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Fear for pound after record plunge
Hugo Duncan10 Dec 2008
FEARS over the value of the pound deepened this afternoon as it crashed to a record low against the euro.
Growing alarm about the British economy sent sterling trading down to its weakest level since the birth of the single currency in 1999. At its lowest point, one pound bought just ¤1.139.
City forecasters said that a one-for-one exchange rate between the pound and euro was looking increasingly likely in the coming months. It has already fallen in value by about 20 per cent in the past year.
The pound also remained marooned far below its summer peak of $2 against the US dollar at $1.4803.
The latest slide in the value of the pound comes as the first skiers of the season head out to France, Italy and Austria to face prices up to 25 per cent higher than last year because of inflation and currency movements.
International investors are baling out of the pound because of recent deep cuts in interest rates to two per cent and concerns about the Government's ability to fund high levels of borrowing.
It also emerged the surge in government borrowing to fund spending through the recession has left Britain with a worse credit rating than fast-food chain McDonald's.
Pressure is mounting on the Bank of England to cut interest rates again next month to stop recession turning into full-scale depression. However, this will incapacity benefit to "fiddle the figures" and were left without any support or pressure to get back to work.
Declaring that "we are determined not to waste people's talent, but also not to waste taxpayers' money", Mr Purnell stressed that last month 200,000 people moved back into work despite the economic downturn.
"There are half a million job vacancies out there in the economy. At a time of economic uncertainty, we are certainly not wasting taxpayers' money on people who are playing the system, but most of all we are not wasting people's talents," Mr Purnell told Sky News.
"We think it is the right thing to do to expect people to be doing something in return for their benefits... because benefits aren't intended to be a way of life. They are intended to be a way out of poverty."
When put to him that he risked stigmatising those recently made unemployed through no fault of their own in the downturn, Mr Purnell said: "When people say we should be slowing down the pace of welfare reform, actually we say we should be doing the opposite. We should be giving more help to people looking for work but also doing more to ensure they don't fall out of touch with the world of work."
He went on to attack David Cameron for linking all benefits claimants to convicted child abductor Karen Matthews. "There's a danger of saying, as David Cameron did in the Sunday papers, that all five million people on benefit are potential Karen Matthews. I think that's offensive to people looking for work."
He said the Government was spending an extra £1 billion over the next two years on more Jobcentre advisers and other help. Mr Purnell said that the lone parent changes were aimed at giving young people more "aspiration". But he admitted that "if there isn't childcare, that would be a good reason for not going to work". Today's White Paper features moves to increase sanctions on those who avoid work, with a range of penalties from losing one week's £60 jobseeker's allowance to being forced to work for the benefit.
However, Right-wing think tank Civitas hit out at the proposals for being "too soft". It claimed that allowing single parents to simply "monkey about with their CV" was a "waste of time".
Reader views (32)
when BLAIR used bill clintons line ITs A NEW DAWN.has it not dawned on the people that this new labour has done its job and crippled the country ITS OVER,what about a REFEREDUM,its up to the people NOW
- Phil, usa, 11/12/2008 14:10
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Watch out for Euro-propagandists. They don't tell us that we would have been stuck with an interest rate suited to the continentals rather than our own country, with its different economic characteristics (as the Irish have found).
Italy was forced to revalue its weakened Lira as a price of joining the Euro. This would shoot our interest rates back up to EU levels, creating mortgage misery.
- Jools, London, 11/12/2008 13:05
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I lived in France for forty years and have seen the fortunes of France and the UK go up and down...so don't panic, it's never as bad as it seems.
- John Kinsella, Paris France, 11/12/2008 12:54
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The question on everyone's mind should be what if the Eurozone rejects Britain's application to join the Euro - the pound would most definately sink sub euro, assuming that it hasnt of course by the time GB applies
- Wallytrader, london, 11/12/2008 10:33
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You do all realise that, would the UK have joined the Euro in 2001 like every other country in Europe did, instead of always trying to be "special" we wouldn't be having this discussion now, don't you?
- Marco, Notting Hill, 11/12/2008 10:06
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Well said, Jacqueline of Hampstead.
Previous cuts in base rate haven't worked, isn't it a sign of madness to keep doing the same thing and expecting a different result?
- J R J, Glen Vine, 11/12/2008 08:59
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Spare us the bleading hearts and hand wringing from the expats - it was your choice guys! It's amazing how everyone thinks that EUR/£ at 1.00 will bounce us into EMU. It won't, and that's good because the last thing we need is to be dragged into the one-rate-fits-all envirinment which basically does whatever suits Germany and is bringing the PIGS (Portugal, Italy/Ireland, Greece and Spain) to their knees. With interest rates equalising across the globe, the exchange rate is ever more a country's share price, and UK plc is deep in the do-doo thanks to Brown and Darling.
