Embattled Prime Minister Gordon Brown issued a last-minute plea to voters not to punish Labour in the local and London mayoral polls today.

He admitted many families were facing a "tough year", with soaring fuel, food and mortgage bills, and confessed to "differences and debates" over his Government's actions including the axing of the 10p starting rate of tax.

But he urged voters today not to turn their backs on him and London Mayor Ken Livingstone. Losing the capital to Boris Johnson would be a huge blow to Labour and Mr Brown sought to portray the choice facing Londoners as "stark". He said: "I know this is already a tough year for many people. It is vital that we stick to a course of stability."

Mr Brown has taken a more contrite stance in recent days but it was far from clear whether voters will have been swayed by his vow to listen more to their concerns.

The Prime Minister may have seen a glimmer of hope that he could emerge from the woes that have engulfed him since he called off the election-thatneverwas last autumn.

The Bank of England signalled that the worst of the economic buffeting being suffered by the UK may be over within months. But it also told banks and building societies they could harm the economy if they do not relax their squeeze on credit including higher mortgages, which could leave hundreds of thousands in financial difficulties.

Giving a warning that the correction in the credits markets has gone too far, the bank predicted that feared losses by financial institutions may be overstated and that City chiefs would soon start to regard some assets as looking "cheap".

John Gieve, deputy governor, said: "While there remain downside risks, the most likely path ahead is that confidence and risk appetite will return gradually in the coming months."

However, other experts warned that the wider economy could still be hard hit. Former Financial Services Authority chief Sir Howard Davies, now director of the London School of Economics, said: "The worst of the particular type of credit crunch that we have been living through since last August may well be over. But we may now just be moving into straightforward economic recession where all kinds of other assets begin to deteriorate in quality and in price."

In America, the Federal Reserve cut interest rates by 0.25 to two per cent yesterday, raising pressure on the Bank of England to take similar action next week.

Tory leader David Cameron, though, blamed the Government for the country's-financial difficulties, telling the Institute of Directors last night: "They've failed on their central mission - to deliver social justice and economic efficiency."

Ministers are braced for the loss of London and about 200 town hall seats, with the possibility of being pushed into third place behind the Liberal Democrats. That would spark fresh talk of Mr Brown being asked to step aside.

More than 4,000 council seats are being contested and some Labour chiefs fear falling to 25 per cent or below and losing key town halls such as Reading.

Link to:

Columnists

Andrew Gilligan

Now Team Boris really needs to get into gear

Andrew Neather

Come on Boris, show us cycling really matters

Nick Cohen

Our new man in town to fight political correctness

Don't miss...

• 

  Judgement Day for Sir Ian

  We recreate the day on which Met Commissioner Sir Ian Blair will finally be judged - the killing of innocent Jean Charles de Menezes

  ---

• 

  Don’t cry for me Dame Marjorie

  A report yesterday claimed the number of women in top jobs had fallen. But Antonia Cox argues not all women want to enter the corporate battlefield

  ---