Interest rates cut in global move

The Bank of England cut interest rates by 0.5% to 4.5% as part of a global response to the meltdown in financial markets - the first co-ordinated action since the 9/11 terrorist attacks. And central banks across Europe, the US, Canada and China reduced interest rates in an emergency move.

UK taxpayers were told hours earlier they will fund a £50 billion part-nationalisation of major banks under a Government rescue plan - with a further £250 billion in taxpayer guarantees for banks.

But the extraordinary measures provided little respite for stock markets, with turmoil quick to return to London's blue-chip share index as fears mounted of a global recession. The UK's benchmark FTSE 100 Index closed down more than 5% on Wednesday.

Prime Minister Gordon Brown described the plans for the banking sector as "bold and far-reaching" but admitted the measures would offer no quick fix.

Public cash will be used to buy stakes in stricken banks under plans unveiled by Chancellor Alistair Darling.

Eight UK banks and building societies - including Royal Bank of Scotland, Barclays, Halifax Bank of Scotland, Lloyds TSB and Nationwide - have pledged to increase their capital by £25 billion but Government will pump in the funds if called upon. The Treasury also stands ready to make at least another £25 billion available if necessary.

The Bank of England - alongside its interest rate reduction - is also taking emergency action to help ensure that banks have enough cash to run their day-to-day activities. It has increased the size of its Special Liquidity Scheme that allows banks to swap risky assets for Treasury bonds to £200 billion. The Government is also making a further £250 billion available for banks to guarantee debt although a fee will be charged.

Mr Brown also moved to reassure that taxpayers would have the potential to "earn a proper return" from their investment.

The cut in rates will mean a saving of around £47 a month on a typical £150,000 mortgage if the reduction is passed on in full by lenders. A number of major banks - including Lloyds TSB, Royal Bank of Scotland and Britain's biggest mortgage lender Halifax - passed on the rate cut to borrowers with standard variable rates.