CHANCELLOR Alistair Darling flew to Washington today for crucial talks with the world's top finance ministers.

He will meet chiefs of the G7 group of rich countries tomorrow and the International Monetary Fund on Saturday.

KEY QUESTIONS What is the Government doing? The Treasury will make £50billion available for banks to strengthen finances. It will also provide - for a fee - guarantees of around £250bn on loans between banks, which it hopes will ease the pressure in frozen money markets. The Government has also expanded its Special Liquidity Scheme, which allows banks to swap risky assets for safer Treasury bonds, to £200bn and is accepting a wider range of collateral in its funding auctions. How much taxpayers' money is at risk? At least £50bn from spending money on stakes in UK banks although the Government could profit if markets recover. It is £820 for every person in the UK. Inter-bank lending guarantees could hit £250bn but will only cost taxpayers if banks default. Why is the Government acting now? The banking system is arguably facing its biggest crisis since the Great Depression. Inter-bank lending has virtually stopped. Since the collapse of Lehman Brothers last month the crisis has heightened with nationalisations and bail-outs in Europe, the US and the UK's Bradford & Bingley. Will it work? It is too early to say. Inter-bank overnight lending rates fell sharply yesterday by around 0.75%, suggesting easing in conditions. But the rate at which banks lend to each other for three months reduced only marginally - indicating longer-term uncertainties remain. Volatile stock markets fell - the UK's benchmark FTSE 100 Index closed down more than 5% yesterday. Will there be an impact on the public finances? If the £50bn injection is financed with public borrowing, some experts say this would take the UK's net borrowing requirement well above £100bn this year. This is almost three times official estimates and could increase the chance of tax rises and spending cuts. What other action is being taken? The Bank of England slashed interest rates by 0.5% yesterday along with five other central banks - the first co-ordinated emergency action since November 2001. China also cut interest rates.

But his eyes will be on the stock markets in the next 48 hours to see if the UK's £500billion bid to beat the credit crunch has restored confidence in the financial markets.

The London stock market steadied today.

The FTSE 100 Index was up more than 1.5% after interest rate cuts in South Korea, Hong Kong and Taiwan fuelled a modest recovery for Asian markets.

Banking shares were boosted, with HBoS and Royal Bank of Scotland up 16% and 19% respectively.

Mr Darling had unveiled a £50billion bailout yesterday to help stricken UK banks, along with £250bn to insure against bad debt and doubling money available to £200bn.

The early announcement was followed hours later by the Bank of England, the US Federal Reserve and European Central Bank all cutting interest rates by 0.5%.

China also cut its rate, acting on its own initiative in response to the other world banks' actions.

Despite the dramatic announcements, the FTSE 100 Index plunged more than 5% yesterday to 4366.7, its lowest level since August 2004 amid growing fear of recession. The fall wiped £57bn from blue-chip stocks.

There were also deep losses on America's Wall Street, in France and in Germany. Japan's Nikkei saw its biggest drop since the October 1987 stock market crash.

There are now worries the Government's gamble may not be enough to stop the markets sliding and get banks lending to one another again.

There are also questions over whether Mr Darling and Prime Minister Gordon Brown have a Plan B if it fails.

The International Monetary Fund added to the gloom today after warning of a deep downturn for the global economy .

US Treasury Secretary Hank Paulson warned: "The turmoil will not end quickly and significant challenges remain ahead."

The Chancellor and Prime Minister will spend the coming days pushing for co-ordinated international action to restore stability to the financial sector.

As well as Mr Darling's Washington talks, Mr Brown will be in close contact with his counterparts ahead of next week's European Union summit in Brussels, following criticisms that last weekend's pledge to co-ordinate their response to the credit crunch has fallen apart within days.

Treasury officials were today talking with UK banks over the level of individual take-up of the Government's £50bn recapitalisation scheme and the precise terms of the deals.

Eight UK financial institutions - Abbey, Barclays, HBoS, HSBC, Lloyds TSB, Royal Bank of Scotland, Standard Chartered and Nationwide Building Society - have promised to increase their capital by £25bn, but Government will pump in the funds if called upon.

