12 months ago Gordon Brown was riding high

In Scotland, his close ally Wendy Alexander had a clear run at the Labour leadership and seemed ready to give Alex Salmond a real challenge. At Westminster, David Cameron's Conservative Party was in turmoil after the sacking of an A-list candidate. And so, a year ago this week, talk of a snap election to cement Mr Brown's position began. Roll forward 12 months and it is hard to imagine Mr Brown – holed up in his holiday cottage – was not grimacing at a whole new raft of damaging headlines yesterday. There was a leaked memo from Mr Blair criticising Mr Brown's leadership of the Labour Party, a report of former Cabinet minister Stephen Byers sticking the knife in, suggestions that the Labour leadership election in Scotland was descending into name-calling and personal attacks – and a resurgent Tory Party urging the Prime Minister to call an election the Tories believe his party cannot win. Chris Grayling, the shadow cabinet secretary, said: "The Labour Party is clearly split right down the middle, with some people backing Brown and others trying to knife him.

"We have a government in chaos at a time when Britain faces serious challenges. We can't go on like this for another 18 months. We need a general election sooner rather than later."

Brown supporters are demanding he sacks the Foreign Secretary, David Miliband, for what many consider an open leadership challenge. Ladbrokes has cut Mr Miliband's odds of taking over from 9/4 to 2/1.

There were reports last night that a group of unnamed Labour ex-ministers plans to fill a "vacuum" at the heart of government – by setting out a list of four or five major initiatives which would draw a clear line between Labour and the Conservatives.

One of the group said Mr Brown had "become more obsessed with the leadership than with running the country".

The fact that three Cabinet ministers – Harriet Harman, John Denham and Alistair Darling – felt the need to write to a national paper pledging their confidence in Mr Brown is seen as a sign of his weakness.

"It's not the sort of thing that happens if you are a genuinely strong leader," said Professor John Curtice, a leading British political analyst from Strathclyde University.

A poll has suggested replacing Mr Brown would do nothing for Labour's fortunes, with 40 per cent would be less likely to vote Labour if he was replaced, but 38 per cent less likely if he stayed.

However, Prof Curtice believes Mr Brown is the problem and that in the heady days of August 2007 the seeds of destruction could be found.

"It's easy to say this in hindsight, but the subtext of the story of last summer shows where the problems lay," he said.

"His popularity was based on surprise that he had been able to make quick decisions in crises, but the Brown bounce was not nearly as good in polling terms as it was for other leaders."

He pointed out that Mr Brown's weaknesses were highlighted by Northern Rock's collapse, the rising cost of living and 10p tax rate crises.

"What happened since, particularly with bottling the election in October, is that his weaknesses have come to the fore – he takes too long to make a decision, even longer to unmake a bad one, such as scrapping the 10p tax band and he is a poor communicator.

"You have to wonder why it took so long for the government to accept that hikes in fuel tax were unacceptable and weren't going to happen. They ended up being cancelled in by-elections and it looked like his hand had been forced."

Prof Curtice suggested MPs, 90 per cent of whom nominated Mr Brown as leader, now wondered "if they made the greatest political blunder ever".

The damage can be seen in the polls. Instead of enjoying a nine-point UK lead over the Conservatives, as he did in August 2007, Mr Brown now has a 21-point deficit. In Scotland the SNP has turned his 14-point lead in a Westminster election intentions into a 14-point deficit.

Publication of Mr Blair's secret memo, written last autumn after Mr Brown backed away from a snap election, intensified the pressure. Mr Blair has avoided public criticism of his successor and his office said he remained "100 per cent supportive of Gordon Brown and the government". But his private concerns may be seen as a green light for Blairites to push for change.

In the memo, Mr Blair accused Mr Brown of playing into Conservative hands with a "lamentable" and "fatal" strategy of disowning the New Labour legacy of a decade in power.

In trying to distance himself from the Blair era by renouncing "spin" and promising to be honest, Mr Brown "dissed our own record" and effectively accepted Tory propaganda, the memo warned.

It said he had "junked the TB (Tony Blair] policy agenda but had nothing to put in its place". The document emerged as Blair ally Mr Byers said Labour had "a mountain to climb" to win the next election, but had come forward with only "a multitude of small policies and worthy initiatives that are more suited to a Sunday afternoon stroll".

Meanwhile, Tom McCabe, who ran Ms Alexander's campaign, condemned Westminster Labour of arrogance and failing to understand devolution.

This followed demands by leadership candidate Andy Kerr for lottery money to be returned to Scotland. Similar comments were made by Mr Gray last week. And both, along with Cathy Jamieson, the third candidate, have suggested far greater independence for the Scottish Labour Party.

