Filling up her Ford Focus at a Southampton petrol station on Friday afternoon, Deborah James became the victim of a modern phenomenon: pump rage. The 31-year-old marketing assistant had just spent £55 on something that would have cost her less than £45 just a few months ago.

“Every time I go to fill up my car, the price of fuel seems to have gone up,” said the mother of one. “It’s an absolute joke.”

The strain of rising prices across the board is telling on the family finances of James and her husband Paul. “We’re having to make cutbacks in our shopping budgets as it seems the price of everything is going up,” she said. “If it carries on much longer a lot of people are going to be very hard up indeed.”

Across Briton millions of consumers are experiencing the same thing. At the other end of the country Amanda Newton, 46, a health authority administrator from Whitley Bay, North Tyneside, has seen her family’s weekly costs balloon.

“We were spending around £50-£60 a week on petrol a year ago; now we’re spending between £80-£90,” she said.

“And it’s horrendous the way food prices are going up. Our weekly grocery bill has gone from about £130 to £170. A year ago I would have paid £1.60 for a dozen eggs; now they’re £2.60.”

Newton and her husband Robert, an engineer, had been looking forward to the benefits of a double income once again as she is back in full-time work after seeing the last of their six children safely into school. But now they are feeling more stretched than ever.

“The frightening thing is that we just don’t know how much worse it is going to get,” she said.

The signs that the economy is getting worse were paraded almost every day last week with a succession of gloomy figures. Householders were warned that their gas bills could breach the £1,000-a-year mark, pushed up by wholesale prices that have reached a level nearly double that of a year ago. Gordon Brown then added to the misery by suggesting that energy prices would remain high for years.

“This is not just a national problem,” said the prime minister. “It is a global problem of supply and demand, not just in the short term but the medium and long term.”

He had been addressing concerns over spiralling oil prices which had seen about 300 hauliers mount a protest in central London on Tuesday. The benchmark Brent crude ended the week at $128 a barrel, down from the historic high of $135 a week before, but still more than double what it was this time last year.

The flow of alarming data was becoming a flood. Household spending was down, reported the Confederation of British Industry (CBI). Consumer confidence was at its lowest point since the early 1990s, said another survey.

On Friday came news that house prices had fallen by 2.5% in May. A survey by Nationwide building society noted that prices had fallen for seven months in a row, marking the longest sustained decline since 1992. Previous forecasts of a soft landing for the housing market were hastily revised.

Hundreds of thousands of people were left in darkness by electricity blackouts after seven power stations shut down unexpectedly. The impression grew that the grisly days of the 1970s, when Britain last experienced a prolonged downturn, were being reprised.

Have things got that bad? Are we about to enter a recession? And what can the government do about it, if anything? IN the City of London, the experts paid to assess the economy’s prospects have started using an acronym to which they retreat in bad times to reaffirm their faith in the free market system. “Tina” stands for “there is no alternative”.

“This is a Tina moment,” said Geoff Dicks, chief UK economist at Royal Bank of Scotland, last week. “We have a real problem with inflation, it’s not just us – it’s Europe and the US, Asia, everywhere.”

Dicks says inflation could easily top 4% this summer, despite official figures that suggest it is now 3%, already one percentage point above the Bank of England’s target.

“Oil prices are pernicious – they touch everything because most things have to be transported around,” said Dicks. “It’s hard for every type of consumer, but particularly on larger families – with bigger food bills, bigger cars and bigger mortgages to pay.”

Peter Spencer, chief economic adviser to the Ernst & Young Item Club, the only forecasters to use the Treasury’s model of the economy, said: “This is the first time since the early 1970s that Britain’s consumers have been hit by the double whammy of rising fuel and food prices at the same time.

“In recent years when there’s been a slowdown, people dipped into their savings or borrowed to tide them over. But many people have done that repeatedly and, of course, with the credit crunch still biting, they can’t borrow their way out of trouble. And that could lead to a sharper slowdown in growth than many of us are expecting.”

Yet, habitually cautious, many economists are wary about predicting a recession.

Partly it is a question of definition. For the UK to have officially entered a recession, the economy would need to shrink for two quarters in a row. As most economists expect it to grow by about 1.8% this year – and because the UK economy has shown the ability to surprise commentators in the past with faster than expected growth – that still seems some way off.

