Chancellor Gordon Brown is in denial over the UK's economic outlook and is living in a different world from those hit by his decisions, opposition parties have said.

In a Commons debate called by the Conservatives, shadow chancellor Michael Howard said Mr Brown's "soundbites are now turning to ashes in his mouth".

Our policy has not only enabled us to cope with the slowdown without recession, but has seen growth rise Gordon Brown Chancellor

Businesses were struggling with red tape, pensions were in "crisis" and public service reform targets were being missed, said Mr Howard.

The Liberal Democrats also joined the attack, but the chancellor insisted the UK's economic building blocks were secure.

With Valentine's Day approaching, Mr Howard said the British public's "love affair with New Labour" was coming to a close.

"This is the chancellor who promised no more boom and bust," he said.

Michael Howard: Business has been undermined

"But he has managed to provide both boom and bust at the same time.

"This is the chancellor who promised prudence for a purpose. But he has been neither prudent in handling the nation's finances nor purposeful in reform of the public services.

"This is the chancellor who has presided over missed growth forecasts, over halved productivity growth, over a pensions crisis, and over rising government debt."

Real world?

Mr Howard said share prices had fallen last week because the cut in interest rates was seen as a sign of economic concern.

Corporate profitability was also at its lowest for nine years, he claimed.

Mr Howard continued: "That is the real world. The world in which British business lives.

A chancellor who will not admit the relative problems of the UK economy is not a chancellor who will come forward with policies to correct them Matthew Taylor Lib Dem spokesman

"In short, this is a world in which the government has steadily, relentlessly and remorselessly been undermining the ability of British business to win orders and create jobs."

The Tory spokesman also argued the value of personal pensions had halved in the last 10 years.

He added: "Of course for those living in a parallel universe, the chancellor's decision in 1997 to tax the dividend income from pensions savings at �5 billion a year had nothing to do with this."

Lib Dem Treasury spokesman Matthew Taylor said it was not world economic problems that were the problem.

In the UK, there was a "dangerous split" between a manufacturing sector in deep trouble and a buoyant services industry which was now slowing down, he argued.

'Underlying stability'

Mr Taylor accused the chancellor of being "increasingly delusional" about the economic prospects.

"You're in denial about the state of the economy," he said.

"The concern is that a chancellor who will not admit the relative problems of the UK economy is not a chancellor who will ever come forward with policies to correct them."

Mr Brown himself argued the opposition were missing out key facts about the economy.

"We have the lowest inflation for 40 years, the lowest interest rates for 48 years, lower unemployment than America, Japan and the rest of Europe for the first time since 1945," he said.

Spending 'disaster'

The chancellor continued: "Despite all the economic uncertainties and restructuring that I acknowledge is taking place in the British economy, employment is up by 150,000."

He insisted the UK's policies had enabled it to cope with the global slowdown without slipping into recession.

Mr Brown said the Tories wanted to cut government spending by 20% - something that would be a "disaster" for the British people.

Tory spokesmen denied those claims, saying they were only looking at "areas of potential for saving", which did not include cuts in health or education funding.