Leadership hopefuls warned over insults

THE Labour Party in Scotland has been warned that it will tear itself apart if the leadership election continues to be an exercise in back-stabbing and insults.

The warning came from Hugh Henry, the campaign manager for one of the three contenders, Cathy Jamieson, after a series of personal attacks on her from supporters of Andy Kerr, one of her two rivals.

Mr Kerr's backers had likened a victory by the left-wing Ms Jamieson to going back to the caves in terms of pushing Labour's agenda forward. But on a day where Ms Jamieson called for parties to get together to sort out the problems of alcohol in Scotland, her campaign manager vented his fury at the comments.

"We really need this election to concentrate on the battle of ideas and issues," said Mr Henry. "If we start this back-stabbing we will tear the party apart."

In a busy weekend, Mr Kerr also issued a veiled attack on Gordon Brown taking lottery money from Scotland to pay for the London Olympics. He said 150 million should be given to pay for the 2014 Glasgow Commonwealth Games.

It was further evidence of all three leadership contenders wanting to distance themselves from Mr Brown and London Labour. Iain Gray last week also said lottery money and prisons money should be returned.

Just in case you had forgotten, it is also exactly a year since the phrase 'credit crunch' entered our collective consciousness

A YEAR ago this week the dreaded words "credit crunch" became headline news – and a worldwide problem. Few imagined that it would develop into the worst global financial crisis since the 1930s.

What began as a deepening crisis over problem loans in America's housing market travelled with remorseless force across the entire financial world. Stock markets round the world began to topple. But even as the falls steepened in the opening days of August there seemed little to concern Prime Minister Gordon Brown and Chancellor Alistair Darling. All that changed with the run on Northern Rock.

The bank was forced to go cap-in-hand to the Bank of England as wholesale funds dried up. Confidence evaporated. Lengthening queues of depositors outside branches – the first run on a UK bank in 140 years – compelled immediate action. Darling had to offer solid guarantees that depositors' money was safe. But the impression left was of a government and a Chancellor out of their depth.

Months of dithering ensued over whether to sell Northern Rock to a rival or take it into public ownership. Brown finally plumped for the latter – driving a huge hole through his own 'golden rules' on government debt.

Across the economy the supply of credit has tumbled, mortgage lending has plunged and banks are having to set aside billions of pounds in bad debt provisions. Their shares have crashed. And the FTSE100 overall is down almost 20 per cent.

Mortgage lending has fallen to the lowest level since October 2000 – a total of 3.1 billion was lent in June, well below the 9.9 billion witnessed in June 2007. Mortgage approvals have plunged with only 165,000 new loans agreed during June, almost two-thirds down on the level a year earlier.

Growing numbers of people are unable to secure finance to get on the housing ladder. First-time buyers and those with stretched incomes have been the worst hit.

Although average house price inflation began to slow before August 2007, the onset of the credit crunch intensified the decline and turned the predicted slowdown into a full-on downturn.

At the start of August last year, the average house price stood at approximately 183,898, according to the Nationwide. Today that figure is 169,316 – an annual fall of 8.1 per cent.

Last week Andy Hornby, chief executive of HBOS, warned the house prices may fall between 15 and 20 per cent by the end of next year, with no recovery expected until 2010.

The house building industry, pole-axed by the slump in mortgage lending, has had to mothball sites and make thousands redundant. Consumer confidence, rattled by falling house prices, has fallen to the lowest since 1983.

The credit crunch is not the only malign force that has blown across the UK. Rising food and fuel costs have driven the Consumer Price Index – the official measure of inflation – from 1.8 per cent in August 2007 to 3.8 per cent today – well above the government's target of 2 per cent. More worrying is the rise in the all-items Retail Price Index to 4.6 per cent – and with a 35 per cent increase in gas bills still to work through.

The price of food has risen sharply over the past 12 months. Eggs are now a third more expensive than this time last year, while cheese is up 15.8 per cent and milk and bread are up by 13 per cent.

The price of oil has soared 91 per cent since this time last year. Last August the price of a litre of unleaded was 96.5p. The figure is now 1.17.

Latest figures show that gross domestic product grew by just 0.2 per cent between April 2007 and June this year – the lowest period of growth for three years – and with every prospect of recession ahead. Between the same period in 2006 and 2007, the growth rate was a much healthier 2.3 per cent.

Britain is now on the brink of a recession – defined as two quarters (six months) of negative growth. Some even warn that we could be heading for years of low growth.

Bill Jamieson

12 months ago Gordon Brown was riding high – but just look at him now