Downturn is all academic to PM, says Cameron

In a highly personal attack, he said Gordon Brown did not live in the real world where many Britons were struggling to make ends meet.

The real economy, he argued, was "not a place of academic theories, that so obsess Gordon Brown, but one of people's hopes and ambitions, and fear and anxieties".

He delivered the speech to the CBI today as it was announced the Consumer Price Index measure of inflation had risen half a point to 3.8 per cent in June.

Mr Cameron said the public mood was turning from anger at the state of the economy to fear at the impact on their own finances.

"Now, people are just incredibly worried - worried about their families and worried about their future," he said.

The soaring cost of living was discussed in the weekly Cabinet meeting this morning where Chancellor Alistair Darling insisted that Britons were suffering no worse than people in other countries.

But the prospect of further rises in inflation over the summer - with some analysts now predicting a peak of 4.5 per cent - mean the Government's pleas for pay restraint in the public and private sectors are coming under strain.

Mr Cameron made his speech as another nightmare was unfolding in the markets today. Global share price falls triggered a 1.2 per cent fall in the FTSE 100 Index, which was heading towards its lowest close since October 2005.

A global sell-off sent Hong Kong's Hang Seng index down four per cent while Japan's Nikkei index lost two per cent and Chinese shares fell three per cent.

Mr Darling responded to the bad news by repeating his call for pay restraint.

He said: "Whether you're in the private or public sector, whether your sitting in the boardroom or working on the shop floor, we cannot allow inflationary wage increases because that would mean everyone, especially those on low incomes, would suffer and nobody wants to see those days again."

Liberal Democrat T reasury spokesman Vince Cable said a rise in interest rates might be necessary to cool the economy, despite fears of a fullblown recession.

He said there was "absolutely no hope of an interest rate cut in the near future", meaning more mortgage misery for homeowners.

But the British Chambers of Commerce warned it would be a "serious mistake" if the Bank of England's Monetary Policy Committee decided to tackle rising inflation by raising rates.

CBI deputy director general John Cridland said: "The fact that the economy's slowing will bring inflation down but not till next year."

A spokesman for Gordon Brown blamed inf lation on global price increases in food and oil and said other countries were worse off.

He said: "Although inflation went up, it remains lower than, for example, in the US where it remains over four per cent.

"The Prime Minister's view is that this is a challenging economic period we are facing, but these are issues that are affecting all countries."

Senior Tories believe Mr Brown is a soft political target with the economic slowdown and the rising cost of living. Their research suggests that voters see him as an intellectual who is insulated from the real world pressures on ordinary household budgets.

Mr Brown does not drive and cannot use supermarkets for security reasons.