Alistair Darling will make a high-risk bid to lead Britain out of recession tomorrow, when he is expected to cut VAT and entice the British people to go on a pre-Christmas spending spree.

The move by the Chancellor and Gordon Brown won the support last night of Charles Clarke, one of the Prime Minister's most high-profile critics, a sign that the economic crisis is at last uniting Labour and focusing minds on the battle against the Tories. With high-street stores slashing prices to attract customers, Darling will offer help with his pre-Christmas price cut in an attempt to limit the collateral damage from the global financial crisis.

The cut is expected to see the rate drop from its current level of 17.5 per cent for at least a year - and possibly for as long as two years.

However in an interview this morning, the Tory leader, David Cameron, warned public borrowing could top £100bn to pay for Brown's "fiscal stimulus" package to rescue the ailing economy.

'I think people are going to be shocked tomorrow when they see the extent of government borrowing,'' he told BBC1's Andrew Marr show.

'Maybe £80bn this year, before the recession's even properly started, and possibly over £100bn next year. And next year, that is over £4,000 extra for every family in the country.'

Lord Mandelson, the business secretary, acknowledged this morning that the government could not know whether the planned changes would persuade people to spend more. 'We don't, but that's not a reason for inaction,' he said.

Asked when there would be tax rises, he added: "In the medium term, the chancellor has said, and he's absolutely right to say this and he'll do so again tomorrow, that we have to get our public finances on to a sustainable basis.

'He's got to explain how he's going to do that and he will.'

Last night, as Darling put the finishing touches to the most important financial statement of Labour's 11 years in government, there was speculation that he might slash the rate to 15 per cent, a move that would cost the government about £12.5bn a year.

Such a move, certain to be interpreted as evidence that Brown is preparing for a possible election next year, is seen by the Prime Minister as essential to help the economy ride out the severest economic downturn for generations.

Darling is also expected to announce an extension of the £2.7bn giveaway announced in the summer to buy off Labour rebels opposed to the abolition of the 10p income tax rate. The original rebate, worth £120 a year to basic rate taxpayers, was due to come to an end next April, but the Chancellor is likely to carry it over for at least another year. There could also be wider changes in personal tax allowances to take many low earners out of paying tax at all, as well as plans to speed up infrastructure projects to help salvage jobs in construction.

In an interview with the Sunday Mirror, Darling today promises help for 'every household' so people can 'get through the difficult period'. He also promises support for householders with mortgages and those facing redundancy. 'Worried mortgage holders will get help and I shall do what I can to help those who lose their jobs.'

The public sector, he says, will be asked to spend less. 'In these difficult times the public sector will, like the rest of the country, be tightening its belt.'

There was also speculation that Darling could help motorists by postponing plans to increase vehicle excise duty on the most polluting cars.
With the financial markets nervously waiting to see how Brown and Darling intend to pay for the measures, the Prime Minister received a significant boost last night when Clarke, a former Home Secretary, finally buried the hatchet and lavished praise on his former political enemy over his handling of the economic crisis.

Ending one of the bitterest feuds at the top of the Labour party, and in a sign of how it is now united behind its leader, Clarke, who only in September called for Brown to shape up or quit, told The Observer that the Prime Minister had shown 'genuine economic and political leadership at a time when it was both desperately needed and difficult to do'. He said: 'It's been a real surprise to me but Gordon's economic self-confidence has made him more decisive on the political front.' The PM had listened to his critics and had 'earned the right to support'.

'I think that, since the Labour party conference, he has done really well in meeting the challenges of the world financial and economic crisis,' said Clarke. As a result, he said he felt Brown could lead Labour to a fourth consecutive general election victory.
'Winning the election, particularly in the marginal seats in the south east, remains a really tough call, but Labour is obviously back in the race and can do it.'

City economists said a VAT cut was 'psychologically attractive', as it would encourage people to spend when times were hard and could easily be withdrawn later.

The government's deficit will balloon to way above £100bn next year, but the Treasury hopes to reassure the City about the long-term health of the government's finances by announcing detailed plans to increase taxes and squeeze public spending, once the recession is over.
Britain's approach of plunging deeper into the red to pay for a short-term economic support package was echoed in the United States, when President-elect Barack Obama promised to save 2.5 million jobs with a two-year stimulus plan.

'There are no quick nor easy fixes for this crisis, which has been many years in the making, and it's likely to get worse before it gets better,' said Obama. 'But 20 January is our chance to begin anew, with a new direction, new ideas and new reforms that will create jobs and fuel long-term economic growth.'

In a speech to the CBI annual conference tomorrow, Brown will defend his own 'fiscal stimulus' plan, insisting that a 'new approach is now needed if we are to get through this unprecedented global financial recession with the least damage to Britain's long-term economic prospects'.

This weekend, the Conservative party launches a nationwide campaign aimed at highlighting its view that Brown's '£100bn borrowing binge' will mean higher taxes in the long run. Poster vans warning of a 'tax bombshell' - the same phrase the Tories successfully deployed against Labour in the 1992 general election campaign - are being used in London and in busy shopping areas across the country.

George Osborne, the shadow Chancellor, last night accused the Prime Minister of conning the electorate with tax cuts that would have to be paid back. 'Only the Tories will deliver lower taxes that last,' he said.

A 'misleading' figure included in a major government watchdog report has led to a false and vastly inflated picture of the numbers of children who die from abuse in England.

The revelation comes as an Observer investigation today reveals there has been a huge surge in applications to place children into care since the furore over the Baby P case erupted earlier this month. Amid a public clamour for tougher child protection measures, nervous social workers are pressing for the removal of any child suspected of being at risk of abuse.

Last night the figures used to estimate the scale of child abuse in Britain were themselves under scrutiny. The annual report of education and children's service inspectors Ofsted, published last Wednesday, stated that 282 child deaths had been reported by local authorities across England over the 17-month period ending in August 2008.

According to government sources, Ofsted has now privately admitted this figure is 'misleading' and should have been explained or broken down. The figure of 282 is made up of all children who died while receiving any kind of local authority help - including terminally ill children receiving social care and accidental deaths of nursery age children.

In fact, it is likely that the deaths of fewer than 100 children could be attributed to neglect or abuse.

A spokesman for the Department of Children, Schools and Families said its records would suggest about one child dies through neglect or abuse in England each week, in line with previous estimates.

'Since 1 April 2007, the department has had a database of the serious case reviews following the death or serious injury of a child, so we can confirm that, as of July 2008, serious case reviews were initiated following the deaths of 81 children who died during 2007,' the spokesman said.

The NSPCC said the confusion over the Ofsted report was 'not helpful'. 'We keep statistics because it is important to monitor any changes,' a spokesman said. 'We were confused when we first read the report because it was so much higher than our statistics, which come from the government homicide statistics. But it seems they have put all child deaths together, not just ones that are linked to abuse, so it isn't really helpful.'

An Ofsted spokesman said that the report may have been confusing for a lay person, but, while the figure was not wrong, the context 'wasn't made clear enough'.

In the wake of the Baby P case, staff working in the family courts report there has been as much as a three-fold increase in applications to place a child into care in the past fortnight. The Inner London Court would normally expect to receive between two and three applications a day for children to be placed in care. However, last week, staff said they were receiving between eight and 10 applications a day.

In Leicestershire, there were nine applications for child protection orders over the past week, compared with an average two to three in a normal week. On Thursday, staff working at the family court in Colchester said they received three applications in just 24 hours, while staff in Leeds said they had nine cases in the last week, an 'unprecedented number', according to an insider.

Figures collected by Cafcass, which looks after the interests of children involved in family proceedings and is responsible to the government, confirm there has been a significant spike in the orders as the police and local authorities rush through cases to remove 'at risk' children.

The Cafcass figures reveal that, across England, there was a 26 per cent increase in applications for all forms of child protection orders made between 10 November and 20 November this year, compared with the same period in 2007.

In an article published on observer.co.uk today, Anthony Douglas, chief executive of Cafcass, acknowledges that the Baby P case appears to be having an effect on child protection policy. 'This is hardly surprising,' he writes. 'Negative publicity usually leads to institutional risk aversion.'

Unions warned a rise in child protection orders would impact on the child protection system. 'A dramatic increase will put additional pressure on Cafcass,' said Harry Fletcher, assistant general secretary of Napo, the family court union. 'Each report leads to the court appointing a Cafcass guardian to represent the child. Doubtless the agency will struggle to meet demand.'

A British man suspected of close links to al-Qaeda's leadership and involvement in a high-profile bomb plot in Britain has reportedly been killed in an American missile strike in the volatile border regions of Pakistan.

Rashid Rauf, originally from Birmingham, was said to have died along with at least four other militants with alleged links to al-Qaeda in an attack in the North Waziristan tribal agency, according to Pakistani intelligence officials. The area is a key base for hardline extremists, including European militants.

Pakistani intelligence sources say that they intercepted communications between militants after the strike indicating that Rauf was among the casualties, but warned that no direct evidence of his death had yet been found. 'He was probably killed,' one intelligence officer said. 'That's as far as I can say.'