Some are now prepared to make the call, however. Peter Warburton, director of the consultancy Economic Perspectives, believes the oil price surge of the past 12 months is the catalyst that will finally force us into recession.

He believes the economy will start to slide into negative growth by the end of this year and that GDP will contract by 1.7% over the course of 2009.

“Recession is now unavoidable,” he said. “Oil prices are just the latest blow after food prices, the credit crunch and high levels of debt that will force the economy into a great adjustment – and a recession that may last several years.”

Others are not prepared to go quite that far but are trimming their forecasts for the next year. Goldman Sachs, the American investment bank, predicts that the economy’s growth between April this year and next will plunge to 1% – a third of the typical rate over the past 15 years.

“We think a recession is unlikely,” said Kevin Daly, one of the bank’s economists. “But it is a definite risk. It’s very difficult at this stage to say how bad it will get.”

The uncertainty of those who analyse the economy merely reflects those at its sharp end, in business and on Britain’s high streets.

“The global slowdown is like a tsunami coming,” said Arun Sarin, the outgoing chief executive of Vodafone, the mobile phone giant. “I have no idea whether, by the time it reaches us, it will be rain or it will be a hurricane or what.”

His firm is consequently changing what it offers consumers. “We are selling more Sim card-only products. We are selling more low-end handsets. We are selling smaller vouchers for top-ups,” said Sarin. “We are making it easier and more comfortable for our customers to buy.”

It is in retail that the real pain is being felt. Firms that rely on discretionary purchases, such as DIY stores, furniture manufacturers and clothing stores, are suffering. Some are starting their summer sales a month early in an attempt to boost revenues.

Even John Lewis, that totem of middle England, reported last week that sales were falling compared with a year earlier at almost all of its stores. Only its flagship outlet on Oxford Street in central London, its Aberdeen branch and its website managed to buck the trend.

A spokesman for the British Retail Consortium said: “The oil price rises have come at a desperately difficult time for retailers, who are already seeing sharp rises in other costs such as wages and raw materials. Our members will do their best to absorb these costs, but they can’t do that for ever.”

There are bright spots, however. Britain’s engineering companies, which have long been in the shadow of the fast-growing services sector, are enjoying something of a purple patch. A survey out tomorrow from the Engineering Employers’ Federation is expected to show manufacturing in robust health. Orders from the rapidly growing economies of China, India, Russia and Brazil have been booming.

Despite the double squeeze of inflation and high interest rates, there is no shortage of jobs. Employment in the UK has proved resilient to all the shocks of the past year.

In May, official figures showed the number of people in work during the first three months of the year was 29.5m, an increase of about 117,000 on the previous quarter. At the same time the number of unemployed rose slightly to 1.6m.

Economists think one of the biggest threats to the job market comes in the southeast, where the booming financial services industry is beginning to falter as the hangover from the credit crunch bites. Recently several big City banks have quietly laid off hundreds of employees, a trend that is likely to escalate.

What is certain is that British families are suffering from the feelbad factor. Having first been assailed by the credit crisis, which made borrowing money much more expensive, they are now feeling the full effect of rising prices.

Last week a survey put consumer confidence at minus 29, down five points from April and the lowest reading since November 1990, the start of the last UK recession. The poll, by GfK NOP, saw expectations for the economy over the coming year fall to minus 39, the lowest figure on record.

Rising prices appear to have taken the place of dearer credit in consumers’ minds. Officially the government’s statisticians say that inflation is running slightly above target at 3%. The finances of millions of households, however, tell a very different story.

Basic household spending inflation is actually running at 5.7% – nearly double the official rate – according to research by the Centre for Economics and Business Research (CEBR), a respected think tank.

The typical household now spends £28 a week more on essential basics such as food, housing, utility bills and transport costs than a year ago. This means that the annual running costs of a typical home are now nearly £1,500 higher.

Worse is almost certainly on its way. The National Farmers’ Union warns that the lag in price negotiations between supermarkets and food producers means much of the big jump in costs seen by farmers, with energy bills up 3 0 % and fertiliser up 75%, has yet to feed through to the public.

