Fuel payment proposals leaked on train

(AP)

Gordon Brown's economic recovery plans took a farcical twist as a senior civil servant was overheard discussing secret proposals to give families a one-off windfall of up to £150 towards their winter fuel bills.

Officials are working on a range of measures for breathing new life into the economy as the Prime Minister seeks to restore his battered credibility and fend off attempts by Labour opponents to depose him.

Tensions are rising in Whitehall as speculation over a stamp duty holiday is blamed for undermining the property market and Downing Street casts around for voter-friendly initiatives. Treasury officials were forced yesterday to deny reports of a growing rift between Mr Brown and Alistair Darling, the Chancellor.

Ministers were considering a payment to seven million families receiving child benefit as part of the economic recovery package, it emerged yesterday. They are looking at several figures, thought to range up to £150, a sum that would leave the taxpayer with a £1bn bill.

The scheme was disclosed by a traveller who overheard Sir Brian Bender, Permanent Secretary at the Department for Business, Enterprise and Regulatory Reform, discussing the idea with a colleague on a train between Leeds and London. The unnamed commuter told The Sunday Times that the civil servants were talking about ways to alleviate the soaring costs of fuel. She said: "I heard [Sir Brian] say: 'He wants to give it to the ordinary people.' I think he was referring to Gordon Brown."

She said: "His colleague suggested the extra cash could go to the needy, but he replied: 'No, a fuel rebate for everybody on child benefit.'"

Whitehall officials confirmed that they were looking at proposals to ease the impact of high fuel prices on families, but stressed that no final decisions had been taken.

Philip Hammond, the shadow Chief Secretary to the Treasury, said: "Britain faces yet more confusion on the back of this new speculation about the Government's plans.

"If Gordon Brown had acted prudently and put money aside for a rainy day during the good years, as all our competitors did, he wouldn't be floundering now, floating all sorts of ideas that he doesn't know how to pay for."

The Treasury denied a report that Mr Darling was angry he had been "stitched up" by Downing Street through a briefing operation over stamp duty. No 10 sources also fiercely dismissed as "utter garbage" suggestions they were responsible for triggering speculation over stamp duty. However, Labour MPs are aghast that the issue has turned into a serious own goal with evidence that the uncertainty over stamp duty was further damaging the already fragile property market. A survey for the National Association of Estate Agents found that 24 per cent of its members believed sales had fallen through as a result of the speculation.

The hunt for ways of giving the economy a desperately needed lift comes amid further evidence of Labour's electoral crisis. A YouGov survey for the News of the World put the party 20 points behind the Tories. It also suggested Labour would do better without Mr Brown at the helm – a finding which is likely to increase agitation for a leadership contest in the weeks ahead.

Tony Woodley, joint leader of super-union Unite, accused the Government of losing touch with its core supporters. "Labour needs to be on the side of ordinary voters, huge swaths of whom are union members wanting to see less appeasement of business people who do not and never will vote Labour."