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UK’s Brown sets economy as 'overriding priority'

In a short legislative programme set out in the traditional speech to parliament by Queen Elizabeth, Prime Minister Gordon Brown said he would focus on easing the pain of a looming recession by promising laws to protect savers and prevent banks suffering funding crises that have crippled the economy.

“The strength of the financial sector is vital to the future vibrancy of the economy,” the Queen said in the speech.

“Legislation will continue to be taken forward to ensure fairer and more secure protection for bank depositors and to improve the resilience of the financial sector.”

Britain’s banking system has been shaken by the global economic crisis, with two major lenders now effectively in the hands of the government and others struggling. Their reluctance to lend has had a profound knock-on impact on the economy, particularly on small businesses starved of operating funds.

Despite the problems, Brown has won praise for his handling of the financial crisis, with voters and previously sceptical party members now banking on his experience of 10 years as finance minister to help Britain ride out the storm.

His opinion poll ratings, once far lagging the opposition Conservatives, have rebounded, meaning the next general election, due by mid-2010, may be tighter than once thought.

By making aid to families and small businesses the centre of the coming legislative agenda, Brown will be hoping to capitalise on his newly bolstered popularity and boost his party’s—and the economy’s—fortunes ahead of the election.

“Overriding priority”

The Queen said the programme would include new laws on welfare reform, health and education, which would serve the government’s overriding priority—“the stability of the British economy during the global economic downturn.”

The heavy economic focus comes as Britain slides into recession. Its economy shrank at its fastest rate in 18 years between July and September and economists polled last month predicted it would contract by 1.3 percent next year.

News on Wednesday also showed the services sector, a major employer and a key driver of Britain’s post-industrial economy, shrinking at a record pace in November. [nL2553471]

Brown has announced plans to borrow billion of pounds and inject them into the economy to try to offset the slump, which could cost Labour a fourth consecutive election victory.

In his legislative programme, Brown also promised a bill to create so-called “Saving Gateway” accounts which would offer incentives for those on low incomes to save.

Brown had already outlined many of his proposals for new legislation in May, but since then Britain’s economic prospects have taken a further turn for the worse and some measures seen as unfriendly to business have been dropped or put on hold.