The Treasury also stands ready to make at least another £25 billion available if necessary, effectively part-nationalising the banks.

But it was the interest rate cuts worldwide that helped boost markets today.

Rik Zwaneveld, trader at AFS Brokers, said: "Markets are not turning positive, they are recovering from heavy losses we saw earlier this week. The sentiment has not really improved.

"The rate cuts are a good step in the right direction to stop the bleeding, but this won't be enough. European governments have to act swiftly and decisively together."

And dealer Matt Buckland, of CMC Markets, warned markets were likely to remain volatile.

He said: "There's so much uncertainty as to what happens next."

There was a call from Virgin tycoon Sir Richard Branson for Britain to follow Germany and Ireland in guaranteeing 100% of savers' deposits. But he also called for more cuts of as much as 1.25% in the Bank of England base rate, which is now 4.5%.

He said: "It's not too late. The Government, at no costs to themselves, could stand behind all deposits in the banks and I think that would stabilise the banking system once and for all and that is something I think they should do soon.

"I think the Bank of England, who brought in the 0.5% interest cut, just were not bold enough.

"They are almost definitely going to have to bring in another 0.5% or 0.75% cuts in the next few months. They might as well do it tomorrow rather than wait until the end of the year."

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Scots councils hit by crisis in Iceland

ANOTHER four Scottish councils today admitted having money in at-risk Icelandic banks.

North Ayrshire, South Lanarkshire, East Ayrshire and South Ayrshire councils told the Evening Times they had millions a pounds of taxpayers' money tied up in the country.

It follows news that Perth and Kinross has £1m in Glitnir Bank.

South Lanarkshire has £7.5m in Icelandic banks. A council spokeswoman said: "Yes, we have some money in Iceland. Officers are at a meeting, but will be putting out a statement shortly."

South Ayrshire has £5m with Landsbanki, Iceland's national bank and parent bank of British internet bank Icesave, which is also in trouble, while East Ayrshire has between £3m and £5m tied up.

South Ayrshire Council's chief David Anderson said: "We have investments with a wide range of financial institutions, including Landsbanki. The value of that investment is £5m."

A North Ayrshire spokesman said: "We have exposure to Icelandic banks and are monitoring the situation closely. I can't give any details of the amount of money involved. That's all I can tell you."

The councils invested with the Icelandic banks because they offered higher interest rates. However, Icelandic banks have been hit by a number of collapses in recent weeks and many English local authorities also have money tied up in them.

Kent Council has £50m between Landsbanki, Heritable and Glitnir Bank. And 20 more authorities could have exposure to the crisis.

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Petrol hope as oil prices drop

HOPES were rising today of a possible fall in petrol prices.

It came as fears over a global recession sent oil prices to their lowest level for almost a year.

Oil prices still remain around 40% less than the $147-high recorded three months ago, while on the forecourt, petrol and diesel prices have also been falling.

Average petrol prices across the UK yesterday were 109.4p a litre, 8% lower than this year's high of 119.9p seen on July 17.

Diesel prices averaged out at 120.8p, 9% lower than the 133.3p high.

Debt clock can't keep up

THE US National Debt Clock in New York City has run out of space to record the growing total.

As a short-term fix, the digital dollar sign on the billboard-style clock near Times Square has been switched to the figure 1 to mark the current debt of $10.2trillion.

The Durst Organisation plans to update the sign next year, adding two digits to allow it to track debt up to a quadrillion dollars.

Group is given second loan

THE Federal Reserve has agreed to provide insurance giant American International Group with a loan of up to £21.8million on top of one made to the troubled company last month.

Under the new programme, the Federal Reserve Bank of New York will borrow investment-grade, fixed income securities from the Manchester United shirt sponsors in return for cash collateral.

Record fall in house prices

HOUSE prices plunged at a record rate during the year to the end of September - losing 13.2% of their value.

The fall was the biggest ever recorded by the Halifax house price index, which posted a year-on-year decline of 12.7% in August.

House price inflation, which compares prices during the previous three months to the same period a year ago, fell by 12.4%, pushing the average cost of a UK home down to £172,108.