The government is facing a growing backlash over its rescue package for the economy after the pound slumped to below parity with the euroon British high streets and at airports for the first time since the single European currency was launched a decade ago. Sterling's decline to a value of less than a euro, after commission charges, is seen by economists and opposition politicians as a pivotal 'psychological moment' - and evidence of declining faith in the British economy on global currency markets. Last night, as skiing operators and other holiday companies across the UK reported customers shunning expensive trips in favour of cut-price deals, Currency Exchange on London's Oxford Street was selling euros for as little as €1.0532 to the pound. After commission and a handling fee, however, €18 cost The Observer £19.61, an exchange rate of €0.918 to the pound. Tourists at Birmingham, Liverpool and Luton airports were also getting less than €1 to the pound after sterling tumbled in value every day last week. Customers changing £200 at Birmingham and Liverpool were last night receiving just €197.13 from Travelex counters, while those at the ICE bureau de change at Luton took away €199.63 - an exchange rate of €0.986 to the pound at Birmingham and Liverpool and €0.998 at Luton. Tories and Liberal Democrats laid the blame for the pound's collapse firmly at the door of Gordon Brown. Philip Hammond, shadow Chief Secretary to the Treasury, said the Prime Minister's decision in the pre-Budget report to let borrowing soar to fund £20bn of tax cuts had severely damaged - rather than boosted - economic confidence and people's willingness to spend. 'Hundreds of thousands of Britons find themselves grounded as the pound falls below one euro in value,' he said. 'This is the currency market's verdict on Gordon Brown's economic plans and his decision to go on a borrowing binge.' Vince Cable, the Liberal Democrat Treasury spokesman and deputy leader, said that while the immediate cause of sterling's fall had been the rapid drop in interest rates from 4.5 per cent to 2 per cent since last month - and the expectation that they would drop further - the reason the cuts had been necessary was the result of the government's failure. 'Behind it all is a sense that we are a weak economy with a much bigger housing bubble than other countries, and Brown failed to do anything to address that.' Cable argued that sterling's vulnerability strengthened the case in the medium to long term for the UK to be 'locked into a bigger currency block' - meaning entry into the euro. The case for euro entry was also put by leading economist and commentator Will Hutton. 'The pound buying less than a euro is an important psychological moment. Britain first doubted the euro would be launched, then whether it would survive, then whether it would ever become a serious currency,' said Hutton. 'Even today people are rushing to pronounce its death warrant. Now it is plainly the world's second currency after the dollar. As the pound becomes more volatile and less valuable, the euro will be seen increasingly as a safe haven - a zone in which both British industry and the City of London would flourish. The question is not if Britain will join, but when - and how many working lives and businesses will be wrecked by ideological opposition before it does.' New opinion polls today suggest Brown is not sustaining his 'bounce' of recent weeks. A ComRes poll for the Independent on Sunday showed Labour on 36 per cent, still behind the Tories on 37 per cent - the same figures as in a survey for the daily Independent 10 days ago. The poll also showed 52 per cent agreeing that the recent fall in the value of the pound was evidence that 'Gordon Brown's economic plans probably won't work', against 39 per cent who disagreed. A YouGov survey for the Sunday Times showed the standing of the parties virtually unchanged from a similar poll last month. The Tories increased their lead from 5 per cent to 6 per cent, putting the Tories on 41 per cent (unchanged), Labour on 35 per cent (down 1 per cent) and the Liberal Democrats on 15 per cent (up 1 per cent). Both Tories and Liberal Democrats are determined to maintain the pressure on Brown, following his slip of the tongue at Prime Minister's Questions in the Commons last Wednesday in which he claimed to have 'saved the world' from economic collapse. The Conservatives dug up a quote from Brown's time as shadow Chancellor when he said 'a weak currency is a sign of a weak economy, which is the sign of a weak government'. Labour ministers have fired back, claiming the Tories have no answers to the economic crisis and are a 'do-nothing party'. The Treasury last night refused to comment on sterling's fall and said there was no prospect of entering the euro in the near future. Official rates showed the pound was worth €1.11 yesterday. At its high point against the euro in May 2000, a pound was worth €1.746. The pound has fallen 17 per cent against the euro this year as the Bank of England has cut rates from a peak of 5.75 per cent to a more-than-50-year low of 2 per cent. Interest rates in the eurozone remain higher at 2.5 per cent, despite a 0.75 per cent cut by the European Central Bank last week.
Pound slips below euro on Britain's high streets
• £20 buys only €18 at UK exchange • New rate 'key moment for economy'
Sunday, 14 December 2008
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