Nor can hard-pressed families fall back on that traditional bolster of British personal wealth, real estate. The Nationwide survey made grim reading, highlighting a 2.5% fall in prices in May. The mortgage lender says prices are now 4.4% lower than they were this time last year.

Such gloomy figures must be countered by the fact that prices are still 5% higher than two years ago and 10% higher than in May 2005. Economists also point out that such falls are theoretical for most people, who will not need to move house in the near future. Compared with the house price crash of the early 1990s, home-owners also have relatively more equity in their properties and a greater number have opted for repayment rather than interest-only mortgages.

Nevertheless, the cost of owning houses is rising fast. Householders cannot yet expect any relief from reduced interest payments, something that might normally be expected when the economy begins to falter. Yesterday Moneyfacts.co.uk, the price comparison website, predicted that the average rate on a two-year fixed-rate deal would soon rise above 7%. Two years ago it stood at 4.3%.

Central banks worldwide are finding themselves unable to cut their base rates because, with oil prices seemingly stuck above $100 a barrel for the foreseeable future, to do so could fuel inflation even further. The pain seems here to stay.

For an entire generation this will be the first time they will have experienced a downturn. The uninterrupted economic growth of the past 15 years means that anyone under 30 will have provided only for themselves in good times.

“What you’ve got is people in their twenties who as long as they have been conscious of economics have known low interest rates, low unemployment, cheap food, cheapish fuel and cheap clothes. For them this is a completely new situation,” said Chris Tapp, director of Credit Action, the debt advice charity.

It is a situation for which they are poorly prepared. Encumbered by debt from student loans, cheap credit and having been unable to get a place on the housing ladder as property prices spiralled, many will struggle if things get rough.

Pasca Lane, 24, who works in public relations in London, said that she had grown up “aware of a real feeling of prosperity in this country and there has been a move away from that”.

She is gradually noticing changes as prices rise. “When I go to my local supermarket and get a pint of milk and a loaf of bread, I seem to come away having spent £8. I moved out from home a year ago and I have really noticed a change since then,” she said.

“My gas bill has gone up so much recently that I am about to ring them and complain.”

As things get worse, there will be many more such complaints. IN Whitley Bay, Amanda Newton knew where she put the blame for the problems.

“I never agreed with Tony Blair, but at least when he was in power you always felt he had a handle on what was happening,” she said.

“Gordon Brown seems to have no control or sense of direction. He doesn’t instil any confidence and you just get the feeling that we’re heading into a black hole.”

It is a growing problem for the prime minister. Last week a YouGov opinion poll put Labour at an all-time low of 23%, 24 points behind the Tories.

Brown’s inner circle insist that he does “get it” with regards to the economic problems that ordinary Britons are facing.

“He is totally absorbed by the problems posed by rising worldwide fuel prices and the increasing cost of food,” said one No 10 aide.

“You will find that he raises these issues with every world leader he speaks to. When he eventually calls a general election he wants to be able to demonstrate to voters that he took the right long-term action.”

The outline of the Brown response to rising energy costs began to emerge last week.

The prime minister said that he would talk to the Opec group of oil-producing countries to urge them to increase production. Brown wants the oil question to be top of the agenda at the G8 summit of some of the world’s wealthiest nations which will be held next month in Japan.

Meanwhile, there was a statement confirming that the government would back a new generation of nuclear power stations, which could generate a third of Britain’s electricity and reduce the dependency on increasingly expensive fossil fuels.

On Friday ministers fleshed out plans to help those suffering from “fuel poverty” – defined as those who spend more than 10% of their income on energy bills. This has become a growing problem with the surging cost of gas and heating oil.

However, Brown’s growing army of critics, both within Labour and without, believe that his approach centring on the global commodity markets fails to get to the heart of the crisis.

They say that while Brown may understand the big global picture, he struggles to relate to voters’ short-term anxieties. Some pointed out that new nuclear power stations would take a decade to start providing benefits, while the public was more worried about the 2p rise in fuel duty due to be introduced in October.

As David Cameron, the Tory leader, memorably put it, Brown knows the value of a barrel of oil but not how much it costs to fill a family car with petrol. On motoring issues Brown will always be vulnerable to attack because he does not himself drive, the result of a teenage rugby accident that left him blind in one eye.