Rauf has been named as a 'key person' in the so-called airlines plot that was uncovered days after the dual British-Pakistani national was held in Pakistan in 2006. Police in London and High Wycombe, Bucks, launched a series of raids following his seizure, arresting 24 people. The operation was followed by the tightening of hand baggage restrictions around the world, as it was believed conspirators were planning to smuggle home-made liquid bombs on board a series of Atlantic passenger flights.

Aftab Sherpao, Pakistan's Minister of the Interior at the time of Rauf's arrest and trial, said last week that the 27-year-old, who is also wanted for questioning in the UK over the 2002 murder of his uncle, was considered the mastermind of the plot and was linked to al-Qaeda. However, a Pakistani court later dismissed terrorist charges against him.

Rauf has always been shrouded in some mystery. Born the son of an immigrant baker in Birmingham, he moved to Punjab in 2002, basing himself in Bahawalpur with his wife and children. His family refused to comment yesterday. Though accused of contacts with some of the most wanted men on the planet, Rauf's Pakistani lawyer said his client had only ever been a member of Tablighi Jamaat, a non-violent and legal mass organisation committed to preaching a rigorous version of Islam.

'He was an innocent, God-fearing, devout, polite man, not a very educated dangerous person, and, if it is confirmed, this is an extra-judicial killing,' Hasmat Habib said.

After his arrest in 2006, Britain launched extradition proceedings, but Rauf escaped from custody outside a court in Rawalpindi when policemen took off his handcuffs to allow him to wash before prayers. His flight sparked anger in Britain and concern about possibly complicity by Pakistani authorities. If he is dead as claimed, the Pakistani intelligence service (ISI) and the new civilian government will seek to capitalise on it diplomatically. The fact that David Miliband, the Foreign Secretary, is due to arrive in Pakistan this week may not be a coincidence. Pakistani authorities have a history of carrying out such operations shortly before the arrival of representatives of allies who are concerned that Islamabad may not be fully committed to the fight against Islamic militancy.

US forces have carried out about 20 missile attacks since August in northwestern Pakistan at a sharply increased pace that reflects Washington's frustration at local efforts to tackle militants.

Though the attacks have killed a number of high-profile militant leaders, civilian casualties and a sense of wounded national pride has led to outrage in Pakistan. Islamabad has been forced repeatedly to deny reports that a secret pact has been concluded with Washington to allow the missile attacks to go ahead.

'Pakistan condemns any such action, as it is a violation of our sovereignty. It would have been better if our authorities had been alerted for local action. Drone incursions create a strong backlash on indigenous anti-terror objectives for Pakistan,' Sherry Rehman, Pakistan's Information Minister, said yesterday.

Yesterday's missile strike came shortly before dawn and is thought to have killed at least five militants. One is believed to have been an Egyptian named by Pakistani intelligence sources as Abu Zubair al'Masri. Though in recent months their numbers have dropped, Egyptians are still strongly represented, along with Libyans, Saudi Arabians and Algerians, among the senior ranks of al-Qaeda.

The officials said the attack targeted a house in Ali Khel, close to the small town of Miram Shah. The owner, who led a group of local extremists, regularly sheltered foreign fighters, officials said. Such arrangements are common, with international militants often paying substantial amounts to their hosts.

Arthur Keller, a former CIA agent who served in the tribal areas of Pakistan, said that joint teams of American intelligence, defence department and ISI specialists work to track down militants, sifting leads from hundreds of contacts within the local community.

'We had our guys who would speak to us directly. The Pakistanis had their guys and would pass on information,' Keller said. But, the former spy alleged, Pakistani co-operation was only forthcoming when it concerned 'internationals', not the local or Afghan Taliban.

Yesterday's operation appears to have been launched after a lead reached the ISI. Western intelligence officials in Islamabad say the recent strikes have demoralised militants, with some even sleeping under trees - for cover from overhead surveillance - rather than risk staying in a house. They have also sparked a hunt for a suspected spy within the extremists' ranks, the officials said.

Pakistan has played host to the evolution of the terrorist threat in Britain, with many major bomb plots involving British or dual-nationality citizens who have travelled to Pakistan for training or strategic advice from al-Qaeda's leadership, which has been able to reconstitute a base in the lawless tribal zones along the Afghan frontier in recent years. The latter provide 'the crucial X-factor' which allows the angry and alienated to become potential bombers, according to specialists. According to the Pakistani army, such men play the same role in the insurgency now raging along the frontier. 'They are the salt in the bread mix,' said Colonel Naumann Saeed.

About 20 British citizens who are already known to the British government as potential threats make their way to Pakistan each year. Some just visit family, others head to the frontier region each year. They are joined by British citizens who are radicalised in Pakistan and others who arrive 'pre-cooked'. Often Pakistani militant groups act as intermediaries for the new recruits with the senior international militants. Some of the volunteers go on to fight in Afghanistan, others are told to return to the United Kingsdom.

The MI6 overseas intelligence agency works closely with its American counterparts to track individuals they believe pose a 'material' practical threat to Britain. Rauf would have fallen squarely into this category. As MI6 has neither the capability nor the legal right to undertake lethal operations in Pakistan, intelligence is passed to the Americans, whose drones are fitted with Hellfire missiles powerful enough to destroy a local mud-walled home.

Anyone on the receiving end of such a strike would be dead in seconds. Rauf may well have fallen into the latter category, too.

Still on the run

Osama Bin Laden
First wanted in connection with the 1998 bombings of the US embassies in Dar es Salaam, Tanzania, and Nairobi, Kenya, which killed more than 200 people. US is offering reward of $25m for his capture.

Ahmed Mohammed Hamed Ali
Wanted in connection with the 1998 bombings. Thought to be in Somalia under protection of the Islamic militia.

Ayman al-Zawahiri
Often described as a 'lieutenant' to Osama bin Laden. Under indictment in the US for his role in the 1998 bombings.

Abdul Rahman Yasin
Constructed bombs for the 1993 World Trade Center bombing. Yasin was allegedly a prisoner of Saddam Hussein in 2002, but has since gone missing.

Ahmed Ibrahim Al-Mughassil
Wanted by the US in connection with the 1996 attack on the Khobar Towers housing complex near Dhahran, Saudi Arabia. Identified as head of the military wing of the pro-Iran Saudi Hizbollah.

Adam Yahiye Gadahn
Indicted in a US court for providing support to al-Qaeda. The charges are related to a number of terrorist activities.

Ricky Hatton was rightly pleased with an improved performance in beating Paulie Malignaggi and restoring much of his reputation.

But it's way too early to get carried away. Victory at the MGM Grand Arena this morning over an opponent whose tricks evaporated under sustained pressure keeps Hatton in line for a huge payday in the UK next summer, against the winner of the Oscar De La Hoya-Manny Pacquiao fight in the same ring on 6 December.

And there was much to admire about his better head movement and his patience. He still gets caught too easily when coming in, especially early in a contest when the adrenalin is pumping. Once he had settled down though, behind a jab that he has ignored for far too long, he was able to set his man up for some heavy hooks to head and body.

He took Malignaggi's boxing away from him. After a few anxious moments in the early rounds, Hatton was confident of blasting his way past what has to be one of the weakest jabs in the light-welterweight division.

When the end came, 28 seconds into the 11th round, there was a sense of relief around the Arena, although Malignaggi was hardly out on his feet. His trainer, Buddy McGirt, said he threw the towel in because his fighter was losing and did not have a punch with which to pull it out of the fire.

He was right. But Malignaggi, a proud man, looked willing and capable of taking it a bit further.

Hatton's long camp with Floyd Mayweather Snr has obviously improved his sharpness and technique. He sat down on his punches and, after missing early, did not panic.

Can he beat De La Hoya or Pacquiao? I don't know. Neither does he. But he has put himself into that frame with a much better chance than he might have had a year ago.

Billy Graham, the trainer from whom he parted after his last fight, a poor points win over Juan Lazcano six months ago, was in Las Vegas but not at the fight. That was puzzling and sad at the same time, as he will have wanted his friend to do well - and yet not want to be seen as the trainer who oversaw the deterioration of his boxing.

At last it's official. One of the gravest and most consequential decisions Barack Obama will make in his presidency - as least as far as a small and highly privileged segment of Washington is concerned - has been taken. Obama and his wife, Michelle, have decided where their two girls will go to school.

In a city where social status is conferred by proximity to political power, the Obamas' decision on where to educate their two daughters, Malia, 10, and Sasha, seven, had assumed outsize importance - in no small part because of the potential social opportunities it offers to Washington's elite and wealthy parents.

Washingtonians are used to the quadrennial changing of the political guard, but there is a special excitement this time around about the incoming First Family. It has been decades since there were children this young in the White House, and there has never been an African-American family there at all. The decision on schools is the first in a trail of clues as to what sort of town Obama's Washington will be, to be followed in due course by solemn announcements of the family's choice of puppy, chef and sport of choice at the White House, as well as what church the family will attend.

On schools, the Obamas have made the predictable choice: Sidwell Friends School. The Quaker-founded school is liberal with a strong green orientation, and has an excellent academic reputation. The population is about 1,000, and 39 per cent of pupils describe themselves as being of colour.

'A number of great schools were considered,' said Michelle Obama's spokesman, Katie McCormick Lelyveld. 'In the end, the Obamas selected the school that was the best fit for what their daughters need.'

