In the end it took a face-to-face meeting between Gordon Brown and Frank Field last night to end the 10p revolt.

But if the government thinks it’s out of the woods, it should think again. Backbenchers are ready to use their newfound clout over other issues: the next big one being 42 days terror suspect detention without trial.

Not that the more left-wing Labour backbenchers are wholly convinced by today’s concessions:

Paul Flynn, MP for Newport West, tells me: “We’re saying we want to see issues that are recognisable as traditional Labour issues, we are now seeing the strength of the backbenchers, muscles have been flexed.” 

Dai Havard, MP for Merthyr Tydfil and Rhymney (pictured below), says Frank Field had capitulated too quickly without cast-iron guarantees: “My opinion is if we’d squeezed his balls we’d have had £1bn in writing by Monday,” he tells the FT.

The U-turn is already happening. Apparently Gordon Brown will - in Prime Ministers’ Questions at noon - announce compensation (backdated!) to those affected by the removal of the 10p tax rate.

Good news for poor workers.

Bad news for the government’s reputation: it’s the Treasury’s third U-turn in as many months.  

Expect David Cameron to have a field day in a few minutes’ time in the Commons.

Frank Field has now gathered 45 Labour names for his amendment to the finance bill - which would provide compensation to those hammered by the abolition of the 10p rate.

At this rate the rebel former minister looks increasingly likely to defeat the government.

This morning we wrongly wrote that - having claimed 39 names yesterday morning - the list was down to 31.

Simple explanation: Frank’s spokesman left a message on my phone last night with the wrong number. Today he apologised for confusing 31 (rebellion losing steam) with 41 (rebellion gathering steam). Ahem. We’ve all been there.

Gordon Brown is now under pressure to pull a more convincing rabbit out of his hat this week.

These are the MPs who joined the revolt overnight.

Kelvin Hopkins
Jim Hood
David Chaytor
Bob Marshall-Andrews
Rosemary McKenna
Hugh Bayley

Mark Durkan (SDLP)

It has taken a year for many Labour MPs to notice that the headline cut in income tax from 22p to 2op came at a cost - the abolition of the 10p band.

That seems pretty embarrassing. Bear in mind that the headlines - the day after the 2007 Budget - focussed on this sleight of hand.

No surprise then that one MP, at Monday night’s meeting of Labour backbenchers (the PLP) got his sums confused. It was wrong, argued the person (Tom Levitt apparently) that MPs would each be £1,000 better off while poor workers suffered. The sum was totally erroneous - being his application of the 2p cut to his entire salary. D’oh.

Meanwhile someone tells me that posters were made a few years back, declaring the greatest achievements of the Labour regime: among them the introduction of the 10p band. Apparently John Prescott still has the posters in his office. But is the 10p one still there?

One wag suggests that supplementing the 1 for a 2 would solve the problem.

Rightly MPs are worried that the issue is going to bite them at next week’s local elections. Apparently the Tories have already drawn up material showing how much worse off different types of workers are going to be.

A tea-spluttering moment this morning when I read Anatole Kaletsky in The Times. 

Until recently the paper’s economics guru was a bull on the UK economy/housing market (accurately as it turned out).

Today, perhaps inspired by the latest IMF report, he was talking about price falls of up to 30 per cent.

 You might feel sympathetic towards Gordon Brown at this point. Why should he take the political flak for any downturn?

Here are three reasons which come to mind:

1] Changing the Bank of England’s inflation target from RPI to CPI (which does not include house price inflation). This enabled the monetary policy committee to cut interest rates much further in recent years. This allowed people to borrow more. Boom.

2] Shifting planning guidelines for new homes from greenfield to brownfield. Though well-intentioned, this has led to a glut of city centre flats, bought mainly by buy-to-let investors. Fingers will be scorched.

3] Rhetoric. Policies, speeches and initiatives have been laced with the presumption that house prices were a one-way bet. The target for home-ownership was upped to 90 per cent (why have one in the first place?).

Even now, the government is “helping” low-paid public sector workers risk what meagre savings they have getting on the housing ladder……as if this can only be a good thing.

It seems odd given what has happened since.

But a bill* published last year gave new powers to building societies to borrow more from the wholesale markets. That is, the ones which enabled Northern Rock to grow like topsy and then implode. The bill has increased the maximum wholesale borrowing level from 50 per cent to 75 per cent.  

Luckily, the timing means few if any building societies will have taken advantage of this new freedom. Even if they wanted to - unlikely given the Rock disaster - the credit markets have been frozen.

The purpose of the change was to place building societies on a level playing field with banks. In theory this could help create more long-term (25-year) fixed mortgages, something which Gordon Brown is keen on.

Lord Davies of Oldham, deputy chief whip in the Lords, told a debate in October that “in the light of recent events in wider financial markets, we will want to consider carefully whether such a power should be used.”

