Small businesses are to receive prompt payment for services provided to central government, regional agencies and health trusts to help them cope with the economic downturn, Treasury Minister Ian Pearson has pledged.

The Dudley South MP offered a lifeline to struggling small firms as Gordon Brown, the Prime Minister, admitted for the first time that Britain is heading for a recession.

But Mr Pearson came under fire from Tory Shadow Business Secretary Alan Duncan, who complained that he was announcing the measures instead of the “real Secretary of State”, Peter Mandelson.

The MP said the Government would help small businesses facing “real difficulties” as a result of the credit crunch and the world-wide economic slowdown.

He said: “Central Government will aim to pay its suppliers as soon as possible, and within 10 days at the latest. This will bring forward billions of pounds worth of payments, on top of the majority of payments already made within 10 days.

“The Regional Development Agencies, who spend around £750 million annually with suppliers, have also committed to this.

“And yesterday the Communities Secretary (Hazel Blears) wrote to the Local Government Association and the chief executive of the NHS wrote to NHS trusts, asking these public bodies to review their payment performance.”

The Government would also put pressure on banks to lend money to small businesses, he said. “We want to see banks taking appropriate risk assessments on small and medium enterprise lending - being responsible but not being unduly risk averse and not passing on unreasonable costs.”

Mr Duncan complained that Mr Pearson had been despatched to the Commons to make the announcement because Lord Mandelson sat in the House of Lords. He said: “This statement is an unprecedented occasion representing an unacceptable mixture of farce and contempt.”

He added: “The Government has been slow to cotton on to the fact that the turmoil witnessed over the last few months in financial markets is now causing the deepest imaginable pain to businesses both big and small up and down the country.”

Mr Brown admitted for the first time that the country was heading for a recession, following a similar assessment from Bank of England Governor Mervyn King.

He said: “Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too, he said at question time.

During a fierce confrontation with Tory leader David Cameron over the state of the economy, he insisted his “undivided attention” was on helping families and businesses through the slump.

Mr Cameron repeatedly challenged the Prime Minister to admit that he had not, as he had previously claimed, abolished boom and bust and admit some blame for the present problems.

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