So that's one key element of the transition decided. Obama's cabinet also took on greater shape yesterday. Timothy Geithner, president of the Federal Reserve Bank of New York, is to be Treasury Secretary. Bill Richardson, the governor of New Mexico who served as Energy Secretary under Bill Clinton, is to take commerce and Hillary Clinton is expected to be formally confirmed as Secretary of State following the Thanksgiving holiday on Thursday. Obama announced last night that close aide Robert Gibbs would be White House press secretary with Ellen Moran serving as director of communications.

The Obamas' deliberations on schooling had been closely followed in Washington, where there was keen appreciation for the potential benefits of a presidential connection. The morning after his election, Obama had been photographed dropping his children off at school in Chicago - fuelling anticipation about the possibility of befriending the President or First Lady on the school run when the family move to the capital. There are other potential points of connection: Sasha and Malia, when they start at school in Washington, might want to invite some of their new friends to the White House.

Sidwell has a long connection with money and the political elite. It is the alma mater of President Nixon's eldest daughter Tricia Nixon Cox, Chelsea Clinton and Al Gore III, the son of the former Vice-President. The three granddaughters of the Vice-President-elect, Joe Biden, are at the school. A number of former Hillary Clinton aides send their children there, including her pollster, Mark Penn. The journalist Bob Woodward sends his child there. And some are not shy of using these connections.

One leading Democratic fundraiser and hostess in Washington had her granddaughter, who is at Sidwell and is about the age of the Obamas' eldest daughter, write a letter to Malia praising the school - which Malia then passed to her mother.

In contrast to what might happen in Britain, there has been little debate about whether the Obamas would choose a private or a state school, and they are unlikely to face much criticism for choosing to pay fees. Tuition starts at more than $28,000 a year. The last presidential child to attend public (state) school was Amy Carter, in the 1970s, and she was the first for more than 70 years. Photos show her scurrying into the school yard with a newspaper over her face, trying to shield herself from photographers.

The city's mayor, Adrian Fenty, had urged the Obamas to consider sending their children to a public school because of the message it would send other parents in Washington. The mayor sends his own twin sons to a private school.

With that decision out of the way, the conversation in Washington yesterday turned to the Obamas' choice of church. Here they have to navigate not only class but race, because the choice could also reawaken the controversy over Obama's former pastor, the Rev Jeremiah Wright, at his church in Chicago.

Sally Quinn, the self-appointed arbiter of the capital's social scene, has also weighed in on the subject, with a piece in yesterday's Washington Post recommending the National Cathedral, which is Episcopalian. The Obamas might want to listen to Quinn, wife of the former Washington Post editor, Ben Bradlee: she famously felt snubbed by the Clintons when they arrived in Washington and Hillary did not jump at an invitation to be introduced to her social set. Quinn spent the next eight years cavilling about how the Clintons lacked class.

Now, where will the Obama girls do ballet?

Gurkha soldiers refused to leave a dead comrade behind enemy lines even though they knew they would face 'extreme fire' from Taliban forces.

The first accounts of the courageous recovery of the body of the first Gurkha killed in Afghanistan can be revealed today as British troops continue to defend the strategic former Taliban stronghold of Musa Qala in Helmand province.

Braving withering fire from fortified Taliban positions, men from the 2nd Battalion, the Royal Gurkha Rifles, located the body of Rifleman Yubraj Rai and then carried it more than 100m across open ground.

In previous years the fighting in Helmand has subsided in November, but the latest dispatches from the region reveal concerted resistance from the Taliban forces. Rai, who had been in Afghanistan for only two weeks, was shot during an operation to clear the southern districts of Musa Qala after intelligence revealed that the Taliban had consolidated their forces almost a year after British troops seized control of the town.

During the operation earlier this month, a Gurkha platoon was ambushed on a stretch of open ground. Amid the chaos, Rai was hit almost immediately.

Colleagues initially believed that the 28-year-old was just diving for cover. But after he realised Rai had been hit, Lieutenant Oli Cochrane began planning to rescue his body, but suddenly lost all radio contact as a bullet hit his radio. Further rounds then pierced his rucksack.

As Taliban fighters found their range, Captain Gajendera Angdembe, Rifleman Dhan Gurung and Rifleman Manju Gurung ran 100m across open ground to retrieve Rai's body.

Last week Manju Gurung described how bullets were 'kicking up dust around their feet'. So intense was the weight of fire being directed at the Gurkhas that Dhan Gurung was forced to use Rai's weapon as well as his own. 'At the time it seemed impossible to evacuate Yubraj. While on the open field I thought we would not come back alive, thank God we are here. I felt helpless not being able to save Yubraj,' he said.

Cochrane added: 'They showed courage, refusing to leave an injured man behind. The boys acted with immense bravery and with disregard for their own lives as they moved through open ground under fire to recover the casualty.'

The battle continued to rage for another six hours. The Gurkhas were later joined by Warrior armoured vehicles which pushed the Taliban 2km back in skirmishes that went on throughout the night and into the following morning. Still enduring fierce enemy resistance, British troops inside the Warriors cleared 10 Taliban-occupied compounds, discovering a cache of explosives and weapons.

Captain Kit Kyte said: 'Despite the heavy weight of fire from the enemy, we were able to dismount [from the Warriors] and clear a lot of compounds at very close quarters.' Officers said the mission had successfully cleared a route and up to 50 civilian homes that British forces hope will be reoccupied by local people. 'Frankly, we can carry on killing the enemy and they can carry on trying to kill us for as long as they like, but we're not achieving anything,' said Lieutenant-Colonel Chris Darby, commanding officer of 2nd Battalion.

Details also emerged last week of how Colour Sergeant Krishnabahadur Dura, 36, was killed near Musa Qala after a roadside bomb tore through his 25-ton Warrior.

Last week more than 2,000 people gathered in Parliament Square in London in support of 2,000 Gurkha veterans fighting for the right to live in the UK. In the wake of a High Court ruling, the government is expected this month to reveal whether it will grant residence to Gurkhas who retired before 1997.

Zam Zam Abdi fled Mogadishu after being threatened with death by the hardline Islamist militia - the Shabab. The message from the armed group once allied to the Union of Islamic Courts, the coalition that briefly seized power in 2006, was simple: if she continued working for her women's rights organisation in the Somali capital, she would be killed. The warning was posted on her office gates. But it is what happened to a friend and colleague, working for another organisation, that persuaded her to escape. He was shot dead and the same note left on his body.

'Most of us had to leave,' she said. 'We had emails and phone calls telling us to stop working. They used an expression famous in Somalia: Falka aad ku jirtid maka baxeeysa. May ama haa? It means - "Stop what you are doing or we will act. Yes or no?" Then someone spoke on the radio - a local leader called Sheikh Mahmoud - delivering the same warning.'

Zam Zam, 28, separates the chaos and violence that has pervaded her country since the overthrow of President Mohamed Siad Barre in 1991 into 'ordinary Mogadishu' and 'not ordinary'. 'Ordinary', in Zam Zam's definition, describes her country's persistent clan warfare, even the heavy fighting in the city that drove her to leave before with her daughter when Ethiopian troops - supporting the internationally recognised government - shelled her neighbourhood in 2006 to drive the Islamic Courts out after six months in power.

In the ordinary violence and chaos, Zam Zam and her colleagues could still work, negotiating with the clan warlords. In common with the UN, Zam Zam believes that what is happening now is something else. Something terrible, exceeding perhaps even the bloodsoaked chaotic days of the early 1990s when Somalia was last plunged into anarchy.

It is Mogadishu that symbolises what is happening. A large proportion of its population - already jobless, hungry and surviving on aid - has fled the fighting in the city between the Shabab and the forces of the country's weak and rapidly imploding government, backed by its Ethiopian allies. The streets are stalked by assassins, kidnappers and suicide bombers. And the Shabab is threatening to overrun the country's south and centre.

If what is happening is a disaster, it is a disaster hardly noticed by the world. Yet it has not only been human rights workers who have been attacked. Government officials, politicians and journalists, anyone who does not fit in with the Shabab's world view, have been threatened and killed, mostly for being tainted by Western ideas. 'When the leadership of the Islamic Courts fled in 2006, the Shabab became more independent,' said Zam Zam.

For humanitarian workers, problems were exacerbated when one of the Shabab's leaders, accused also of being a leader of al-Qaeda, was killed in a US air strike in late spring in the town of Dusa Mareeb. 'When the US hit Shabab hideouts they started seeing us as being spies of the West. If people were kidnapped they would ask to see our laptops before releasing us to see what information we held on them.'

While the world has focused on the rampant piracy problem afflicting the Gulf of Aden, which saw yet another tanker held for ransom last week, the seizing of ships is only a symptom of a much more terrifying malaise.

What it points to is the wholesale failure of a state and the international community's abandonment of the Somalia problem except where it affects its interests - in terms of shipping trade and the 'war on terror' for the West and on a more local scale for the regional interests of Ethiopia and Eritrea.

Last week, however, the African Union Commission's chairman, Jean Ping, reiterated what many are convinced of: that the piracy problem is inseparable from Somalia's caustic political and security problems. 'Piracy is an extension on the sea of the problem you are facing on the land ... [it] is an important aspect of all the disorder you already have in Somali territory,' he said.

