Gordon Brown today promised further measures in the weeks ahead to get banks lending again, warning that a "vital" function was currently lost to the country.

As interest rates were slashed to their lowest ever level by the Bank of England, the Prime Minister and Chancellor Alistair Darling again said it was essential that mortgage and business lending was stepped up.

At a "listening" event in Liverpool designed to show that ministers are in touch with a recession-hit country, they acknowledged that further Government action was necessary.

Businesses were "worried" and homeowners needed more security, the Prime Minister said.

"That’s why we had to take urgent action a few weeks ago, when we had to recapitalise the banks - and we were the first country in the world to do it, but others have followed us.

"And that’s why in the next few weeks we are looking at the measures we can take to take the next step, and take it with effect, and that is to get the banks to resume the lending that is necessary.

"We know now how important banks are to the system, but if they can’t supply finance, and if they don’t keep the money moving in the economy, and if they are not able to fund new business loans or fund mortgages, then we have lost an important function that is vital to every part of the country.

"So we want to move from the capitalisation of the banks to securing the funding that is necessary, for business projects, for home ownership and for the everyday business concerns that people have in the banking system."

His comments coincided with the latest in a series of cuts in interest rates and come amid mounting concern about when the economy will begin to recover.

Mr Darling told the same gathering that banks should respond to today’s interest rate cut with improved lending facilities.