Osborne fears sterling collapse
Gordon Brown's willingness to borrow his way out of trouble could lead
to the collapse of sterling, shadow chancellor George Osborne has
warned.
In the Times, he accused the PM of being "irresponsible" and suggested
he "doesn't care" how much he borrows.
Sterling has fallen sharply in recent weeks amid fears about a UK
recession.
Labour accused Mr Osborne of "talking down" the economy, but a former
advisor to three Thatcher chancellors said he had been right to raise
the issue.
There has been a so-called convention that opposition spokespeople do
not say anything that might damage the economy and talk down the pound,
said BBC political correspondent David Thompson - and Mr Osborne would
appear to have broken that.
But the Tories say Mr Osborne is the shadow chancellor and is meant to
give a critique.
Warwick Lightfoot, who advised Nigel Lawson, John Major and Norman
Lamont, told BBC 5 Live: "The exchange rate has fallen sharply this
year, by about 16% overall. In my judgement, that's been a good thing...
"But you do not want, even in a very deep recession, your exchange rate
to go into some kind of freefall because it completely undermines
confidence in your economy."
'Scorched-earth policy'
Will Hutton, of the Work Foundation, and Conservative MP Michael Fallon,
who is a member of the Commons' Treasury select committee, said it was
clear the pound had fallen and there was no point in keeping silent
about it.
The Alpha and Omega of economic policy at the moment is to
persuade the banks to maintain public borrowing
John Hutton
Mr Fallon said: "It's the shadow chancellor's job to warn, and there's a
very serious issue with sterling now."
On Friday, the pound slipped to a 13-year low against a basket of other
currencies, hovered near a six-and-a-half year low against the dollar,
and traded at a near-record low against the euro.
Mr Osborne says the more the prime minister borrows, the less attractive
the currency will become.
He said: "We are in danger, if the government is not careful, of having
a proper sterling collapse, a run on the pound."
He said that would push up long-term interest rates, "which is a huge
burden on the economy".
"The more you borrow as a government the more you have to sell that debt
and the less attractive your currency seems."
He went on to label Mr Brown's tactic as a "scorched-earth policy",
which a future Conservative government would have to clear up.
"His view is he probably won't win the next election. The Tories can
clear this mess up after I've gone," he said.
Internal criticism
A Labour spokesman said George Osborne was making "panicky" criticisms
"in a desperate last throw of the dice to save his career".
And Liberal Democrat shadow chancellor Vince Cable said Mr Osborne's
criticism signalled "massive intellectual confusion" within the
Conservatives over fiscal policy.
He said: "For the last decade, the Conservatives have been rubbishing
the idea of Britain joining the euro on the basis that we need to have a
flexible exchange rate, yet when we have a flexible exchange rate, they
complain because it's flexible."
Mr Hutton said the most important thing was to persuade the banks to
maintain public borrowing.
The really important thing here is that we continue to protect
the public's stake in these banks
Michael Fallon
He said banks that had been bailed out by public funds should have had
non-executive government directors placed on their boards to oversee how
the money was used.
Mr Fallon said: "The really important thing here is that we continue to
protect the public's stake in these banks, which has already gone down,
and that we get it back with added value."
BBC political correspondent Nick Robinson said Mr Osborne's intervention
was "pretty extraordinary" and marked the sense of frustration from the
opposition that they are seeing political and economic orthodoxy torn
up.
The Tories have chosen to say this is "very dangerous indeed" - but they
are doing it in a way in which they themselves can be accused of
damaging the economy, he said.
And until the government's pre-Budget report due out on 24 November, it
is hard to tell how great a departure from recent economic practice we
are actually going to see, he said.
Mr Osborne has also been criticised by former Conservative treasurer
Lord Kalms, who told the BBC that former shadow home secretary David
Davis would be more appropriate as shadow chancellor.
Up until now, any unease among Conservatives about Mr Osborne's
performance during the credit crunch has been off the record.
Last month, Mr Osborne admitted he had "made a mistake" by meeting
Russian billionaire Oleg Deripaska while on holiday in Corfu in the
summer.
But he denied claims he tried to solicit a £50,000 donation for the
Conservative Party.
Story from BBC NEWS:
http://news.
Published: 2008/11/15 11:39:06 GMT
Saturday, 15 November 2008
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