Somalia is not so much a failed state as one that is atomising. Forty-three per cent of the country is in dire need of humanitarian assistance, about 3.2 million people at the last count. There are 1.3 million internally displaced, 100,000 of them fleeing the fighting in Mogadishu alone since the beginning of September. Inflation is running at 1,600 per cent. One in six children in southern and central Somalia is acutely malnourished.

Dozens of aid workers, most of them locals, have been murdered this year, largely by members of the Shabab. According to the Shabab, even locals who take money from the UN are therefore in the pay of foreign interests and enemies to be killed.

Mogadishu and other centres have been hit by suicide attacks - merely one aspect of an intensely violent society. There is the religious conflict between the factions of the Islamic Courts allied to the Shabab and those they regard as insufficiently Islamic. Then there are the ever-present clan conflicts, at the centre of which is the rivalry between the Hawiye and the Darod groups. Added to this is the battle between the Transitional Federal government backed by Ethiopia and the Islamic Courts.

These conflicts are underscored by complex, interleaving rivalries even within the Islamist factions which have pitted the Shabab - literally the 'Youth' - against the more moderate Djibouti faction. On top of all this has been the mushrooming of criminal activity, piracy, smuggling and people-trafficking, some of it linked to groups such as the Shabab. Foreign jihadi fighters have also been attracted into the chaos. The consequence has been a disaster.

'The situation is very serious,' said a Mogadishu businessman who spoke to The Observer on Friday asking not to be identified for fear of being targeted by one of the rival groups. 'A lot of the population has fled from the city. Some areas are deserted and it is very difficult and dangerous. There are no jobs. People are only surviving on the food provided at the kitchens of the aid organisations. Others get money sent from their relatives overseas.

'The military loyal to the government are looting. They are taking mobiles from people and committing other crimes. Then there are the different factions of the resistance who call themselves names like the Union of Islamic Courts or Islamic Jihad. Last week the Shabab took two more towns. This is the worst situation since the civil war began,' he added. 'You don't know who will attack or kill you.'

And despite the advances on the battlefield made by the Shabab, he does not believe that the period of calm and order enjoyed in Somalia in 2006 when the Islamic Courts first took over would be replicated if the Islamist groups won once more. 'This time it will be worse,' he said. 'The Courts replaced the clan warlords but had no ideas for the future and were driven back. This time the Islamic groups will fight among themselves. This time we will have Islamic warlords. They will fight and there will be more difficult problems.'

Somalia's tragedy has been a slow, deadly and divisive affair that has ground out over the years since the fall of the socialist state founded by Siad Barre in 1991. Its roots, at least partly, are to be found in his disastrous war to seize the Ogaden region of Ethiopia, an adventure that would lead to eventual defeat for Somalia's forces and the beginning of Ethiopia's long history of interference in Somalia, which saw it arm the warlords who brought Siad Barre down.

Despite the overthrow of his authoritarian regime, the rival clans responsible for his downfall could not agree on a replacement, leading to lawlessness and social collapse. The result was a country that, when confronted with famine, was unable to cope, leading to the deaths of more than a million of its people.

While the rest of the world knows Somalia for the intervention by American and Pakistani troops as part of Operation Restore Hope in 1993, for Somalis the country's story has been told in clan strife and repeated failures - 14 to date - to establish a government whose writ runs throughout the state.

The most recent effort was the establishment of the Transitional Federal Government (TFG) in Djibouti in 2004 whose authority was quickly challenged by the Islamic Courts, which emerged out of the port city of Kismayo and sought to establish a strict interpretation of sharia law before being driven out by Ethiopian troops who intervened on behalf of the TFG.

While the rule of the Islamic Courts was, by most Somali accounts, a period of relative calm, it is what has happened since that has driven Somalia towards a new catastrophe. Despite a peace deal between one of the factions of the Islamic Courts and the TFG, the Courts' former militia, the Shabab, has split apart - with the most militant faction responsible for the most violence, in particular those who look to the leadership of Sheikh Hassan Dahir Aweys, a hardline Salafist said to be close to al-Qaeda.

The outcome so many Somalis feared has already come to pass in large areas of south-central Somalia that have fallen under the control of the country's reinvented militant Islamist movement. In recent days its fighters have captured two more towns close to the capital, including Elasha, nine miles south of Mogadishu. In Elasha in recent days rival Islamist groups have already clashed violently.

Elsewhere, the Shabab is already consolidating its victories, including in Marka, capital of the Lower Shabele region. Speaking to a crowd in Marka, Muktar Robow - known as 'Abu Mansur' - a spokesman for the Shabab said the group had come to secure the region against foreigners and criminals.

According to the community-based station Radio Garowe, in the north of the country, he said that the Shabab intended to establish an Islamic court to administer justice, adding: 'We will not allow the citizens to be oppressed again.'

Militarily, it is a situation so bleak for the forces of the TFG and its Ethiopian allies that President Abdullahi Yusuf Ahmed admitted two weeks ago that Islamists now control most of Somalia, raising the prospect that his government could completely collapse. 'We are only in Mogadishu and Baidoa, where there is daily war,' he said.

That leaves a fundamental question: will the Shabab press its advantage to attempt to take Mogadishu once again? On Friday the indication was that it might be its intention, as the capital saw one of the fiercest gun battles in recent weeks when Islamist fighters attacked the house of a local government official, leaving 17 dead.

The Islamist factions have also become increasingly bold in recent weeks, with their spokesmen in Mogadishu regularly holding news conferences and carrying out floggings in the parts of the capital they control, whereas only a few months ago they were careful not to be seen in the open.

Despite the high profile of the Shabab in recent weeks, some analysts believe that it may be content with the chaos in Mogadishu that has bogged down the contingent of African peacekeepers as well as Somali-Ethiopian troops. They believe, too, that the Shabab is wary of the several thousand Ethiopian troops who defeated them before.

Fears over what would happen if the Islamists were to take the capital and impose sharia law across the south were underlined by a single incident at the beginning of the month - the stoning to death for adultery of a 13-year-old rape victim, Aisha Ibrahim Duhulow, in Kismayo. 'You know how bad it is getting,' said Zam Zam, 'when a 13-year-old is stoned to death. Then you know that it is really scary.'

'Somalia in general and Mogadishu is in the midst of a deep political, humanitarian and security crisis,' said Asha Haji Elmi, an MP and activist and delegate to the UN-led peace process, who fled before the Ethiopian advance in 2006. Now based in Nairobi, she remains in daily contact with people in Somalia.

'They talk to me about a precarious situation, and it is civilians who are paying the heaviest price, especially women and children. It is unbelievable. There are internally displaced spread everywhere. There is no secure place.'

She forcefully rejects any new attempt to impose a military solution on her country: 'The solution is political. It requires dialogue. That is the only symbol of hope. A military solution cannot be the answer to the problem. Everyone who has tried to solve Somalia's problems by force has failed.'

A short and bloody history

1960 Britain withdraws from British Somaliland, making way for a union with Italian Somaliland. The new country is known as the Somali Republic.

1969 A coup launched by Mohamed Siad Barre ushers in a period of increasingly authoritarian rule.

1977 Siad Barre invades the Ethiopian territory of Ogaden in a bid to create a Greater Somalia. The Soviet Union and Cuba back Ethiopia.

1991 Siad Barre is deposed by warlords, largely from the south, armed and supported by Ethiopia. The country descends into factional fighting. In May the northern clans declare an independent Republic of Somalia.

1993 Facing an appalling famine, the UN launches a humanitarian effort led by US and Pakistani troops. Thwarted by General Mohamed Farah Aideed, the mission suffers casualties, including the episode described in the film Black Hawk Down, above right, when 17 US Rangers were killed - and the UN mission leaves in 1995 in the wake of the US withdrawal.

2004 The two-year peace process concludes in the establishment of the Transitional Federal Government. It never manages to establish real authority.

2006 A coalition of businessmen, clerics and militias known as the Union of Islamic Courts sweeps to power. Ethiopia, encouraged by the US, intervenes to support the TFG and drives back the Courts, claiming they are allied to al-Qaeda's East African network.

2008 With the leadership of the Courts in exile, a resurgent Islamist movement, focused on the hardline Shabab militia group, makes gains throughout the country, threatening Mogadishu and Baidoa by November.

Boris Johnson, the mayor of London, was branded 'naive' yesterday after raising the prospect of an amnesty for illegal immigrants, a move that puts him in open opposition to Conservative leader David Cameron.

Johnson's plan to study the potential benefits of an amnesty was attacked by the government's Phil Woolas, who said it could lead to more people being exploited by traffickers. It was also ruled out by Johnson's own party, as shadow home secretary Dominic Grieve warned that an amnesty would be 'massively counter-productive'.

Woolas, the Immigration Minister, said: 'I think this is naive of the mayor. His comments might start with the best of intentions but will lead to more people-traffickers making more money and exploiting more vulnerable individuals.

'The UK Border Agency is committed to stopping illegal migration. We are putting in place the biggest shake-up of the immigration system for 45 years and are seeing the results. We are putting more resources into expelling foreign lawbreakers and last year we removed one person every eight minutes.'

