Page last updated at 20:50 GMT, Saturday, 15 November 2008

PM 'regrets' Tory economy attack

Gordon Brown says politicians must work together during a crisis

Gordon Brown says he is disappointed by "partisan talk" after the shadow chancellor warned his actions could lead to sterling's collapse.

George Osborne told the Times the PM's willingness to borrow his way out of trouble was "irresponsible".

Sterling has fallen sharply in recent weeks amid fears about a UK recession.

Speaking in Washington, Mr Brown said: "We are taking the policy that is absolutely essential to take people through these difficult times."

Labour has accused Mr Osborne of "talking down" the pound, while the Lib Dems say his comments show "confusion" within his party.

But the Tories said Mr Osborne is the shadow chancellor and meant to give a critique.

What the Shadow Chancellor was warning of today was the reaction of the markets if they lose faith in the British government's financial responsibility
Nick Robinson

BBC political correspondent David Thompson said there has been a so-called convention that opposition spokespeople do not say anything that might damage the economy and talk down the pound.

However, former Tory chancellor Ken Clarke said he had not heard "of any convention that opposition politicians - including the shadow chancellor - cannot comment on sterling".

He said: "The foreign exchange markets had already made their minds up about the pound, regardless of any political comment".

He said the shadow chancellor had "made a perfectly sensible comment".

Mr Brown, who is attending the G20 summit of the world's leading economies this weekend, said he regrets "the partisan talk from the opposition".

"At a time when nations are coming together all over the world to deal with these problems, I think people are looking to politicians to be responsible and to show leadership."

He said the governor of the Bank of England had "made it absolutely clear that it is not only right to cut interest rates, but it is perfectly reasonable to have a fiscal stimulus".

Speaking at the end of the G20 summit, Chancellor Alistair Darling said he was surprised at Mr Osborne's comments because there had been "widespread agreement that this is the time we need to support our economies".

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.

Mr Osborne said the more the prime minister borrowed, the less attractive the currency would become.

He told the Times: "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".

George Osborne
George Osborne suggests Gordon Brown does not care about debt

"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.

"His view is he probably won't win the next election. The Tories can clear this mess up after I've gone," he said.

Conservative MP John Redwood, who chairs the Tories' policy group on economic competition, told the BBC: "Part of the reason it's been falling is the loose and careless remarks of government ministers and the governor of the Bank of England, because they in power can move markets.

"And part of the reason for the sharp decline is overseas investors losing confidence in Britain because they think this government is borrowing too much."

'Intellectual confusion'

And shadow chief secretary to the Treasury, Phillip Hammond, said there there was broad support for Mr Osborne in the party and backed his warnings of the risks in the government's approach.

Labour MP John McFall, who chairs the Commons Treasury Committee, told the BBC that Mr Osborne's comments were "very dangerous".

"We have abormal economic times here," he said.

Phillip Hammond said there is broad support for Mr Osborne in the Conservative party

"You can witness that by the G20 meeting in Washington this weekend and George Osborne is running the risk of a run in sterling or making false predictions if and when sterling recovers."

Liberal Democrat Treasury spokesman Vince Cable said Mr Osborne's criticism signalled "massive intellectual confusion" within the Conservatives over fiscal policy.

He said: "For the last decade, the Conservatives have been rubbishing the idea of Britain joining the euro on the basis that we need to have a flexible exchange rate, yet when we have a flexible exchange rate, they complain because it's flexible."

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