Osborne attacked for raising pound fears

Published on Saturday 15 November 2008 18:42

THE Conservatives were forced to rally round shadow chancellor George Osborne yesterday as he came under heavy attack after claiming Britain was about to experience a run on the pound.

Prime Minster Gordon Brown demanded "responsible" behaviour from the opposition, amid warnings that Osborne's comments may end up "talking down" the pound.

But the Tories hit back, claiming the fall in the value of sterling – already at a 13-year low this weekend – was the fault of the Labour Government's vast borrowing plans.

Osborne lit the blue touch paper yesterday when he used a newspaper interview to warn that the pound was in danger of crashing in the currency markets. By doing so, he broke an unwritten convention that shadow chancellors do not discuss the value of the currency.

But Osborne said: "The more you borrow as a government the more you have to sell that debt and the less attractive your currency seems. Sterling has devalued rapidly against the euro and the dollar. We are in danger, if the Government is not careful, of having a proper sterling collapse, a run on the pound."

A sudden crash in the exchange rate would see the cost of overseas goods and foreign holidays soar. Economists believe that while it is unlikely to happen, it is a possibility.

But Brown said yesterday that for a leading politician to warn of such a fall was wrong. He also defended his plans, to be unveiled next week, to borrow more funds to pay for a one-off tax cut.

"When nations are coming together to deal with these problems, I think people are looking to politicians to be responsible and to show leadership," Brown said. "We are taking the policy that is absolutely essential to take people through these difficult times."

&#149 David Cameron is being urged by senior Tory party figures to ditch his pledge to match Government spending and offer major tax cuts to hard-pressed households.

Former Scottish secretary Lord Forysth says Cameron's pledge to copy Labour's spending plans if he gets into power is "unsustainable".