Rates rise knocks Blair's farewell

CHRIS FISHER, EDP Political Editor Gordon Brown's 'coronation' as Britain's next prime minister began badly yesterday when interest rates were jacked up at the very moment that Tony Blair announced his resignation as the leader of the Labour Party.

CHRIS FISHER, EDP Political Editor

Gordon Brown's 'coronation' as Britain's next prime minister began badly yesterday when interest rates were jacked up at the very moment that Tony Blair announced his resignation as the leader of the Labour Party.

The blow to millions of home-owners threatened to make the long-coveted 10 Downing Street inheritance a poisoned chalice.

As both the new PM and the chancellor responsible for giving the Bank of England control over interest rates, Mr Brown stands to suffer the wrath of voters struggling to meet higher mortgage repayments.

The bank's rise in interest rates from 5.25pc to 5.5pc will add a further £8 to monthly repayments on a £50,000 mortgage.

It is the fourth rise in 10 months, and citizens' advice bureaux in East Anglia warned it could be the final straw for some hard-pressed homeowners.

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"Just the smallest rise could tip people over the balance, especially those who have taken out mortgages that are considerably greater than their wages," said Jo Willingham, debt adviser at Norwich and District Citizen's Advice Bureau. "It's going to be quite a push on top of everything else and could be the final straw."

Adam Sampson, chief executive of Shelter, added: "Thousands of families are already overstretching their finances to keep a roof over their heads, but this rate rise could be the final nail in the coffin for many borrowers hoping to keep their homes."

The announcement of the interest rate hike came at midday, just as Mr Blair revealed that he would be stepping down as prime minister on June 27.

Mr Brown is now certain to succeed him on that date. All the main potential challengers to him have dropped out.

And it is possible he will not even face a contest with a left-wing standard-bearer after Michael Meacher and John McDonnell were unable to decide which would stand down in favour of the other. A decision has been delayed until Monday.

And with supporters apparently thin on the ground, it is possible both will be persuaded to drop the idea.

Mr Brown will launch his campaign today even though there may be no contest, and is expected to receive a firm endorsement from Mr Blair. He hailed the outgoing prime minister's "enduring legacy" last night. Praising his leadership after the '9/11' and '7/7' terror attacks in the US and London, he said Mr Blair had also presided over a strong economy, had made Britain's reputation in the world stronger than ever before and "at all times he tried to do the right thing".

Mr Blair's announcement of his resignation as his party's leader came at an emotional meeting at the Trimdon Labour club in his Sedgefield constituency, and was quickly followed by a statement from John Prescott that he is quitting as Labour's deputy leader. There are six declared runners in a race to succeed him.

Mr Brown is condemned to a wait of almost seven weeks to inherit the prime ministerial and Labour crowns even if there is no competition to succeed Mr Blair. In that time he will tour Britain outlining his plans, while the prime minister undertakes a world 'farewell' tour that will include visits to the US, France and Africa.

Mr Blair went to his constituency after telling the cabinet that he would be resigning as Labour leader and triggering procedures for the election of his successor.

He began his announcement in Trimdon with the words: "Today I announce my decision to stand down from the leadership of the Labour Party. The party will now select a new leader. On the 27th of June I will tender my resignation from the office of prime minister to the Queen."

Appearing at times to be close to tears, he said that 10 years as prime minister was long enough for him and the country and continued: "Sometimes the only way you conquer the pull of power is to set it down."

He argued that expectations of him and his government might have been too high when he first took office, but also pointed to economic and social progress made since then. Britain was "at ease with globalisation", "at home in its own skin", and confident of its future. It "is not a follower, it is a leader", he stressed.

Mr Blair will leave office in the knowledge that for many of his detractors, the Iraq war will be the defining feature of his premiership.

Referring to that, he said that after the terror attack on the US in September 2001, he had decided "we should stand shoulder to shoulder with our oldest ally", and he had done so "out of belief".

He offered his "apologies" to the British people "for the times I have fallen short", but there was no acceptance of error in going to war in Iraq in 2003.

As prime minister it was his duty to act according to his conviction he said. And - without specific allusion to Iraq - he added: "I ask you to accept one thing - hand on heart I did what I thought was right. I may have been wrong. That's your call. But believe one thing if nothing else - I did what I thought was right for our country."

In contrast to the succession to Mr Blair, there could be close and even fierce competition for the post of deputy Labour leader. It is unlikely that all the six contenders - education secretary Alan Johnson, international development secretary Hilary Benn, Labour chairman Hazel Blears, Northern Ireland secretary Peter Hain, justice minister Harriet Harman and backbencher Jon Cruddas - can secure the 45 nominations required from Labour MPs.

But Mr Hain and Ms Harman were quickly out of the traps yesterday claiming they had the necessary support, and Ms Blears said she has the backing of home secretary John Reid and work and pensions secretary John Hutton.

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