Britain’s economy is looking sick

First, there’s the price rises – from gas to petrol and food.

Second, there’s the banking problems – like Northern Rock and the fall-out from dodgy loans some banks took on.

Third, there’s the housing market slowdown – with the credit crunch making mortgages more costly and increasing home repossessions.

The critical question is, will this get as bad as the early 1980s and 1990s under the last Conservative Government, when we saw unemployment hit 3 million, interest rates reach 15% and repossessions and business failures occurred on a horrendous scale?

Or can the economy avoid recession?

A sensible Government hopes for the best, but prepares for the worst.

The biggest danger would come if the housing market entered a vicious circle of repossessions and fire sales of properties. That could turn a slowdown into a crash – with homelessness, negative equity and even weaker banks.

So Ministers should be talking with mortgage lenders about avoiding a return to mass home repossessions.

The Liberal Democrat Shadow Chancellor, Vince Cable, has advanced two ideas for this.

First, people in danger of losing their homes must have guaranteed access to independent advice, and an option of arbitration, before court proceedings for repossession are allowed.

Second, rather than simply repossession, lenders could be encouraged to offer pressed homeowners the “shared ownership” option of part rent, part buy, with banks acquiring a share of the equity, in lieu of full payment.

Unless Government makes such preparations now, it will be too late if and when a recession hits.