A revelation last week painted an interesting picture of a man who, while insisting that he is concentrating on the big picture, is easily sidetracked by minutiae. Brown has reportedly taken to telephoning members of the public who have written to him with their problems. The strategy, it was claimed, almost backfired when he called one voter at 6am. Luckily the recipient of the call was a shift worker who was already up and about.

A spokesman hotly denied that the prime minister made calls at antisocial hours.

The sense of a lack of focus is amplified by the way the budget, traditionally the unalterable expression of the taxation and expenditure plans of Her Majesty’s Treasury, has started to resemble a first draft or tentative “kiteflying” exercise.

The U-turn over plans to axe the 10p starting rate of income tax was damaging enough. Now the government is being forced towards a double climb-down over motoring taxes. Ministers have already hinted at a delay to the 2p levy on petrol. As the Labour back-bench revolt grows, a concession over forthcoming rises in vehicle exercise duty also seems unavoidable.

Last week saw cabinet ministers get in a muddle over the fate of this scheme. Initially they had suggested that they were open to compromise. Jack Straw, the justice secretary, and John Hutton, the business secretary, had hinted that changes could be made to the new regime which will mean an increase of more than £200 a year for some family cars.

Hours later, however, Alistair Darling, the chancellor, moved to dampen expectations. This weekend the Treasury was still hoping that the issue could be booted into the long grass.

“Alistair is sticking to what he said in the budget,” said a spokeswoman. “He will come back to fuel duty. The vehicle excise duty provisions are not in this year’s finance bill; they will be in next year’s. He will of course look at it. But we are not giving any signals now.”

This week Labour MPs will return from the Whitsun recess in a febrile mood and ministers may be forced to act more quickly than they would like. The Commons motion calling for a rethink on car tax has 42 signatures at present and dozens more could add their names in the next few days.

Wider criticisms of Brown’s prime ministership are taking root. Writing in this newspaper today, Alan Milburn, the arch-Blairite former health secretary, warns that despite the talk of taking tough long-term decisions, there has been a lack of focus in Downing Street.

“For all the blizzard of initiatives that emanate from Whitehall, Labour has yet to develop a coherent postBlair agenda,” he writes.

Milburn goes on to identify the key area that needs to be addressed in recession-hit Britain: the level of taxation. “Taxes should be cut, especially for the low paid,” he says.

He is not alone in believing that the complex fiscal system needs to be pruned back. Denis MacShane, the former Europe minister, spoke of “the insatiable greed of the state” and called for tax cuts targeted at the “indigenous working classes”.

The mixed messages sent out by the government over the past week may not be just a result of the half-term holidays. Insiders point to growing rifts between the key departments running economic policy. There is increasing resentment in the Treasury at what officials regard as “micro-management” by No 10.

Darling and Brown, both from the east coast of Scotland, were once the closest of allies. However, the string of political crises since the Northern Rock bank collapse has tested their relationship to destruction.

Civil servants believe that Brown’s protégé, Ed Balls, the schools secretary, could take over as chancellor in a summer reshuffle. He would certainly be a popular choice in the City, where he acquired a strong following during his five years as Brown’s chief Treasury adviser.

No 10 strategists do not rule out a summer shake-up but insist: “Gordon is not even thinking about it just yet.” He has plenty more to worry about.

Additional reporting: Holly Watt, Isabel Oakeshott, Nigel Green

Church to offer prayers for recovery

With the economy moving in a mysterious way, the Church of England has abandoned faith in the earthly powers of Downing Street. It is instead urging vicars to ask God to ease the effects of the credit crunch, writes Marie Woolf.

Priests have been asked to offer special prayers of support for parishioners struggling to pay rising food, energy and transport costs while having to cope with their mortgages.

A church committee will meet this week to draw up an official set of prayers calling for divine assistance for those worried by debt, as well as plans to offer more practical help at parish level.

John Packer, Bishop of Ripon and Leeds, is one of the clerics leading the drive to offer support. “The church can provide pastoral care for people who fall into difficulties because of the rises that are going on at the moment,” he said. “It is important that people feel they are not alone.”