- Paul, London, 11/12/2008 08:48
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I'm not about to defend the improvidence of the current government over the past 8 years, but I am getting quite disappointed with the Conservatives.
As a matter of fact I have been looking to them for good and sensible policy proposals to the economy back on track. Unfortunately all I see from them is people scoring political brownie points and jeering. And not a single constructive proposal.
Why aren't we seeing concrete and detailed proposals for what the government should and should not do to get us out of the recession? I mean ... people who are so proficient at heckling as the current opposition ought to be able to come up with a few obvious improvements, right? Only we're not seeing any of them.
Of course the Conservatives retort that they can't have Labour "stealing" their ideas. Pardon me? They feel that it must be them who administers good policy, not Labour? A case of not caring what happens to the country as long as they make political gains? What's wrong with Labour enacting Conservative policy? Wouldn't that be a good thing? And if they do, wouldn't voters be able to tell whose ideas they were?
I'm sorry, but the longer I watch them, the more I feel that Conservatives really haven't thought about alternatives, let alone improvement. They are too busy jeering and seem only too happy that they aren't called upon to take the helm yet.
- Golodh, London, UK, 11/12/2008 03:37
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Arthur, you've made the choice to be an expat surely.
I have and not regretting the move at all (sorry to sound smug)
- Chaz, Perth, Australia, 11/12/2008 01:12
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The pound now buys you 10% more Australian dollars than it did back in the summer (now 2.25 was 2.02). So forget European holidays - come here instead!
- Tonyb, Melbourne, Australia, 10/12/2008 23:56
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If Alistair Darling is supposed to be an account answer me this - any accountants will tell you that if you sell all of your assets and then spend the money the result
= 0 which is about what this country is worth right now - we make nothing - build nothing - export hardly anything - we stack shelves - bank - and sell insurance - enough said
- Eddie O'Riordan, wisbech, 10/12/2008 20:43
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Strange how a few years ago, this Government were eager for us to change to the Euro, without a Referendum. At that time it would have been disasterous for many pensioners living abroad as the pound would have to have been devalued by over 30%. Now, not a word is heard from the Government. I believe they are just waiting for it to reach parity, because it is what they really wanted all along. Now, the pensioners in Europe are rwally suffering. Most single pensioners are about £130 worse off every four weeks and married couples, considerably more. If this goes on, there will be some pensioners leaving their homes in Europe to return to the UK. There will be many who will be unable to sell their property and will be a burden on the taxpayer in the UK as they will need a home.
- Paul Bradford, Monflanquin, France, 10/12/2008 20:39
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This government has been a bad failure. They have no clue about economics and have borrowed too much when they should have been saving and now want to spend when they have NO MONEY LEFT!
- Jacqueline, Hampstead, London, 10/12/2008 18:56
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crikey. so long as the right wing crackpots have got someone to blame!
Why not make up some unfounded facts about us being the poor man of europe and blame a politician for interest rate cuts decided on by every central bank that I'm aware of (FED, ECB etc.) Get over yourselves people.
I'm no fan of Gordon Brown but lets keep the debate rational and based in reality.
- Dan, london uk, 10/12/2008 18:39
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Well said Adrian in Paris. I wish I had never left Paris some years back.I am just aghast at the ability of Brown to destroy a once prosperous economy in a matter of months.
Thank God I kept my property in Euroland and I am selling up in January to get out as much as I can from the UK and shall never return.
Even if Dave gets in this place is going to be a car crash for 5 years minimum, if it ever recovers this time.
And anyway I am sick of the archaic way of govt. This place needs a complete bomb under it, and can never compete with modern well run economies in Europe and Asia.
- Mikey, Guildford, 10/12/2008 18:36
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It has been reported several times that a 0% interest rate is being considered.
When Japan was in deep recession they applied a 0% interest rate. The result was a TEN YEAR year stagnation of that nation's economy.
Can any other concerned reader suggest how we, the public, can protest again this insane policy?
- Sydney Marks, London, UK., 10/12/2008 18:17
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Just what Brown/Mandelson want - by hook or by crook!
- Wen, Oxfordshire, 10/12/2008 17:44
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Mr. Lincoln, having decided to leave the UK for whatever reason, now complains his situation is permanent, but bleats about help from HM government,
Show some loyalty to your country and perhaps you wouldn't be an ex pat but a PAT standing alongside others that can't afford to desert their country.