Later he added:

“The concentration of funding will also pose risks that need to be effectively managed by firms. The recent case of Northern Rock is a clear example of the importance of risk management in this regard.”

Just when the government should have been worried about the growing credit bubble they were taking steps to encourage building societies - Britain’s most prudent lenders - to loosen up. Bizarre in retrospect.  

   * Building societies [funding] and Mutual Societies (Transfers) Bill

The man from the Halifax sounded quite convincing on the Today programme this morning when he said house prices wouldn’t fall much - because the labour market was sound.

This is the line we have been spun for ages by the government. (It was repeated this morning in an editorial in The Times). It doesn’t ring true.

The problem is that last time around - nearly 20 years ago - employment did not go into meltdown until nearly a year after house prices started to fall. Just as is now happening in the US.

The UK housing market peaked in 1989. Employment kept on rising and peaked in April 1990. Before dropping like a stone.

If this sounds unlikely, check out the chart supplied by our friends at Bloomberg. It augurs very badly indeed. Meanwhile, check out the Spectator blog for an accurate take on Gordon’s “no recession” strategy is faring.

There was a bit of a space-crunch in Saturday’s paper, so were were unable to run a piece looking at the impact of the credit crunch on public confidence in the economy. The basis for it was a remarkable Ipsos poll showing that economic optimism had fallen to its lowest level since the early 80s, when Britain was experiencing its most severe post-war recession.

It is hard to imagine that voters really are that pessimistic. After all, 28 years ago inflation was approaching 20 per cent and interest rates were well-clear of 15 per cent. Anyone with doubts should take a look at these charts, which were kindly put together by Jerry Latter at Mori. They really do underline the scale of the political challenge faced by Gordon Brown.

But there is an odd trend illustrated by the graph that may work in Mr Brown’s favour. For the past six years, we appear to have gone through the “gloomy boom”. Even though house prices were rocketing, money was cheap and unemployment was low, people were more pessimistic than the last years of the Major government. Indeed at times they were more pessimistic than during the 1991 recession. How is that possible?

The peculiar gloom during the noughties does somewhat undermine my next question: is economic confidence a leading indicator for confidence in the government? The chart below is inconclusive. While economic optimism came before faith in government during the Thatcher era, the track record is much more mixed during the Major and Brown years. However the sharp fall in recent months will undoubtedly be worrying Mr Brown’s pollsters.

I’m looking forward to reading the Spectator cover story on the “unexploded subprime timebomb”, which has been trailed on the Coffee House blog. The full political impact of indebtedness is still unclear, although its importance is sinking in across Westminster. The data on which the Spectator piece is based will add some much needed clarity to the debate — in Fraser Nelson’s words: “if you want to know where the unexploded sub-prime bombs are planted in Britain, this is the list you need”.

But we should be careful, because I’m not sure figures tell us what we really want to know. The breakdown of “subprime exposure” provided by Experian is not a based on the number of subprime borrowers, but rather the potential size of the subprime market for lenders. Basically, it shows the number of people in jobs who have patchy credit rating. This means it includes people who have not borrowed. And it includes people who took a mortgage two years ago to buy a house that may have since doubled in value. It reminds me of the cable tv channels that claim they have a potential audience of 500m, but don’t tell you how many people watch the channel.

That said, the map of credit problems is fascinating. Just don’t expect it to represent what Britain’s true credit problems are. Britain’s borrowing binge is much more complicated — and probably even more consequential than this data suggests.

Gordon Brown seems to think that the British economy is uniquely strong. This has become a new mantra of the prime minister. Last night I loitered outside the weekly meeting of the Labour PLP (Parliamentary Labour Party) where Brown was making a rare appearance.

Apparently he said that the government has led Britain in “98, 2000, 2004″ through difficult economic circumstances and therefore has the policies to get through the current turbulence.

I’m not a skiier, but isn’t that a bit like claiming that the black run holds no fear because we’ve done pretty well on the nursery slopes?

Incidentally, the PM is currently doing his monthly press conference at 10 Downing Street.

Just now he promised yet more help for first time buyers to get on to the housing ladder through government-backed schemes. If and when they find themselves in negative equity will he take the blame?

Just in on Wednesday afternoon…..

 More proof needed, if any were needed, that the government is eerily complacent about the gathering threats to the economy.

This afternoon the Lib Dems introduced a debate about “the economy, repossessions and the housing market” which noted the fissures in the mortgage market and the housing market.

 Vince Cable, the party’s Treasury spokesman, said it was becoming increasingly clear that the downturn in the housing market “is much more than just a blip”.

Britain was in danger of returning to the “woes of the Tory recession”, he said.

The government’s response?

Angela Eagle, exchequer secretary to the Treasury, told the Commons that the Lib Dems warning were ”colourful and lurid fiction” which read like the storybook of Apocalypse Now or Bleak House.

The Lib Dem comments were “hysterical” and “doom-laden” and lacked responsibility, she added.