London this evening, knows the same rules of the game that applied to the Tories back in 1992 apply to him.

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