Johnson's comments risk opening a rift between himself and Cameron, with whom he clashed on the issue of an amnesty earlier this year. It will do nothing to quell speculation that the maverick mayor is positioning himself as a rival to his party leader, particularly at a moment of Tory weakness in the polls.

Grieve told The Observer yesterday: 'Our policy remains unchanged. We're not in favour of having an amnesty, because the evidence is overwhelming that amnesties encourage more people to come into this country as illegal immigrants. We've considered this very carefully and remain firmly of the opinion that to have an amnesty at the present time with the current state of our borders would be potentially massively counter-productive.

'If the situation arises where we have complete control of our borders and are satisfied that any future inflow of illegal immigrants has been properly curbed, obviously one must always keep open reviews of policy in that context. But at present our borders are not secure in any way and it would simply encourage massive further immigration.'

He played down suggestions that Johnson is seeking to undermine the party leadership: 'He's the mayor of London and is entitled to express his view, particularly in the context of the problems he has to face. It's an interesting contribution to the debate, but doesn't change my view on the matter.'

Of the 700,000 immigrants thought to be working illegally in the UK, about 400,000 are in London. Johnson said that allowing long-term illegal immigrants to earn the right to stay in Britain would see 'hugely increased' tax revenues. Speaking on Channel 4 News, the mayor said: 'What I want to do is commission a study by my own economics team here at the Greater London Authority into the possibility. We want to look in detail at what the economic impact of such an earned amnesty system would be.'

He acknowledged illegal immigrants had broken the law and should 'in principle' be deported, but added: 'Unfortunately it's just not going to happen.'

Johnson raised the issue during his campaign for City Hall in April. Cameron was quick to express his disagreement, saying: 'The problem with amnesties is that people expect another one in the future.' The pair also clashed in the summer when Johnson described his leader's claim that Britain is a broken society as 'piffle'.

Sir Andrew Green, chairman of MigrationwatchUK, said the amnesty proposal was 'unbelievably irresponsible' and would 'cost the taxpayer at least £500m a year'.

The thrill of City life appears to be fading for hundreds of investment bankers who are preparing to turn their back on the financial sector and opt for a career in science teaching.

The Training and Development Agency for Schools (TDA) has revealed that inquiries about science teaching posts rose by a third last September compared with the same month in 2007. The agency will reveal this week that formal applications for science teaching posts have reached record levels and that further significant rises are expected next year in the wake of the world financial crisis. Many of those applicants are coming from the City, it says.

Among those swapping the trading floor for the school laboratory is Elizabeth Baldwin. The 44-year-old worked for almost 20 years for major banks, including Merrill Lynch and Lehman Brothers, until she found, a few months ago, that the excitement of the job was disappearing.

'I had just had my second child, Thomas, and the thought of going back to the City became less and less palatable,' she said. 'The high pay no longer compensated for the long hours and lack of social life.'

So the business analyst - who has a degree in chemistry and biology from King's College London - quit and is now applying to join a training course to become a science teacher. The City is a major employer of science graduates. As it cuts back on jobs, and as more individuals like Baldwin become disillusioned with the financial sector, the numbers of science teachers are set to soar as stockbrokers and analysts quit their Ferraris and stock options for test tubes and Bunsen burners, according to experts.

'There is no doubt that the credit crunch has a huge silver lining in terms of science education in Britain,' said Graham Holley, the agency's chief executive. 'It is going to do a great deal of good for the teaching of chemistry, physics and biology.'

Science teaching has been a cause of considerable concern for education experts for decades. The City has attracted large numbers who are employed, often with lucrative salaries, as business analysts and IT experts. As a result, fewer graduates with top degrees have become teachers. Physics, chemistry, biology and mathematics classes have suffered and fewer children have been inspired to take up science.

In turn, fewer graduates has meant fewer scientifically trained individuals available to work for British industry - and not enough good graduates available to become teachers, who are needed to inspire future generations of sixth-form students and undergraduates to study science subjects.

The government pledged years ago to halt this trend and has introduced a number of measures, including increased salaries for science teachers compared with those in other subjects.

The TDA also launched its Transition to Teaching programme this year to increase numbers. Encouraging results are emerging. This week the agency - which is responsible for boosting teacher recruitment in Britain - will reveal that for the first time the country has exceeded the target set for numbers of new science teachers.

A total of 3,114 science trainees entered colleges during the academic year 2008-09, a rise of 2.5 per cent on the previous year. 'That is the highest number of science teachers we have recruited since the TDA began 13 years ago,' said Holley.

Most of these new recruits have been encouraged by schemes that ensure that salaries start at around £24,000 for science teachers, and can eventually rise to £50,000 for more mature candidates, according to the TDA.

It is a reasonable reward, but it certainly does not match what a science graduate can earn in the City, a point stressed by Baldwin.

'I will be earning a third of what I would have got had I stayed in the City,' she said. 'But money is not everything. Instead of going to work early and leaving very late, I will get a chance to come home and be with my boys, Matthew and Thomas.

'My father was a teacher, so I know what to expect and what I will get out of the job. I know teaching won't be easy, but I know as well that it can be very rewarding.'

'I wanted more time with my boys'

For two decades, Elizabeth Baldwin worked for major banks including Lehman Brothers and Bank of America - a job that took her to Australia, Hong Kong and London.

'The City was part of my life. I would work long hours and then drink with friends. It was in my blood, though it did mean that I never saw my house in daylight.

'But after the birth of my sons - Matthew, who is two-and-a-half, and Thomas, who is 15 months - I found the place was no longer my natural habitat.

'Each time I went back after maternity leave, it no longer felt familiar or safe. So I decided to find a job that would give me some time with my boys.

'My father was a teacher and my sister is a teacher, so it was natural that I would think of education. I am not jumping into it, however. My salary will be about a third of its previous level, although my partner still has his job in the City.

'I will miss the cut and thrust, and the gossip. On the other hand, it will be good to get home by 5.30 and see my children.'

The building is painted peach and there are palm trees in front, but there is nothing cheerful about Plaza Auyantepuy. It is a place of death. In the basement, a dungeon-like warren, men in rubber boots and surgical masks swing through the double door every few hours and wheel in another corpse. The earlier arrivals lie on trolleys, turning yellow.

One floor above, relatives of the dead huddle in small, silent groups. Some hold handkerchiefs to their faces to guard against the smell. There is nothing to guard against the grief. This is the national forensic science laboratory in Caracas, the capital of Venezuela, and it is the epicentre of a murder epidemic.

'My son left home this morning at 7am. They rang me at 9.15am to say he was shot,' said Genny Cedeno, 38, clutching a photograph of 18-year-old Carlos. Tears welled in her eyes and she shook her head. 'He had a right to live.'

Yards away sat another family which had just identified the body of Ernesto Salcedo, 29, a security guard who vanished last Saturday. He had a wife and two children.

In the past few years Caracas has become one of the most violent cities on the planet. Armed gangs competing over turf and drug deals wage ruthless, low-level warfare in the slums. Nationally, homicides have soared to more than 13,000 a year, with 2,710 in Caracas alone, according to leaked government figures. That gives a national rate of 48 per 100,000 people. In some Caracas slums the rate rises to 130. The rate in England and Wales is 1.4.

In opinion polls Venezuelans consistently rank safety as their main concern, with 64 per cent expressing fear of being attacked in the street. Kidnappings have also surged, especially 'express kidnappings' in which victims or relatives pay an immediate relatively modest ransom.

President Hugo Chávez may pay a political price today in local and regional elections. Voters are expected to vent frustration at crime - and shoddy public services - by rejecting some of his mayoral and state governor candidates.

'It's mayhem here. And the government does nothing,' said María Elena Delgado, 54, a housewife in Petare, a vast slum in eastern Caracas. 'I have to think about my children.' The four surviving ones, that is. Three of her sons have been gunned down, including one before Chávez came to power a decade ago.

Opinion polls suggest el comandante remains popular, with approval ratings well over 50 per cent, but that anger over crime could lose him control of once loyal bastions such as Petare.

Chávez speaks in public daily, often for hours, but seldom mentions insecurity. He has blamed crime on capitalism and poverty, and said if his family was starving he would steal. 'The perception that crime has soared is a weak point for him,' said Steve Ellner, a political scientist at Venezuela's University of the East. 'He can't talk about crackdowns because that would contradict his whole discourse.'

Some critics claim the President's denunciations of inequality and 'squealing oligarchs' have encouraged youths to ease their poverty the fast way, with a gun. Partly thanks to Chávez's social programmes, poverty levels have dropped from 53 to 37 per cent. Yet crime has spiked. Corrupt and inept policing has been compounded by a flood of cocaine from neighbouring Colombia. Changing the justice minister every year - there have been 10 under Chávez- has wrought institutional havoc.

The authorities have expressed interest in fresh strategies. Ken Livingstone, London's former Mayor and Chávez ally, is advising Caracas on community policing. The Justice Ministry, which no longer publishes murder statistics, did not return calls seeking comment for this article.

In the hillside slums ringing the capital the bloodiest days are Friday and Saturday. The salsa and reggae beats blaring from bars can swiftly be drowned by gunfire, said Miguel Torres, 52, a taxi driver. 'One second you're sipping a Polar [beer], the next you're under the table.'

