Page last updated at 14:17 GMT, Sunday, 16 November 2008

Osborne stands by economy warning

George Osborne believes the UK economy is 'in a mess' due to too much borrowing

George Osborne has dismissed criticism of his warning of a collapse of sterling, saying it is his job to tell the public the truth about the economy.

The shadow chancellor said sterling had fallen to a 13-year low. Markets were looking at "economic fundamentals", not what politicians were saying, he said.

Chancellor Alistair Darling has accused Mr Osborne of "talking down" the pound.

But there was no convention politicians did not talk about sterling's value, Mr Osborne said.

It follows an article in the Times on Saturday in which Mr Osborne warned that Britain was heading for a "collapse of sterling" if the government kept trying to borrow his way out of trouble.

'Worst prepared'

The prime minister criticised his comments as "partisan", while Mr Darling said most world leaders agreed on the need for tax cuts and public spending to boost their economies.

There was also a suggestion Mr Osborne had breached a political convention by talking about possible runs on sterling but the shadow chancellor says there is no such convention.

He told BBC One's Andrew Marr Show: "My job as shadow chancellor is to tell the British people the truth about the British economy."

The choice is very clear. Fiscal responsibility under the Conservatives, fiscal incontinence and imprudence under Labour
George Osborne

He did not repeat his warning about a possible collapse of sterling but said it has already fallen more than it had under Labour governments in the 1960s and 70s, and after Black Wednesday - when Britain crashed out of the European Exchange Rate Mechanism.

He said Britain had the "worst prepared economy" for a recession with high levels of personal debt.

And he said that "despite what Gordon Brown says" there was no global consensus that countries should borrow without limit.

'Hard headed'

He said all tax cuts had to be properly funded but accused the prime minister of wanting to "max out the nation's credit card" to pay for a "tax con" that the public eventually would have to pay back.

He added: "I am telling the public the truth and that is the job of elected politicians, particularly opposition politicians, in difficult times."

It is right you do everything you can to help people get through a difficult period
Alistair Darling
Chancellor

He said sterling on Friday had already fallen to "a 13-year-low against a basket of currencies" and "hard-headed markets" were making judgements about the British economy - not what politicians were saying.

"The reason why sterling has fallen by more than 25% is because they don't believe Gordon Brown when he says Britain is better prepared than other economies," he said.

He added: "The choice is very clear, change under the Conservatives, more of the same under Labour. Fiscal responsibility under the Conservatives, fiscal incontinence and imprudence under Labour."

Speaking to the BBC's Politics Show later, Chancellor Alistair Darling said: "Even a few weeks ago David Cameron said it was right to let borrowing take the strain.

"They now seem to be saying something quite different and the consequences would be very bad for this country."

'Not secret'

He added: "It is right you do everything you can to help people get through a difficult period."

However he said it was important that countries lived "within your means within the medium term".

The Liberal Democrat Treasury spokesman Vince Cable told the BBC Mr Osborne had not broken any rules in what he had said but said his "economic logic" had not been clear.

"This shouldn't be some kind of secret business. Of course there is nothing wrong with George Osborne talking about it," he said.

"I am all for having an intelligent discussion about exchange rates, it just it wasn't very good way of dealing with it."

Mr Osborne was also asked whether he was secure in his job - after reports some Conservatives wanted him replaced as shadow chancellor.

He said he was working "very closely" with party leader David Cameron both on the economy and in his role as election co-ordinator.

The Sunday Telegraph has reported that his predecessor as shadow chancellor, Oliver Letwin had been "drafted in" to draw up a package of spending cuts, in a blow to Mr Osborne's authority.

But Mr Osborne said: "Oliver Letwin has not been brought back, he was always there as head of policy. Oliver and I work very very closely about making sure that you get value for money out of government."

Sterling has lost more than a quarter of its value against the dollar and hit a near-record low against the euro, amid fears over the depth of a UK recession.



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