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Osborne fears sterling collapse Osborne fears sterling collapse
(about 2 hours later)
Gordon Brown's willingness to borrow his way out of trouble could lead to the collapse of sterling, shadow chancellor George Osborne has warned.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 an interview with the Times, he accused the prime minister of being "deeply irresponsible" and suggested he "doesn't care" how much he borrows. 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.Sterling has fallen sharply in recent weeks amid fears about a UK recession.
A Labour spokesman said Mr Osborne was being "irresponsible" by talking down the economy. 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."
13-year low13-year low
On Friday, the pound slipped to a 13-year low against a basket of other currencies. 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.
It hovered near a six-and-a half year low of $1.4555 and traded at 85.40 pence against the euro, also close to a record low of 86.62 pence. Mr Fallon said: "It's the shadow chancellor's job to warn, and there's a very serious issue with sterling now."
Mr Osborne claims the more the prime minister borrows, the less attractive the currency will become. 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.
A panicking George Osborne is trying to talk down the economy in a desperate last throw of the dice to save his career Labour spokesman The Alpha and Omega of economic policy at the moment is to persuade the banks to maintain public borrowing John Hutton
He said: "We are in danger, if the government is not careful, of having a proper sterling collapse, a run on the pound. Mr Osborne says the more the prime minister borrows, the less attractive the currency will become.
"The danger of a run on the pound... is that it pushes up long-term interest rates, which is a huge burden on the economy. 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.""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.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."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 criticismInternal criticism
A Labour spokesman said: "At their conference in October, the Tory leadership said they would support the government in the difficult decisions we had to take to keep the economy on track. A Labour spokesman said George Osborne was making "panicky" criticisms "in a desperate last throw of the dice to save his career".
"Just a few weeks later, a panicking George Osborne is trying to talk down the economy in a desperate last throw of the dice to save his career." Mr Hutton said the most important thing was to persuade the banks to maintain public borrowing.
Mr Osborne is not only facing criticism from the government. The really important thing here is that we continue to protect the public's stake in these banks Michael Fallon
The former Conservative treasurer Lord Kalms has told the BBC that the former shadow home secretary David Davis would be more appropriate as shadow chancellor. 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.
BBC political correspondent Iain Watson said there had been unease among some Conservatives about Mr Osborne's performance during the credit crunch but up until Lord Kalms, most of the comments had been off the record. 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."
Last month, Mr Osborne was embroiled in the so-called Corfu yacht row. 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.
He admitted he "made a mistake" by meeting Russian billionaire Oleg Deripaska several times while on holiday in Corfu in the summer. 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.But he denied claims he tried to solicit a £50,000 donation for the Conservative Party.