Fear for pound after record plunge

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".