ANALYSIS:Gordon Brown and his chancellor have their hands full ahead of next week's elections, writes FRANK MILLAR,London Editor.
BRITISH PRIME minister Gordon Brown and chancellor Alistair Darling are battling to avert a threatened Labour rebellion over government tax policy just days before next week's important local and London elections.
MPs returned from their Easter recess to a febrile Westminster yesterday, where Labour whips reportedly warned dissident backbenchers that a showdown over the planned abolition of the starter 10p tax rate would be seen as a vote of "no confidence" in the government and might even trigger a general election.
A respected pro-Labour commentator had already spelt out the greater risk that defeat on the tax change - which will see up to five million of Britain's lowest-paid workers lose out - would be "curtains" for Mr Brown and could see him forced from office within the week.
The absence of any credible alternative to Mr Brown at this stage - and the maxim that "turkeys do not vote for an early Christmas" - will encourage government business managers that a week of arm-twisting and concessions will avoid calamity just days before the local and mayoral contests that could solidify a national mood even as the government continues to plan its bid for a fourth term in the summer of next year.
In reality, Mr Brown and Conservative leader David Cameron are each facing nervously into the May 1st elections, when a predictably bad overall performance for Labour might just be masked by victory for mayor Ken Livingstone over challenger Boris Johnson in the battle for City Hall.
However, the mood of uncertainty and instability within Labour was again evident when former home secretary Charles Clarke reopened the old Brownite/Blairite feud with a personal attack on Mr Brown's closest ally, cabinet minister Ed Balls.
Last Friday Mr Balls, the Schools Secretary, described private briefings against the prime minister as "indulgent nonsense" by people with scores to settle. In a letter to the London Times, Mr Clarke countered that Mr Balls' injunctions about private briefings against the Labour leader "certainly come from one who is well acquainted with this kind of activity".
Mr Clarke, who has denied he might be a "stalking horse" challenger against Mr Brown, agreed such briefings took the party "back to the days of faction and party-within-a-party that were so damaging in the 1980s". However, he then seized on Mr Balls' references to "disappointment", saying these did "resonate" with many Labour MPs, such as Mr Clarke himself, "disappointed by policy decisions such as the abolition of the 10p tax rate, the overbureaucratic and insensitive nature of the post office closure programme, and the problems arising from the lack of preparation for a Northern Rock-style economic challenge". With the mid-term elections being fought amid deepening gloom about the economic outlook, the threat of City redundancies, falling property prices and the rising risk of negative equity for many households, the Bank of England announced its £50 billion plan to prevent the credit crisis further damaging the UK banking system.
The bank's governor, Mervyn King, said the scheme enabling banks to swap high-quality mortgage debts for government securities was intended to improve liquidity in the banking system and increase confidence in the financial markets.
The Conservatives and Liberal Democrats gave the "swap" scheme a guarded welcome while pressing Mr Darling in the Commons for assurances that the taxpayer would not be exposed.
Mr Darling will meet mortgage lenders again this morning but was unable to guarantee his Conservative shadow George Osborne that the bank's initiative would now ensure falling interest rates were passed on to customers.
Liberal Democrat spokesman Vince Cable tied the Bank of England initiative and the 10p tax rate controversy together, suggesting it was "a strange day for the Labour government" to be advancing billions to the banks while "taking billions from low-paid workers".
Mr Cable cautioned that if one recent report was correct and the British property market was "overestimated" by as much as 30 per cent, then the proposal to cover risk by way of "discounts" on the transfer of assets might be insufficient and could see a liability transferred to the taxpayer.
With Labour consumed by its own internal liquidity crisis, meanwhile, Mr Brown was appearing before the Parliamentary Labour Party last night for the second time in as many months, to demand unity and discipline in face of the electoral challenges ahead.