Brown to reveal housing market plan

LONDON - Prime Minister Gordon Brown will set out plans on Wednesday to shore up the creaking housing market as part of a drive to reverse a slide in support for his government.

Reforms of the banking regulation system, whose failings were exposed last year when Britain suffered its first run on a major bank in more than a century, will also be among legislative plans unveiled by Brown, his office said.

Brown, who took over from Tony Blair less than a year ago, is trying to win back support of voters squeezed by rising food and energy prices as the economy is slowing and the global credit crunch raises the risk of a house price crash.

The Labour Party slumped to its worst performance since the war in this month's local elections as mounting economic woes and fatigue with Labour after 11 years in power led voters to desert the party in droves.

The election drubbing led to sharp criticism of Brown and questions from some in his own party about whether he was the right man to lead Labour into the next parliamentary election, which he must call by 2010.

If the Conservatives repeated their local election result at the next parliamentary poll, they would win by a landslide.

Brown's legislative plans for the year ahead are intended to reinforce the government's message that it is "on the side of the British people" during the economic slowdown.

They will include plans to help first-time home buyers, almost frozen out of the market by high prices and rising mortgage costs.

ECONOMIC PROBLEMS

Brown's office gave no details of his plans to reform banking regulation. The government was forced to nationalise mortgage lender Northern Rock this year after it became the biggest British casualty of the global credit crisis.

Brown will also announce plans to reform education, training, health, welfare and policing, his office said.

Data on Tuesday showed the scale of Britain's economic problems. Inflation rose by half a percentage point to 3 percent in April, the biggest jump since 2002.

That left the rate way above the central bank's 2 percent target and all but scotched analyst forecasts for an interest rate cut in June - pushing sterling up and stocks down.

A minister's briefing notes, glimpsed by photographers, said house prices could fall by up to 10 percent this year. "We can't know how bad it will get," the notes said.

In a surprise attempt to woo voters and defuse a damaging revolt among Labour MPs, Chancellor Alistair Darling announced on Tuesday that the government was trimming income taxes for 22 million people.

The cut will compensate many lower-paid workers who lost out as a result of Brown's decision to abolish a 10 percent income tax band - a move that hit Labour in the local elections.

The government will be forced to borrow 2.7 billion pounds to pay for it, swelling its big budget deficit.

The action ended a rebellion against the scrapping of the 10 percent tax band, led by Labour MP Frank Field, that could have led to the government suffering a humiliating parliamentary defeat on its budget.

Field switched ground, urging the government to tell the Bank of England that instead of just focusing on fighting inflation, it should also aim to safeguard growth and jobs.