Some weekends more than 50 corpses make their way to Plaza Auyantepuy. Monday is funeral day, with hearses sometimes getting stuck behind other cortèges. A gang recently ambushed and killed rivals at a funeral home. 'Often they are just 16- and 17-year-olds but already they are psychopaths,' said Jimin Pérez, director of Project Alcatraz, a scheme which tries to rehabilitate gangsters. 'These guys kill for nothing.'

Project Alcatraz, which is funded by the Santa Teresa rum company, has had mixed results. Some gang members have renounced violence. Others have been assassinated within days of completing the programme. Some have lapsed back into killing. 'We have to offer them a chance of another life,' said Pérez. 'When they feel abandoned and alone, that is when they have no limits, no controls.'

Heavy-hitting Carl 'The Cobra' Froch is unbeaten as he heads for a world title fight against Jean Pascal in December. First, he has to see off Mark 'The Mongoose' Hudson. Read the full story in Observer Sport Monthly

City of God and The Constant Gardener director Fernando Meirelles talks to Jason Solomons about his new film Blindness, working with cinematographer César Charlone and his dream of making a hopeful, funny film

Economics editor Larry Elliott explains why oil prices have fallen to below $50 a barrel.

As retailers feel the chill winds of recession, Martin Wainwright gauges the mood among shoppers in Sheffield city centre.

Farhad Hakimzadeh, a 60-year-old Iranian academic, is being sentenced today at Wood Green magistrates court in north London after admitting damaging priceless and rare books at the British and Bodleian libraries. The British Library's head of collections, Dr Kristian Jensen, assesses the damage to the books.

Immigration minister Phil Woolas talks tough on immigration. But what's the reality behind the rhetoric? Our home affairs editor Alan Travis explains.

Diplomatic editor Julian Borger looks at a report from the US National Intelligence Council on the long-term foreign policy challenges facing the new American president.

Sam Shepard, the American playwright, when asked why he wrote so much about family, answered: 'What else is there?' Tracy Letts likes to borrow the quote, and it is easy to see why. Letts is the author of August: Osage County, an epic tragicomedy about family that has taken America by storm. His new play is the feted youngest member of American drama's extended, dysfunctional family - a natural heir (or, perhaps, wayward stepchild) to Tennessee Williams, Edward Albee and Eugene O'Neill. Steppenwolf's production first triumphed in its Chicago hometown, and then on Broadway (where serious work is often drowned out by the sound of musicals), and went on to capture the 2008 Pulitzer Prize, five Tony awards and the nation's imagination. Rachel Weisz described seeing it as one of her 'top 10 nights in the theatre ever'. Tracey Ullman told Deanna Dunagan, the actress who plays Violet - the bitter, addicted matriarch at the centre of the family web - that she recognised her own mother in Dunagan's performance. And Patrick Stewart paid the cast the awkward compliment of leaving after the first act because he found it too close to home (he promises to return). A film adaptation - with the Weinstein company - is now planned. But it is not just celebrities that are hooked. Family as a subject speaks to everyone - especially when pain and laughter collide.

This week the show opens at the National Theatre in London. And it seems incredible that Steppenwolf have not been seen in the capital since their stunning, sell-out adaptation of The Grapes of Wrath in 1989. The Chicago company first flared into life in the mid-Seventies. Its founders helped themselves - rather cheekily - to the title of Hermann Hesse's novel (even though no one had actually read Steppenwolf). But the name appealed: it sounded arresting, original, bold - and Steppenwolf was all these things. The founders were three boys barely out of school: Gary Sinise, Jeff Perry and Terry Kinney. They had energy, nerve and style. And the company, although peripatetic for years, became renowned for its risk-taking and up-front ferocity. This was where John Malkovich, John Mahoney and Joan Allen started their careers -and many other Steppenwolf stars have blown from the windy city to New York and Hollywood. Yet the company has always commanded loyalty and first-rate actors who wanted to stay on. Their return to London is an event in itself.

Before meeting the cast, I rang Tracy Letts in Chicago to ask about the family tree that inspired his play. Letts is 43 and has been an actor and Steppenwolf member since 2002. He is the author of several smaller-scale pieces (including Killer Joe and Bug - defined by one critic as 'trailer park noir'). Letts told me about the suicide of his maternal grandfather - a labourer who drowned in a lake. It's a story that has haunted Letts all his life. 'His death has always been a mystery and not one I remotely solve.' Instead, his grandfather's suicide exists in the play as the question from which everything else follows. His wife, Violet, is based on Letts's grandmother who became an addict after her husband's death. (Letts himself, more than a decade ago, battled with alcohol and drug addiction.)

He grew up in Oklahoma and does not regard his own family as having been unhappy. His mother, Billie, is a novelist; his father, Dennis, was a literature professor. And it is his relationship with his father that is key to understanding him and the production. Steppenwolf boldly cast Tracy's father (who had, extraordinarily enough, taken on a second career as an actor) in the role of grandfather. He played in Chicago to great acclaim before briefly transferring to Broadway. But in November 2007 he was diagnosed with lung cancer. He left the show in January, died in February. He was 73. Dennis had believed absolutely in his son's play but never lived to see its laurels. For Tracy, this was devastating. The overlap between what was happening on stage and the drama of losing his father was 'the most emotionally powerful thing of my life'. On the night of the Pulitzer ceremony, he could not feel conventionally celebratory. Instead he was overtaken by a rage he could neither subdue nor explain. 'It was complicated. As my shrink said: we're not wind-up dolls. I could not access the feelings I was supposed to feel.'

Letts has a highly developed emotional intelligence. In particular - and it is what makes his play powerful - he understands the force of what is not being said. It is difficult to feel to order - expecting an emotion may make it take flight. He expected his mother to be upset by his portrait of her mother - and she was. But he could never have predicted her verdict: 'You have been very kind to her,' she said. His mother seems to have a way of finding the right thing to say. Apparently - I gathered later from a cast member - she offered her son, after his father's death, the thought that for Dennis, his involvement in the play was 'the cherry on top of the sundae'. She told Tracy: 'Your Dad could not have picked a better last chapter.'

The cast of characters

I met the actors on their first day in London - jet-lagged but buoyant. I had decided to pick half a dozen key family members (the cast is 13-strong) and ask each of them to begin by talking in character, to make it possible not only to ask personal questions but to reveal exactly how dysfunctional this American family is. The poky interview room at the National came perfectly equipped - with a couch.

Jeff Perry

Actor, teacher, co-founder of Steppenwolf. He plays Bill Fordham, a married professor in his fifties having an affair with a student half his age. Perry is delightful yet distrait, with a way of holding one hand up like a traffic policeman, hoping to halt or redirect his thoughts.

'I am Bill Fordham. When challenged, I defend myself with verbal analysis. My marriage is in dire trouble. I am on the second half of the mortal merry-go-round. My wife does not understand, accept or particularly like my hard-wiring. I look forward to hitting the refresh button in my new relationship.' This makes unpleasant listening because Perry's Bill entirely lacks remorse. I banish him, with relief, in order to ask Perry about the company he co-founded in 1976. He is thrilled, he says, that Steppenwolf now has, in Letts, a writer of international stature. And he explains that Steppenwolf has always been defined by its ensemble work: 'We made a religion of communication between ourselves as actors. That has been the unchanging way in which we have measured our success and failure.'

Amy Morton

Actor, director and Steppenwolf member since 1997. She has been in many of the company's productions, including One Flew Over the Cuckoo's Nest. Morton plays Bill's estranged wife. She is an angular beauty and in every way sympathetic but, in character, talks with injured defiance.

'I am Barbara Fordham. I am 47. My qualities are my sense of humour. Loyalty. Passion. Yes - passion. It goes into my anger. My marriage is challenging but I am not to blame. I am not the one who left for someone younger. Bill won't talk to me. I am more than willing to talk to him. My daughter's drug problem? You'll have to talk to her father about it.'

What has it been like to play Barbara? 'There are days when you'd rather peel the skin off your face than go on stage,' Morton says. After a recent rehearsal: 'I went home in an edgy, foul humour and realised: "Oh, right, it's her." She is very frustrated, angry and sad. The older you get as an actor, the less you bring it home, but if you do a role for more than a year, it's going to take its psychic toll.' She admits: 'I feel this character in my bones.'

Molly Ranson

Making her professional debut. She plays troubled, 14-year-old, dope-smoking Jean - Bill and Barbara's daughter. Ranson, unlike her character, is full of shining optimism.

'I have just found out Dad is sleeping with one of his students. Recently, Mum hasn't been there for me, nor has Dad. It all happened suddenly: we were happy, then my grandfather went missing. When did I start smoking pot? During 8th grade.'

Jean represents family history - the addictive gene - repeating itself. Her 'inability to face reality,' Ranson suggests, is 'representative of many Americans'. She likens the play to 'watching a car accident. You feel you shouldn't be there but you can't look away.' The humour is 'real, terrifying and dark'.

Deanna Dunagan

Won a Tony award, among others, for her performance as Violet Weston. Has been in eight Steppenwolf productions. Dunagan is poised, eloquent and diffident. In character, she is unnervingly deluded, unable to face up to being an addict. And she reminds us how often family is about front.

