Gordon Brown tried to reassure voters and his party yesterday by proclaiming the strength of the economy and its ability to withstand world turbulence, and predicting that recent problems would be “forgotten quickly”.

He appeared alongside Alistair Darling, the Chancellor of the Exchequer, at his final press conference of the year, after holding talks on the economy with Mervyn King, Governor of the Bank of England, and Sir Callum McCarthy, chairman of the Financial Services Authority.

Despite a show intended to underline the message that the basics of the economy were strong, the two failed to give 100 per cent guarantees that all the taxpayers’ money lent to Northern Rock would be returned. A month ago Mr Darling said that he “fully expected” to get it all back. Yesterday he and the Prime Minister ducked questions on whether all of it would be recovered, with the Chancellor saying that “one of our priorities” would be to ensure that the money was repaid. Asked for a guarantee, Mr Brown replied: “What I can guarantee is that the loans we have made available, the liquidity, is backed by the assets of Northern Rock.”

Both he and Mr Darling insisted that all options, including nationalisation, remained on the table. The Times understands that an important moment will come in mid-January, when Mr Darling receives a report from Goldman Sachs on the prospects for the sale of the bank to one or several bidders. The prospect of the Government temporarily nationalising the bank and then selling off its assets in parts is believed to be real.

Gordon Brown's Black Wednesday

The Northern Rock disaster has torn away any remaining credibility the Prime Minister had

BACKGROUND

• Sorry story tests Gordon to the limit

• Gordon, how wonderful, wise and talented am I?

• Brown’s brain and his hand are not always connected

• How 'cruel' schooling scarred Brown

Mr Brown brushed aside recent difficulties, saying the past year had been about addressing one by one the long-term challenges that the country faced. That Northern Rock’s problems had not spread to other institutions showed that the tripartite system between the Bank, the FSA and the Treasury was “working well”.

Mr Brown and Mr Darling denied any rift with Mr King and rejected suggestions that they had ignored warnings that Northern Rock was in trouble. “The Governor and I and the Chancellor are completely at one in both the way we deal with these events and analyse what’s happened,” Mr Brown said.

He said that the Government and the Labour Party would be judged on how it dealt with crises such as Northern Rock and the “proxy” donations scandal. Mr Brown played down apparent new criticisms of him by the former Home Secretary Charles Clarke as having been taken out of context, and said that Mr Clarke had an important role to play in the future.

Asked about political donations and the loss of personal data, Mr Brown said: “I think people know that when a problem arises we will deal with it.”

But he said they also wanted the government not to be “diverted” from its long-term aims. “Many of the things that have been written about for the last few weeks will be forgotten quickly,” Mr Brown said. He insisted that the “fundamentals of the British economy are and remain sound”, with inflation at 2.1 per cent and record levels of employment. He also dismissed demands for a U-turn over police pay.

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