The confidential cabinet document suggested that house prices were likely to fall but that it was not possible to predict how far they will drop. “Given present trends they will clearly show sizeable falls in prices later this year – at best down 5-10 per cent year-on-year,” said the document.

Ms Flint’s “speaking notes” warned that: “House building is also stalling. New starts are already down 10 per cent compared to a year ago. Housebuilders are predicting further falls.” They also showed that repossessions were rising, presumably as homeowners struggle to keep up with mortgage repayments.

“We can’t know how bad it will get,” it continues. “But we need to plan now to put in place effective measures against the risk that it does get worse and to prepare for the upturn.”

However, the document was not entirely negative. It said that: “Underlying demand for housing remains high and the fundamentals of the economy remain sound. But the market is being affected by the global credit crunch which is making it difficult for many who would like to buy to do so.

In bold letters it said: “It is vital that we show that at this time of uncertainty we show that we are on people’s side.”

According to Reuters, a statement has since been released to say that the figures in the document were based on research undertaken by external sources rather than by the Government itself.

This statement argues that the report showed that “the fundamentals of the economy are sound” and that the Government “will continue to monitor the situation and take appropriate action”.

However, the BBC cites shadow housing minister, Grant Shapps, describing the unintentional disclosure as “incompetence at the heart of government” and that while one view of the housing market was being presented publicly by the Government, they were airing “the exact opposite scenario behind closed doors”.

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