Chancellor blasts Rover workers

Mr Brown said Rover's bad productivity was to blame for the job cuts, not the Government's economic policies. Rover said the job losses were needed to offset the impact of the strong pound.

But Mr Brown said: "There is absolutely no doubt that productivity is an issue here.

"Anybody who has looked at the productivity problems of the British car industry and the comparisons between different sectors of the industry and different companies in the industry knows that."

Mr Brown said he understood people's worries about the pound but added: "Unless we face up to the fact that we have a productivity gap with our competitors, we will as a nation be failing to meet the challenges of the future."

Mr Brown said that a slowdown in the British economy was necessary to avoid inflation. He said: "It is a hard and difficult road for Britain because we are breaking free of the short-termism which has bedevilled this economy for 30 to 40 years."

Rover chairman Walter Hasselkus insisted that the high pound was the cause of Rover's problems. It made Britain's exports expensive and uncompetitive and imports cheaper.

Rover's Cowley plant will go on a four-day week from mid-August but the 3,500 workers there are shielded from the worst of the cuts because Rover is to build its new R40 model there.

Short-time working is expected to end when the new model goes into full production next spring. The company says it will need an extra 1,000 workers to build the car.

Motor industry analysts warned that Rover's announcement could mean the loss of more than 15,000 jobs in the UK car components industry in three years.

Shadow Trade Secretary Mr John Redwood said the Rover job losses typified the problems of British manufacturers which were unable to "export successfully given this Government's economic policy mistakes".

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