Blame economic crisis on the failings of banks, says Brown

At a private meeting at Goldman Sachs in London this afternoon the Prime Minister was due to say that inadequate banking practices are to blame for gloom in the markets.

The Government has already urged banks and building societies to pass on interest rate cuts.

Mr Brown is to say: "People will probably look back to say this is the first financial crisis of this new era of globalisation.

"And behind this lies the under-pricing and under-reporting of risk and off-balance sheet activities, inadequate credit rating services and more recently the failure to disclose, in a thorough and systematic way, write-offs. All have served to reduce confidence in a global economy that has moved from risk taking to aversion to risk."

But finance chiefs have accused the Prime Minister of trying to deflect voters' anger away from Labour ahead of May's London mayoral and local elections. Ahead of a meeting between Mr Brown and the chief executives of Barclays, HBOS, HSBC and the Royal Bank of Scotland this morning, one bank boss said: "The whole thing about passing on base rate cuts is an attempt to shift the blame."

Another said: "There are elections in May and there needs to be some words directed at the banks." They point out that state-owned Northern Rock has not yet cut its lending rates following the cut in interest rates to five per cent last week.

They were expected to call on the Government to act to swiftly unblock the money markets following the drying up of inter-bank lending which has lead to higher mortgage rates. Finance bosses want the Bank of England to follow other central banks, including the Federal Reserve in America, by accepting mortgage-backed securities as colateral in exchange for government-backed bonds.

There has even been talk of the Bank of England buying mortgage-backed securities.

However, the Conservatives sought to keep the focus of Britain's economic problems firmly on Mr Brown.

Shadow chancellor George Osborne claimed the Prime Minister's economic reputation was "in tatters", after an opinion poll found more than two-thirds lacked confidence in the Government's ability to deal with the current turmoil.

Downing Street has denied the meeting with City chiefs at No10 is a crisis meeting and points to an International Monetary Fund forecast that Britain will enjoy stronger growth this year.