Brown increases threat of energy windfall tax

No 10 is angry that the industry is refusing to stump up money to bale out families hit by rocketing fuel costs.

It is a dispute that risks undermining the next crucial phase of the Prime Minister's political fightback, a package of measures to help needy pensioners and parents cope with rising heating bills.

A planned launch of the scheme tomorrow is being postponed to next week to allow longer negotiations with energy firms, where Mr Brown is being represented by business minister Shriti Vadera, a tough former banker.

The Prime Minister's spokesman confirmed that there were "robust" discussions going on - Whitehall code for a blazing row. "In negotiations of this kind it is not surprising that robust statements are made," he said.

Asked if a windfall tax on the profits of firms was on the table, he replied: "We want to work in a constructive and collaborative way with the energy companies, but obviously nothing is ruled out."

Ministers are furious that foreignowned energy giants are refusing to finance a generous package, despite having benefited from a £9 billion windfall when new European energy permits came in. Without their full support, the heating bill package will have to be severely watered down and, rather than the cash handouts that Mr Brown wants to unveil, it would have to focus on less eye-catching measures such as help with insulation, energy efficient lightbulbs and new boilers - all of which are already being championed by government policy.

Liberal Democrat leader Nick Clegg urged Mr Brown to stand firm, saying the foreign energy giants were guilty of a "glorified form of blackmail" because they had threatened to claw back any spending on needy families by either putting up prices for others, or cutting investment in green energy.

Mr Brown desperately needs a success after yesterday's housing package was dismissed by the mortgage industry as a damp squib.

The package, which also included a stamp duty cut, was also overshadowed by an Organisation for Economic Cooperation and Development report that Britain was entering recession.

The timing was unlucky for Mr Brown because today official figures from Eurostat revealed that France and Germany are both suffering from the slowdown to a greater extent than Britain. Germany's economy shrank 0.5 per cent in the second quarter and France by 0.3 per cent - while Britain was at a standstill.

An official said ruefully: "If these figures had come out yesterday instead of the OECD forecasts it would have been a whole different story." Downing Street revealed that a fresh package of mortgage help may come out this autumn.

Mr Brown is hoping to put together measures to address the root cause of falling prices, the collapse of wholesale lending. But the Treasury and the Bank of England are unhappy with proposals by banker Sir James Crosby for a £50 billion scheme to underwrite new mortgages with taxpayers' money.

Mr Clegg also accused the Government of tempting people into debt with the stamp duty cut.