Gordon Brown sought to regain the political initiative yesterday with an impassioned plea to the electorate to judge him on his ability to deliver long-term economic stability.
Mr Brown, speaking to journalists accompanying him to the Commonwealth heads of government meeting in Uganda, acknowledged the recent torrid headlines but blamed them on events beyond the government's control. He argued the economic policies put in place would give Britain the strength to withstand turbulence around the world.
He said: "We have events to deal with sometimes. These are decisions you have to make where you have to react to events in other parts of the world or events over which you have no control yourself. The question at the end of the day is, people should take a long-term view about what we are trying to achieve.
"The question for Britain is can we continue, as we have over these last 10 years, to steer a course of stability Can we as an economy generally steer that course of stability?
"The decisions we have taken over the last year, including our public sector pay policy, including bearing down heavily on inflation, put us in a position where we should be able, with the right long-term decisions, to withstand some of the turbulence that is coming from the rest of the world."
Not only are Mr Brown's political enemies marshalling their wits to give him a drubbing but the Treasury Select Committee, under the chairmanship of John McFall, will pile the pressure on him today over the government's decision to abolish taper relief on capital gains tax.
In a hard-hitting report to be published this morning, the committee will urge Alistair Darling, the Chancellor of the Exchequer, to take action to soften the impact of the capital gains changes on small businesses and employee shareholders.
According to the report 270,000 employees who have bought shares in their company in the hope of sharing in its success will lose out as a result of the imposition of a flat rate of 18% capital gains tax on the profits from the sale of assets. They make up around one in six of the 1.7 million members of "share as you earn" (SAYE) schemes and could face a 13-point rise in their CGT burden if they are basic-rate income tax payers, or eight points if they pay at the higher rate.
The cross-party committee has urged Mr Darling to take action to "mitigate the effects of the withdrawal of taper relief, particularly for those already within the two-year qualifying period and with especial reference to small businesses".
Mr McFall said: "Tax simplification is a desirable objective, but the reforms of capital gains tax will have an immediate impact on many individuals and businesses that have sought to plan ahead. There is a window of opportunity for meaningful consultation between now and the 2008 Budget, and the Treasury needs to establish clearly the terms for such consultation."
As Mr Brown's allies let it be known that he intended to expand his close coterie of advisers beyond the younger, more inexperienced members of the cabinet, Jack Straw, the Justice Secretary, led a chorus of ministers defending the Prime Minister's performance.
Obviously alarmed by Mr Brown's fortunes in the polls, Mr Straw went on the offensive.
Speaking to Sunday AM, he said it was "utter nonsense" to compare recent events with the pound's exit from the European Exchange Rate Mechanism in 1992.
Urging colleagues to hold their nerve, he contrasted the behaviour of ministers in this government, who, he said were handling the crisis well, and the ministers in John Major's government, who were riven by divisions.
Mr Straw said the government's present problems were "external" while Mr Major's were caused by the "personal decisions of senior ministers".
"The idea that this is an equivalent to Black Wednesday is utter nonsense," he said.
In another interview John Hutton, the Business Secretary, denied the government was running out of steam.
Mr Hutton said: "This government is full of ideas and it is full of ambition for our country. We are not going to get distracted."
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