'I am Violet. I am 67. I have to take many pills - but I don't agree that I have a problem. I have a bad back and knees. I am a survivor. I have been a good mother. I love my girls. Barbara left - she just left. In my day, families stayed together. Barbara is quite smart. Ivy, my daughter who stayed at home, could find a good husband. Karen - has gone away. Regrets? I wish I had been able to make a mark in the world. But my girls are good people and that is an achievement.'

Dunagan believes that audiences want to 'find the key to how to live in a family. There will always be problems. Even if you love each other deeply. You'll be hurt. It's inevitable. Everyone comes to the theatre hungry to see another family's pain.'

Rondi Reed

Member of Steppenwolf since 1979. Has appeared in more than 60 company productions. She won a Tony as Mattie Fae. Reed is ebullient, warm, with a jesting energy.

'I am Mattie Fae, Violet's sister. I am 57. I am gregarious and sexy for my age. I am a goer, a doer, an organiser. I am well provided for by my husband in the upholstery business and I'm upholstered in every sense - always fighting my weight. I have a wonderful sense of humour. But my son is a trial to me. My sister is having big problems. Do I have faults? I like too many sweet things. I probably give people too many chances.'

Reed laughs, exclaiming at how similar she and Mattie Fae are. That's not surprising: the part was written for her.

Kimberly Guerrero

Plays the Native American servant. She grew up near Pawhuska, Oklahoma, where the play is set. TV appearances include The Sopranos. Guerrero has an uplifting spirit and pride in her role.

'I am Johnna. Some people think Native Americans no longer exist, or that we are inarticulate. My role is to embrace the compassion and wisdom of my culture. Native Americans see death as not so far from the beauty of birth - as its photo-negative. We don't look at life as linear, we see it as a circle.'

Letts has described his play as a 'political parable' - a portrait of America. It is no coincidence, as Amy Morton points out, that the play begins (and ends) with a Native American. Morton believes the play reflects the 'mess of the American story and the beauty of it'. Rondi Reed sees the play as being about addiction and a 'toxicity that has pervaded the American psyche'. As a cast of Democrats, they all felt that if John McCain had won the US presidential election, the play would have had a 'sadder reception'. But, as Deanna Dunagan asserts: 'Since Obama has been elected, everything has changed. We were all so embarrassed, depressed, fearful and disgusted with what was happening in our country. Now there is hope. It is astonishing what one day can do in the life of a nation.' And it changes the way they feel about coming to London. Rondi explains: 'It makes us come here with our heads held high, as opposed to slinking through the back door.'

• August: Osage County opens on Wednesday at the National Theatre, London SE1

Some children are brought up to love cats and hate dogs, others to adore Manchester United and despise Liverpool. I was brought up to revere Victorian architecture and to abhor modern buildings. Modern buildings, whatever their vintage, whatever their supposed virtues, were rubbish and that was that. In the 1980s, an 'executive' estate was built on the field opposite our Sheffield home. For my parents, midway through restoring their black-leaded fireplaces, the arrival of these buildings involved a certain amount of trauma, an anxiety that transmitted itself to me.

Our terrace was built of local sandstone and, darkened by age and industry, its exterior always reminded me of burnt toast. These houses, though, were built of brick so bright it made my eyes ache and they had gleaming tarmac drives which looked, even in dry weather, like licks of liquorice. At night, I lay in bed and indulged in violent fantasies in which I went Awol with a wrecking ball.

In Sheffield, haters of modern architecture had a perfect focus for their loathing in the form of Park Hill, the council estate that is now the biggest listed building in Britain. As a teenager, I hated Park Hill even more than I loathed Mrs Thatcher, for the simple reason that it made people think badly of my city. It wasn't just that no one liked so-called Brutalism. By the mid-1980s, the flats, then nearly 30 years old, were in a sorry state: dilapidated, and reputedly crammed with the council's most difficult tenants. Yet no visitor could escape them. The estate sits high on a cliff, overlooking the railway station, dominating the landscape like some great prison (a friend of a friend was once told by a taxi driver that Park Hill had been built, not in the late 1950s, but in the 1930s and that had Hitler invaded Britain, it would have been the site of his HQ).

When I went to university and told people where I was from, they would wrinkle their noses and say: 'Oh, I went through there once on the train...' and you just knew that they were picturing Park Hill. It was embarrassing. Why couldn't the council knock the thing down and start again?

Strange, then, that all these years later Park Hill is not only one of the buildings that I like most in the world, but the cause of an unexpected passion on my part for 20th-century buildings in general and 1960s buildings in particular (though I still hate executive estates and always will). This is not to say that I love every bit of concrete I see. The more I learn, the more I realise that postwar architecture is like any other kind of architecture: some is good, some bad.

Recently, I visited Robin Hood Gardens in Poplar, east London, a scheme with which Park Hill is often compared, and a recent Brutalist cause celebre (in July, to much gnashing of teeth from architecture nerds, the Department for Culture, Media and Sport, advised by English Heritage, ruled that the estate, designed by Alison and Peter Smithson and completed in 1972, would not be listed, though the Twentieth Century Society has since been successful in its request for a legal review of this decision).

Thanks to my new fondness for grey slabs, I expected, if not to love it, then to want to save it; this is the only housing scheme that the radical Smithsons ever managed to get built. But the DCMS was right. Robin Hood Gardens is neither generous, nor well-built, and its site has changed beyond all recognition in the last 30 years, its old dockyard views gone, its 'gardens' polluted by the relentless grind of traffic into the Blackwall Tunnel. It is beyond saving, as its fans would find out if they ran a competition among developers for its renovation (there isn't a company in the land that would want that gig).

But Park Hill is not Robin Hood Gardens. Once a great and innovative building, it one day will be again. In the last year, Sheffield City Council's ambitious plan to give the estate a second life as a hip home for urban professionals has at last got under way: tenants have moved out and Urban Splash, the development company, has moved in. When I first heard about this project, I assumed that these residents, worn down by living in a building so down at heel, would be glad to escape, that they'd say to the incoming yuppies: 'You're welcome to it' and score themselves a nice new house.

I was wrong. More than 200 have put down their names for the share of Park Hill that will eventually be owned by Manchester Methodist Housing Association (determined that the site be socially mixed, the council has decreed that a third of the 900 new flats will be 'affordable' and two-thirds of those will be for social rent). Some are living elsewhere and hope to return. A hard core, however, remains on site even as the dust rises around them. This lot love Park Hill and don't like the idea of living anywhere else.

Cut to last April, when all this started. Until now, I've never been inside Park Hill. Once I'm standing in the middle of it, though, two things strike me. The first is the sense of drama that builds as you walk through its courtyards, which get grander the higher the flats grow (built on a hill, the lowest tower sits on the site's highest point and vice versa); their embrace makes me think not of A Clockwork Orange but of the Colosseum in Rome. The second is the fact that Park Hill, unlike Robin Hood Gardens and its listed neighbour, Ernö Goldfinger's Balfron Tower, is not built of concrete. Its frame is concrete but its curtain walls are made of red, orange and yellow brick. Thanks to the damage wrought by heavy pollution, this is not something you can tell from the street.

Beside me, in the whipping cold, Grenville Squires, a caretaker who has worked here for 26 years - until recently, he lived here, too - is hopping with excitement. He loves tourists. 'The way it all fits together,' he says. 'It's like a jigsaw puzzle. I look at it as a feat of engineering. It was so clever. It had a district heating system - the only place with one like it was in Norway, where they'd capped a geyser - and a communal waste disposal system [this survived until the advent of disposable nappies]. When the new developers did a concrete survey, they found that it is not yet a third of the way through its life.'

We get in Grenville's electric cart, and he drives me along Park Hill's interconnected decks to prove that the now much derided 'streets in the sky' really were wide enough to take a milk float. When we get to a suitable vantage point, he attempts to describe the estate as it was. 'There were four pubs, a supermarket, a hardware shop, a butcher's, a ladies' shoe shop, a chip shop. It was like a medieval village; you didn't have to leave.'

So he doesn't believe that it was Park Hill's architects, Jack Lynn and Ivor Smith, who are to blame for what eventually became of the estate? That their design was too brutal, too idealistic, too rigidly controlling?

'No, it was the council's fault. They gave anyone who wanted one a flat and they didn't work hard enough at maintenance. She's lovely [the building]. She's my mistress, the only lady who's fetched me from the marital bed at two in the morning and made demands. She has come on hard times, but all she's got to do is wash her face and put on a new dress and she will be fine.'

At the Park Hill social club, I meet the hard core who remain in residence; they are of the same opinion. Brenda Hague was 22 when she moved into Park Hill on 7 December 1959. Was she full of foreboding as she took possession of her neat new flat with its covetable kitchen, a reconstruction of which I have just seen in Sheffield's Weston Park Museum? Not at all. 'It was luxury,' she says. 'Me, my husband and our baby were living in a back-to-back. My parents were there, too, and my brother. We had no bathroom, just a tin bath on the back of the door. So when we got here it was marvellous. Three bedrooms, hot water, always warm. And the view. It's lovely, especially at night, when it's all lit up.'

