The economic crisis could spark a resurgence in the Far Right, a close ally of Gordon Brown has suggested.
Ed Balls, the Children’s and Schools Secretary, said the downturn was likely to be the most serious for 100 years, and his comments appeared to raise the prospect of a return to the Far Right politics of the 1930s and the rise of Facism.
His warning, in a speech to activists at the weekend, came after a trade union baron warned that far right parties were trying to hijack the campaign for “British jobs for British workers”.
The row over foreign workers has gathered momentum in recent weeks and Mr Balls seemed to suggest the recession could trigger a return to the Far Right politics that prospered in the Great Depression of the 1930s.
He told Labour’s Yorkshire conference: “The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years.
“I think that this is a financial crisis more extreme and more serious than that of the 1930s and we all remember how the politics of that era were shaped by the economy.”
The remarks are significant because Mr Balls was a key adviser to Mr Brown during his decade at the Treasury as Chancellor of the Exchequer.
Mr Balls said that he believed this to be “the most serious global recession for over 100 years”.
He said: “We now are seeing the realities of globalisation, though at a speed, pace and ferocity which none of us have seen before. The reality is that this is becoming the most serious global recession for, I’m sure, over 100 years as it will turn out.”
Last week Derek Simpson, the general secretary of Unite, gave warning that far right elements were hijacking a campaign against foreign firms bringing in non-British workers.
He said: “We are deeply concerned that other organisations like the BNP are latching onto the movement for their own racist agenda.”
Last night, George Osborne, the shadow Chancellor, said Mr Balls’ comments were at odds with Treasury forecasts suggesting a recovery in the third quarter this year.
He said: “This is a staggering and very worrying admission from a Cabinet Minister and Gordon Brown’s closest ally in the Treasury over the past ten years.
“We are being told that not only we are facing the worst recession in 100 years, but that it will last for over a decade–far longer than Treasury forecasts predict.
“In this time of recession, a Cabinet rift over the economy could be deeply damaging.
“We need immediate clarification of whether Ed Balls is speaking for his colleagues in the Government.”
The Liberal Democrats compared the comments with those made by Treasury minister Baroness Vadera, when she claimed she was seeing “green shoots” of economic recovery, echoing remarks by former Tory Chancellor Norman Lamont in 1991.
She was criticised for saying last month: “I am seeing a few green shoots, but it’s a little bit too early to say exactly how they’d grow.”
Vincent Cable, the LibDems’ Treasury spokesman, said: “Instead of giving clear and consistent leadership, government ministers are oscillating between complacent optimism and this doom laden picture of Armageddon.
“Surely the truth lies between the two? This is a serious crisis but not hopeless.”
The news came as the Financial Services Authority, the City watchdog, warned that the UK was at risk of a deeper-than-expected recession.
The authority said that the worst financial meltdown “in more than 70 years” has far from run its course and the British economy was predicted to shrink by 2.2 per cent this year.
It also said that Britain’s ‘vulnerable’ banks need to make huge culture changes to survive the recession.
A spokesman for Ed Balls denied he had been trying to draw parallels with the Far Right.
He said: “The speech was about the difference between Labour and the Tories on the economy. It was not about trying to draw parallels with the Far Right.
“The Tories are completely isolated in their opposition to a fiscal stimulus that is essential to combating what most economists agree is an unprecedented financial sector recession. “He said that this difference between the parties will define this country’s politics for many years to come.”