Intervening to prop up pound is 'recipe for failure', says Brown

PM expected to admit today that he should have been tougher with 'freewheeling bankers'

Gordon Brown has indicated that he will not intervene to prevent the pound sinking still further against the dollar, the euro and other major currencies.

Speaking at the World Economic Forum in Davos, Switzerland, the Prime Minister suggested that the fate of sterling was a matter for the markets alone: "We do not target our exchange rate." That, he added, would be a "recipe for failure", as it had been when governments tried to "shadow the Deutschmark" and joined the European Exchange Rate Mechanism in the late 1980s and early 1990s.

Mr Brown's comments seem certain to push sterling lower, and may see it hit parity with the euro.

At the same time, Caroline Flint, the Europe minister, appeared to rule out British entry into the single currency, even in the long term. She told The Independent on Sunday: "We are prepared to look at the issues around the euro. This doesn't mean, in principle, that we think we have a journey to the euro. It's about whether it would work for the British economy." Her remarks appeared to be at odds with the position of the Business Secretary, Lord Mandelson, who he said this month that joining the euro remained a long-term policy objective.

Mr Brown will today take some responsibility for failing to get tough with freewheeling banks when he was Chancellor – but he will stop short of a full apology for his role in the recession. "We're toughening up the regulatory system," he will tell BBC1's Politics Show, a move No 10 hopes will tackle claims that he refuses to accept any blame for Britain's plight. "That is an acceptance that it wasn't strong enough to meet what was, effectively... a global financial freezing up."

Market fears centre on the scale of the Government's debts now being piled up, and the possibility that the Treasury will have to take on trillions of pounds-worth of liabilities if the banking system continues to falter. Many liabilities are in foreign currency and large in relation to the UK's GDP, prompting comparison with Iceland, which in effect went bust because of its overextended banks. Economist Willem Buiter has joked about London becoming "Reykjavik-on-Thames".

There are also worries about the state of the economy, and the accumulating bad debts that will accumulate as the UK enters its worst recession in 60 years. The IMF last week forecast that the British economy would shrink by 2.8 per cent in 2009, its worst showing since the Second World War, although Bank of England and Treasury officials seem relaxed about the decline of the pound, in the hope this will boost exports, although there is little evidence of that so far.

Showing considerable irritation about remarks from international investors such as Jim Rogers, who have sold sterling and declared the UK "finished", the Prime Minister said: "We are not going to build our policies around self-interested speculators."

Mr Rogers said recently that he has sold all his sterling assets. And on Tuesday, the billionaire investor George Soros, who "broke the Bank of England" during the 1992 ERM crisis, said he too had been selling, sterling over the past 12 months: "Sterling did fall from around $2 to about $1.40 and at that level the risk-reward balance is no longer compelling. I'm not saying it won't fall any more though – it will continue to fluctuate." Against a basket of currencies, the pound has lost about a third of its value in a year.

There are also concerns in some European circles that the British Government is using the hefty depreciation in the pound against the euro as a sort of stealth protectionism. Mr Brown and the German Chancellor Angela Merkel have warned in Davos about the "retreat to protectionism".

Have you tried new the Independent Digital Edition apps?
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

SQL Report Analyst (SSRS, CA, SQL 2012)

£30000 - £38500 Per Annum + 25 days holiday, pension, subsidised restaurant: C...

Application Support Analyst (SQL, Incident Management, SLAs)

£34000 - £37000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Embedded Software / Firmware Engineer

£40000 - £45000 per annum + Pension, Holiday, Flexi-time: Progressive Recruitm...

Developer - WinForms, C#

£280 - £320 per day: Progressive Recruitment: C#, WinForms, Desktop Developmen...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform