Gordon Brown appeared to acknowledge for the first time today that the world economy was heading for a 1930s-style “depression”.

Mr Brown stumbled slightly over his words at Commons question time, just a week after admitting that Britain was facing a “deep” recession.

As the financial gloom deepens, he told the Tory leader David Cameron today: “We should agree, as a world, on a monetary and fiscal stimulus that will take the world out of depression.”

The comment went unnoticed during rowdy question time exchanges between Mr Cameron and Mr Brown, which centred on protectionism and the Prime Minister’s use of the phrase “British jobs for British workers”. Ironically, the exchange ended with Mr Brown accusing the Tory leader of deliberately "talking Britain down".

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A No 10 spokesman said that Mr Brown's use of the word "depression" was not deliberate. "And he does not think it."

The term "depression" refers to sustained recessions characterised by high unemployment and a severe lack of business confidence rather than regular cyclical downturns. It has not been used by British policymakers during the current downturn except by way of warning and comparison with the Great Depression of the early 1930s.

Only two days ago, Stephen Timms, the Treasury Financial Secretary, suggested in the Commons that the UK could be facing economic conditions as harsh as in the Great Depression. Mr Timms warned the country was “facing some of the harshest economic conditions for decades, perhaps for a century”.

A Tory MP, Andrew Tyrie, swiftly seized on his comments, demanding: “If I heard you correctly I think you said that Britain is now facing an economic crisis which is perhaps the worst for a century. Are you suggesting that what we may be facing is worse than the Great Depression of the 1930s?”

Mr Timms replied: “What I’m suggesting is that the world economy is facing a situation which is certainly the worst in decades ... and some people are saying, for a century.”

In a statement after PMQs, George Osborne, the Shadow Chancellor, demanded clarification of the Prime Minister’s use of the D-word.

"The Prime Minister must personally and urgently clarify whether his statement today that the world is in ‘depression’ was a slip of the tongue, or whether he knows something that we don’t know,” he said. “For the sake of confidence he should clear up this confusion. Prime Ministers in particular need to be very careful about their use of language to ensure they don’t undermine confidence.”

During today’s exchanges the Prime Minister defended his use of the phrase “British jobs for British workers” as Mr Cameron accused him of “pandering to protectionist fears”.

Mr Cameron had asked: “Do you share my concern at the decision by the US House of Representatives to pass ’buy American’ legislation and agree that a retreat into protectionism is the last thing the world needs. Yesterday your spokesman refused to confirm that he would specifically condemn these moves. Will you make clear your position today?”

Mr Brown said he had made clear over the last few months that “the biggest danger the world faces is a retreat into protectionism”.

He added: “We should make sure that every country is analysed for what it is doing by the WTO to prevent protectionism. It’s also absolutely clear that we should agree, as a world, on a monetary and fiscal stimulus that will take the world out of depression.”

Mr Cameron continued with his questions without remarking on the Prime Minister’s use of the word.

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