In those days, Park Hill was a quiet place, most of its tenants young families. But even when it began to be run down, in the 1980s, her fondness endured. 'It always felt safe to me. They say it looks horrible. Maybe it does from the outside. It's what's inside that counts. My son lives in Harrogate now and he has nothing but fond memories.'

How does she feel about the refurbishment? Pleased, so long as she can remain where she's always been. I ask her friend Edith Bradbury, another resident of almost half a century, if it's hard to imagine a new Park Hill, rising like a phoenix from the ashes of its previous incarnation. 'It is. But it was hard to imagine it when it first went up. All the little streets this replaced. Who'd have thought it?'

'Will it work? Will it be a success?' 'Yes. I think it is going to be lovely.'

Park Hill tells the story of a century. The streets it replaced were home to some of the worst slums in Europe, people living 400 to the acre in houses so tightly packed they barely saw the sun, their only access to water a standpipe in the yard. But they had work. The valley that Park Hill lords it over was home to steel mills, mines and the workshops of the Little Mesters, the craftsmen who made the finest cutlery in the world. Park Hill's fortunes faded as this industry evaporated into thin air; between 1979 and 1989, 53,000 jobs were lost in a city of 200,000.

What interests me, though, is what the estate tells us about our relationship with modern buildings. These days, a single structure can come to represent a world view, standing proxy for our aesthetics and our politics. I used to hate it and now I like it. Perhaps you think this tells you a lot about me, but it doesn't really. Or it shouldn't. Park Hill is only one building. This is why we should treat with caution the arguments of commentators like Simon Jenkins, the new chairman of the National Trust, who deride all Brutalist buildings, the 'ideologues' who created them and the intellectuals and theorists who praise them while choosing to live in Georgian terraces.

Brenda Hague is no theorist, nor is Ivor Smith an ideologue. 'When Reyner Banham [the architecture critic] called us Brutalists, we didn't know what it meant,' says Smith (his partner Jack Lynn is dead). 'We didn't think we were Brutalists. We thought we were quite nice guys.'

When work began on Park Hill in 1957, he and Lynn were young, newly qualified, full of youthful enthusiasm and inspired by the optimism abroad in postwar Britain, however austere. 'The Unité [by le Corbusier, in Marseille] had just been built and it was exciting. But it wasn't an infatuation. We'd also made drawings of John Wood's crescents in Bath.'

Returning to Park Hill after 35 years, he thought it looked 'marvellous' from the town. Was there anything he would have done differently? 'The decks. A street has windows at street level. But at Park Hill, conditioned by best value for money, we couldn't have windows on to the pavements.' Does he like Urban Splash's ideas? 'Yes, though if anything I think they could be more daring.'

What of those ideas? The company has produced a flash brochure to showcase its £130m refurbishment of Park Hill and it makes for cheering, if occasionally comic, reading. To the naysayers, it points out that the density of the site - 192 people per acre - is well in excess of what the government considers to be a sustainable community and that the flats' original plans are more generous than the boxes favoured by modern developers. So, Park Hill is a 'bruiser'.

The company will give it 'romance': oak trees, allotments, a wildflower meadow, crown green bowls, a dance studio, a high street ('a butcher, a baker, a candlestick maker'). The marketeers write of wanting to build a 'yellow brick road' leading to a city sweet shop, Granelli's Spice ('spice' is a Sheffield word for sweets and Bertie Bassett one of its most famous sons). Cutest of all, the company will retain the graffiti that adorns Park Hill 13 storeys up and which once had a starring role in an Arctic Monkeys video: 'I LOVE YOU WILL U MARRY ME'.

But none of this would be happening at all were it not for the building itself. English Heritage's controversial decision to confer Grade II* listed status on Park Hill in 1998, for its contribution to British Modernism, now seems prescient and wise. It surely would have been demolished otherwise and lots of identical, red-brick boxes stuck in its place. Of course, refurbishments of modernist buildings are extremely challenging and not all successful. In Islington, residents of Lubetkin's Spa Green Estate are taking legal action over the recent refurbishment of their homes, claiming the work was 'poor at best, and damaging at worst'.

But for the time being, the sense of hope and expectation at Park Hill is palpable. After my visit, I catch the bus home to our toasty old terrace and, over supper, I ask my mother, ever so politely, if she has thought about where she will live in her retirement.

Good, bad, ugly? Modernist landmarks

Royal College of Physicians, Regent's Park, London, by Denys Lasdun (1964)
Most people know Lasdun for the Royal National Theatre, but this is miles better; its elegant sensibility seems to owe more to Frank Lloyd Wright than
le Corbusier.

Hunstanton Secondary School, Norfolk, by Alison and Peter Smithson (1949-1954)
The building that made them famous: a steel frame with brick and glass panels, and a water tank high on a tower, it's a small-scale homage to Mies van der Rohe.

2 Willow Road, Hampstead, London, by Ernö Goldfinger (1938)
Goldfinger is best known for his immense Brutalist tower blocks, Trellick Tower in North Kensington, and Balfron Tower in Poplar. Willow Road, his home, is more gentle and notable for its clever use of space and a spiral staircase designed by Ove Arup.

Trinity Square car park, Gateshead, by Owen Luder and Rodney Gordon (1969)
Also known as the Get Carter car park, after the 1971 film in which it appears. See it now: its demolition is imminent. Gordon also designed the unpopular Tricorn Centre in Portsmouth - demolished in 2004 - and the Michael Faraday Memorial at Elephant and Castle in south London.

Apollo Pavilion, Peterlee, by Victor Pasmore (1963-1970)
Controversial piece of abstract public art in the Sunny Blunts housing estate. A grant from the Heritage Lottery Fund has recently been awarded for its restoration.

Where to start? This was bad. Quite possibly the worst we have seen from an England side in recent times, which is saying something. Come back, Brian Ashton, all is forgiven.

There are mitigating circumstances, of course. For a start, this is a young and inexperienced side, which is very unlike England, and we cannot suddenly complain about that when for years we were moaning that they were too old. But this is a second profoundly sobering defeat this autumn, with the All Blacks still to come, and so far there seems to be a distinct lack of positives being taken from them.

If there is inexperience on the field, there is even more of it in the stands. At least everyone on the pitch has played rugby before. The man managing the outfit has never managed anything before. It seems ridiculous to look at the battered brow of Martin Johnson and call it inexperienced, but this is a new challenge for him – and not new as in a new degree of difficulty; new as in he has literally never had a go at it.

So here is another scoreline to sit alongside the one of 36-0 that needs no introduction. We had all assumed South Africa's annihilation of England in the pool stages of the last World Cup had been a one-off, something we would not see again from a full-strength England side, let alone one at playing at Twickenham. Well, England managed to score six points here, but otherwise this scoreline is every bit as bad – indeed, worse as it incorporates the concession of five tries.

If only we could say South Africa were laceratingly brilliant. They did score a couple of tries that might qualify as such, but the game had long since gone even by the time they scored the first of them, which was with half an hour to go, when Adi Jacobs cut through off some interplay between Ruan Pienaar and JP Pietersen. And the second came right at the end with the score at 37-6, when Bryan Habana rounded off a happier afternoon than any he has experienced lately, taking Pietersen's slipped pass for South Africa's fifth.

It was illustrative that a player such as Habana, whose laboured form has increasingly been the subject of scrutiny, should suddenly look so fleet-footed again. Wales and Scotland have made the entire Springbok party take a mournful look at themselves lately. Pieter de Villiers, the equally scrutinised coach, had suggested that they were all just knackered and could not wait to go home to the beach.

But they were not so good, even here. It needs to be qualified that South Africa never turn on the style until they know the opposition are beaten, and if they know it early enough the subsequent scoreline can get ugly. In the first-half they were content to sit and watch England's enthusiastic efforts, almost holding them at arm's length, like a schoolyard bully while the victim thrashes at the air, unable to reach his target.

The mistakes were not long in coming. England were playing at a hundred miles an hour again, and having harried South Africa into mistakes of their own they won a five-metre scrum.

England swung the ball backwards and forwards across the South Africa defence, not even close to finding a way through. Within a few seconds, they had been forced back to the 22, still swinging it back and forth, and then the inevitable mistake, a hack down field by Ricky Januarie and a five-metre scrum at the other end for the Springboks. Inevitably they scored from it in a way England could not – nothing flash, but a big, fast back-row forward, Danie Rossouw (not even first choice), running through defenders weaker than he is.

The next error came from Danny Cipriani. The young fly-half faces the same sort of challenge as his manager. Acclaimed as some kind of messiah before he had done a thing, his fickle public are now having to deal with the fact that he may not be that. Only a fool would write either Cipriani or Johnson off at this stage, but not as much of a fool as anyone who heralded either so hastily as the answer to England's prayers.

There were no slashing breaks yesterday to smooth over the parts of Cipriani's game that are not working. The truth is he is a brilliant young talent, who is not ready to run an international Test match at this level. The fact that he is still probably the best option for his country at fly-half is neither here nor there. He received a slow, looping pass from Danny Care on his 10-metre line at the end of the first quarter and was almost as slow again in putting his boot to it. Pienaar charged down and cantered home for the free points – 17-3 and it was already looking horrible.

Cipriani never recovered, despite landing a tricky penalty in the 28th minute, by which time Pienaar had landed ano