Why is the pound at a 12-year low against a basket of other OECD currencies?
Peter Mandelson and Gordon Brown have peddled some pretty good bilge in their time, but I don’t think I have ever seen anything so bare-faced and intellectually putrid as their attempt to blame the Tories for the sorry state of the pound.
In a few weeks, we are all off skiing. I am much looking forward to it. Or at least I was, until I realised that we are going to France, where they use the euro – and in all the history of the single European currency, the pound has never, ever been so puny as a purchaser of euro-denominated assets.
If I buy a lunchtime tartiflette to be shared between my four famished children, I can now expect to pay 25 per cent more than last year. And if I try to drown my sorrows with a vin chaud, I will have to cope not only with the outrageous Alpine mark-up, but with the plummeting of our currency.
I will be forced to sip that drink miserably, nursing it in a corner, while all around me hearty red-faced skiers from euroland will be singing shanties and calling for more, slapping their relatively un-devalued banknotes on the counter.
If that isn’t the definition of national humiliation, I don’t know what is; and what has intensified my rage is the Government’s unbelievable suggestion that any further fall would have something to do with George Osborne and his decision to point out what is happening.
Ooh, say the Labour MPs, he’s being disloyal! He’s broken the “convention”, they hiss. The shadow chancellor has been “unpatriotic”, say the henchpersons of Gordon Brown – and how?
He has simply had the guts to point out that past Labour governments have collapsed in sterling crises, and we must all do our best to stop it happening again.
How can there possibly be a “convention” that stops shadow chancellors from pointing out the baleful effects on sterling of an irresponsible fiscal policy? Surely that is the very definition of his job.
This is insanity, and the Labour attempt to accuse Osborne of “talking down” the pound is the most ludicrous and desperate attempt to evade the blame since – well, since 1992, when the Tories tried to blame the Bundesbank’s Helmut Schlesinger and Hans Tietmeyer for the fall of the pound on Black Wednesday.
If Gordon Brown and Alistair Darling are right, and our economic difficulties are identical to those of developed countries the world over, then why the hell is it our currency that is taking such a pasting?
Why is the pound at a 12-year low against a basket of other OECD currencies? Who is to blame for the cost of my vin chaud?
I tell you who: it’s you, Gordon. You did it, by running the largest budget deficit in the world, now hanging round all our necks at more than £100 billion.
You wasted all that money in the good times, water-cannoning our dosh with so little thought or restraint that only Hungary, Pakistan and Egypt are suffering from comparable indebtedness, and Hungary and Pakistan are already in the hands of the IMF.
You weakened the pound, Gordon, because you expanded the public sector without reforming it.
You weakened the pound because you bloated the state pay-roll, and then you added the private finance initiative and the nationalisation of the Bradford & Bingley and Northern Rock, and all the time you somehow believed your own lunatic propaganda that you had personally defied the laws of economic gravity.
You really thought you had created a new paradigm in which you, and only you, had beaten the economic cycle and gone “beyond boom and bust”, and that you were therefore free to take whatever fiscal risks you wanted, and the markets looked at the whole thing, sucked their teeth and said, baloney.
They saw a man simply adding to his country’s obligations, while doing little or nothing to make the countervailing savings in expenditure.
Why are we still spending hundreds of millions on a new register of every child in the country? Why are we squandering billions on ID cards? Why does the Government still spend £800 million on advertising public sector appointments – very often in the Guardian – when they could be conveniently displayed online?
Of all the Government’s pretences, perhaps the most sickening and self-serving is that none of this matters, that there is no use crying over spilt milk, and that the most patriotic thing we can do is keep silent while Gordon the great helmsman gets on with saving the country and the world.
That, again, is phooey. We need to have an urgent argument about this devaluation and its causes, not least since devaluation is not, in itself, an unmixed evil.
We devalued after 1992 and, in spite of all the predictions, the economy recovered, and without importing inflation. We were liberated from the excessively high interest rates and the anti-competitive exchange rate that were forced on us by the Exchange Rate Mechanism.
British exports became cheaper, and Britain became an ever more attractive place to invest – all of which should remind you of the total folly of trying to solve this crisis by abolishing the exchange rate and going into the euro.
But the whole point about that devaluation – and one of the reasons why it was not accompanied by inflation – was that sensible Conservative policies on spending and borrowing allowed us to keep interest rates low, and paved the way for the sustained period of economic growth for which Gordon Brown has absurdly claimed credit.
The risk now is that Gordon Brown seems to be proposing not just to devalue, but also to launch a great unfunded borrowing splurge that could end up weakening the economy further.
We all want tax cuts. Of course we do. We need to stimulate consumption and confidence as quickly as possible.
The danger is that Gordon may be tempted to do this in such a way as to make matters worse. George Osborne is paid to warn of such risks, and he is absolutely right to do so.
[First published in the Daily Telegraph on 18 November 2008 under the heading: “Don’t blame George Osborne, the falling pound is Gordon Brown’s fault.”]