The Church of England has traditionally offered special prayers in its regular services to remember the suffering of others. It is even offering prayers at the moment for people who are taking exams.

As a stop-gap measure while the credit crunch prayers are being written, an adapted version of an earlier offering is recommended to congregations: “We ask your guidance as we work out a household budget. Help us to learn to let no debt remain outstanding, except the debt to love one another.”

This week, a meeting of the church’s National Worship Development office will discuss the writing of new prayers addressing rising fuel and petrol bills and mortgage payments.

A more practical plan is for vicars to hold “credit crunch evenings” where struggling parishioners can go for advice and support. Churches in poor areas will be asked to invite professional debt advisers to use their premises to help people who are victims of the slowdown.

Mere luxury doesn’t cut it with the big spenders

Last week’s announcement by Burberry that it had sold “several hundreds” of its £11,000 Warrior handbag revealed a new trend in spending in the downturn, writes Holly Watt.

Retail analysts are now making a distinction between “super-luxury” and mere “luxury”. Those firms targeting the former are prospering as the super-rich keep spending, almost to mock the economic climate.

Burberry is not alone in reporting boosted incomes. The exclusive Italian brand Bottega Veneta has announced sales up 31.5% in the first quarter of this year. Prada’s profits rose 66% last year.

Private jet sales are up, with Boeing now installing “servants’ quarters” in some of its extended 747 jumbos.

Although mid-range house prices are falling, the very top end of the property market is defying the credit squeeze. Lakshmi Mittal, the steel tycoon, is poised to buy a Kensington home for a record £117m.

Downturn, what downturn?

Tapped: Brown’s 6am calls

It is 6am and Gordon Brown has gathered his advisers together in No 10 to help him make a crucial decision, writes Roland White. Should he telephone a voter?

Gordon Brown: Are you sure this will make me more popular? It does seem very early.

Ed Balls: For God’s sake, Gordon, it’s only a telephone call.

Jack Straw: That said, I advise caution. Wouldn’t you be better stepping aside for the good of the party and allowing a safe pair of hands to make the call?

GB: No, I think I’ll do it. Probably. Yes, I’ll do it.

He dials the number.

Toneless electronic voice: Thank you for calling the British electorate. Press 1 to apologise for the 10p tax cut. Press 2 to set out your vision. Press 3 to insist that you are the best man to lead the nation through economic difficulties. Press 4 to speak to a real voter.

Gordon presses 4.

Toneless voice: We’re sorry. All members of the electorate are busy at the moment, putting in overtime so they can afford the odd litre of fuel and loaf of bread. You are being held in a queue.

GB: Oh this is . . . wait, hang on, it’s ringing . . .

Voter: Hello? Ruddy hell, do you know what time it is?

GB: Good morning, it’s Gordon Brown here.

Click!

GB: Oh! We seem to have been cut off. Let’s try this other number . . . Hello, it’s Gordon Brown here.

Click!

GB: Hello, it’s Gordon . . .

Click!

GB: There’s only one more number, and apparently it’s a hard-working pensioner . . . Good morning, it’s Gordon Brown.

Hard-working pensioner: About bloody time too. When are you coming to finish my bathroom?

GB: I’m afraid there seems to be some sort of mistake.

HWP: I’ll say there’s been some sort of mistake. And I made it when I hired you to fix my bathroom.

GB: I’m afraid I’m not your plumber, I’m the prime minister . . .

HWP: Don’t be daft. Tony Blair’s the prime minister.

GB: Look, Tony Blair resigned last year. I’m the prime minister now.

HWP: What a pity. We liked Tony Blair. He was a lovely young man.

GB: Well I’m in charge now and I’m calling this morning to see how you think the government is doing.

HWP: How is the government doing? You’re having a laugh, aren’t you? I can’t afford to heat the house, I can’t afford to fill up my little car, and you don’t want to know what I think about the price of food. On top of that, some idiot decided to scrap the 10p tax rate and now I have to pay more. The hospitals are filthy, the police aren’t interested in crime. What have you got to say to that then?

There is a long pause

GB: I think there’s been some sort of misunderstanding. I just phoned to say I could come tomorrow and finish your bathroom.