My heart bleeds for you and your like.
- Bob Godfrey, greater london, 10/12/2008 17:33
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Arthur Lincoln: "Surely Her Majesty's Government have a responsibly for the expat"
Absolutely not HM government's responsibility is to UK residents and companies, not those who choose to abandon their country, taking their money with them. UK exports will benefit with the lower rate, and it will discourage importers - both of which will help the UK economy.
- Peter, London, 10/12/2008 17:29
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A load of people warned the amateurs who are running Govt./Bank of England that cutting interest rates would send the currency down fast, but no heed has been taken, and even now the economic 'experts' warn of approaching deflation and the need to cut rates further; a suicidal path when we have to import so much in GBP and make so little to export.
- Jon Kent, Hertford. UK, 10/12/2008 17:16
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As Private Frazer would say, and its all true - "We are all doomned!"
Moses Broone and Baldrick Darling have totally screwed things up. No more Cunning Plans please!
- Uncle Vanya, Chelmsford England, 10/12/2008 17:15
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Gordon and Alastair have got it just right. It matters not how thew pound fares against the Euro - it will facilitate our export goods and bring prosperity quicker
- Keith Price, Luton, England, 10/12/2008 17:14
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These people about to become unemployed through no fault of their own and have never had to face the unemployment office before are in for yet another massive shock, a more useless bunch of incompetents I have yet to encounter...........good luck people, you will be amazed at what your taxes have been supporting...
- Patricia, london, 10/12/2008 17:09
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The fall of the pound against the euro will be used by the new unelected Deputy Prime Minister, Lord Mandelson, to get the UK into the euro. The idea being that this will 'save the world' the UK, and the unelected Prime Minister Gordon Brown. It will do none of these things but Nulabour don't care.
- Steve.W, Birmingham UK, 10/12/2008 17:04
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What an excuse when £1=eu1 for us to be rid of sterling-Mandy arrived there in the end!
G-D help us all.
- Harvey Lawrence, london, 10/12/2008 16:54
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The world market is giving its verdict on Gordon Brown.
- Jeremy E, London, 10/12/2008 16:50
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Well, if you just throw money around like Labour does - what do you expect that does to your currency? Britain has been written off financially - it will end up like Iceland, and Hungary and Argentina, namely bankrupt.
- Delphine, Oxford, 10/12/2008 16:22
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Gordon Brown is determined to take the UK into the Euro, and if he can't do it by winning a referendum, he will do it some other way.
The sooner we have a General Election, the better.
- John, London, 10/12/2008 16:05
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Well done G Brown. You sold gold short, you increased taxes (by stealth) raided private pension funds, cut interest rates to the point that savers who need the interest as part of their income are now worse off, you have increased the number of jobsworths in government who produce absolutely nothing, increased public spending with no significant benefit to any one except the jobsworths who get a fat pension and secure employment, allowed the rich to get richer with hefty tax breaks and now you have ruined the pound. You and your accomplices bleat on about fairness for all. Where's the fairnes in all of this? You have done most of this as a non elected Prime Minister. You must be very proud of what you have done. The world now has no confidence in Great (no longer) Britain and the country is the poor man of Europe. As there is not a lot left to ruin, apart from some crack pot ideas in primary education reform - is it not time for you to go ... and take Mr Speaker with back across the border.
- Adrian, Paris, France, 10/12/2008 16:02
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It is one thing to concern yourselves over tourist and skiers heading for the European ski resorts, but does anyone concern themselves with the plight of the expat who lives in the Euro Zone ? Surley Her Majesty's Government have a responsibily for the expat. It must be stressed the for the tourist it just occasional when they experience the differential when it comes to speding holiday money, but for the expats it's PERMANENT!!! Are we not enetitled to some help similarly set out in what the Prime Minister said in Parliamentary Questions today !!!???
- Arthur Lincoln, London, 10/12/2008 15:57
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I'm surprised he hasn't blamed Osborne yet.
- Nobby Clark, Perth, the Scottish one, 10/12/2008 15:18
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All pie in the sky, Mr Purnell! Cut state involvement in people's lives. Let Churches and Charitities take over the social cases. Cut taxes and let people look after their own money and their own lives. I know you won't do it, so ask your boss to call a general election now so that we, the people, can decide whether we want to run or own lives or let them be RUINED by socialism!
- Jim Allen, London, UK, 10/12/2008 15:16
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