UK Conservatives stumble over sterling talk

Britain's opposition Conservative Party sought yesterday to parry accusations it had imperilled the country's currency by publicly warning of the danger of a run on the pound sterling.

The Conservatives appear to be struggling while Labour Prime Minister Gordon Brown's popularity has risen over his handling of a credit crunch. One poll published yesterday showed their lead, as high as 20 points in the summer, trimmed to five.

Conservative Party Treasury spokesman George Osborne said he had done nothing wrong by telling a newspaper that Prime Minister Gordon Brown's plans to let borrowing rise in the recession could cause a run on the pound.

The global financial crisis has battered Britain's economy in recent months, pushing unemployment to its highest level in more than a decade and hammering house prices and retail sales.

The pound had fallen to a record low against the euro on Friday on expectations Britain will cut interest rates again after this month's surprise 1.5 percentage point cut.

"My job... is to tell the British people the truth about the British economy," Mr Osborne told BBC television. "We are warning the country that Gordon Brown is abandoning fiscal responsibility.

"And when a government does that it stacks up debts for future generations and stacks up tax rises for future generations as well."

Mr Osborne rejected suggestions there had been a convention that British politicians should not talk about the value of sterling for fear of encouraging market buying or selling.

But his gloomy forecast for the currency was seen as political gift to Brown's Labour government.

"At the very least, Labour will now try to pin the blame for the pound's slide on Mr Osborne rather than their own failings," the Observer newspaper said.

Mr Osborne could become Britain's next Finance Minister if his Conservative party wins the next election, due by May 2010. Mr Brown, who was in Washington with other world leaders at the G20 financial summit, capitalised on Mr Osborne's comments, dismissing them as "partisan talk".

"When other countries are coming together for a common purpose, I think it is the duty of politicians to show responsibility and to show leadership," he said.

Mr Osborne had told the Times newspaper: "We are in danger, if the government is not careful, of having a proper sterling collapse, a run on the pound".

Mr Brown says he is ready to provide fiscal stimulus to help the economy recover and urged other countries at the G20 summit to do the same.

Analysts expect Finance Minister Alistair Darling to revise up this year's public borrowing forecast by more than £20 billion and next year's borrowing forecast by more than £40 billion when he details the government's pre-budget report later this month.