Osborne raises spectre of run on the pound
Shadow chancellor George Osborne has expressed fears that the pound could suffer a dramatic fall in value if the country’s budget deficit continues to grow.
Speaking to the Times, the Tory frontbencher criticised the prime minister’s plans to increase public spending in order to provide a boost to the country’s economy.
Previously, Gordon Brown has called for a coordinated “fiscal stimulus” effort from countries around the world in order to stave off the threat of a global recession.
Speaking to the newspaper, Mr Osborne said he feared a widening budget deficit could lead to the “collapse of sterling” and further long-term difficulties for the country.
He said: “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.
“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. The more you borrow as a government the more you have to sell that debt and the less attractive your currency seems.”
Mr Osborne adds that he would not be in favour of proposals in the chancellor’s pre-budget report, which is due on October 17th, containing “unfunded tax cuts”.
Outlining his position on tax cuts, he said: “What we are in favour of is funded tax cuts. I’m in favour of real tax cuts not tax cons. I’m not going to prejudge the pre-budget report. I’m going to wait and see what [Alistair Darling] has to say.”
The shadow chancellor has previously criticised the prime minister for the country’s widening budget deficit and highlighted that Mr Brown had spoken of abandoning his golden rules on fiscal responsibility.
