LONDON (Reuters) - The Bank of England will unveil a plan today to swap government bonds for commercial banks' mortgage debt, injecting cash into the financial system to boost lending and ease the effects of a credit crunch on consumers.

Although the move should give the economy a much-needed lift, it may not be enough to arrest a slump in popularity for Prime Minister Gordon Brown, whose in-fighting Labour party faces likely widespread defeat in local elections in May.

Pressure has been growing on the British government and the Bank of England to do more to resolve a mortgage debt crisis threatening to slam the brakes on the economy.

"The Bank will be making money available to the British banking system ... the idea behind it is it will open up the market and it will begin the process of opening up the mortgage market," Finance Minister Alistair Darling said yesterday .

The Treasury and Bank of England have declined to comment on details of the plan but the BBC suggested the package involved swapping £50 billion ($99.80 billion) of gilt-edged government bonds for mortgage-backed securities.

The Sunday Times said the arrangement was intended to run for just over a year and would involve valuing the less liquid securities the BoE takes on to its books at a discount.

The move would free up bank balance sheets so they can lend more to consumers suffering the effects of an economic downturn, with falling house prices and soaring oil and food prices.

Figures last week from the British Retail Consortium showed like-for-like sales in British shops fell for the first time in two years and at the quickest rate in almost three years last month as consumers cut back on luxuries like electronics.

The global credit crunch which followed a slump in the US sub-prime mortgage market left UK banks wary of lending to each other or offering new home loans, and led to the forced nationalisation of mortgage lender Northern Rock this year.

Royal Bank of Scotland is expected to announce a share issue this week in a move which analysts believe could raise over $20 billion. Darling said other UK banks were likely to follow suit with efforts to shore up their balance sheets.

"We are doing our bit and I would like to see the banks pass on the benefits of the three interest rate cuts we've had over the last few months," he said in a BBC interview.

Willingness on the part of banks to raise cash from investors rather relying simply on government action to ensure stability should help sell the mortgage-swap plan to voters.

However, Gordon Brown and his ruling Labour party still face an uphill battle convincing voters the government can deal with the effects of the credit crunch.

An increasing number of Labour politicians have expressed unease about Brown's decision to scrap the 10-pence income tax band, a move that could leave millions of the poorest Britons worse off.

Brown had to interrupt a visit to the United States last week to call a junior minister and convince her not to resign over the matter.

Darling said on Sunday he would return to the issue in future budgets but could not make changes this tax year.

Brown's popularity has plunged since he took office last year over fears he cannot manage the economic downturn despite a successful decade as finance minister, and his party now risks a drubbing in local elections on May 1 — and losing power to the opposition Conservatives in general elections due by mid-2010.

Research by pollsters Populus for the Sunday Mirror paper found Labour had dropped three points in less than two weeks, and now trailed the Conservatives by 10 points at 30 percent.