Alan Beith, the party's Treasury spokesman, warned that the Chancellor could be embarking on 'the economic equivalent of bungee jumping'.
No one should imagine that 'lush green pastures' were waiting outside the European exchange rate mechanism, Mr Beith said during an emergency debate on the sterling crisis.
'Interest rates may soon be pushed up again by further runs on the pound. If it really is to be free fall it will be the economic equivalent of bungee jumping - dazzling falls checked by jerked-up interest rates.
'It's not a sport I fancy, and it's not a way of life many home-owners and businesses would choose,' Mr Beith said. In addition, import costs would surge and the fires of inflation would be stoked up. 'There is no future for Britain as an offshore island set adrift from the currency system used by our major trading partners.'
To a standing ovation, he said voters should be given an opportunity 'to get rid of this incompetent and discredited government. The party that told us it was the only solution to a sterling crisis has brought about the mother and father of a sterling crisis.'
Mr Beith repeated the party's willingness to co-operate with Mr Major and John Smith to help give stability and said the necessary action should include measures to deal with the recession and an announcement that the Bank of England would be allowed to act as an independent central bank.
He ridiculed Norman Lamont's position as chairman of the EC finance ministers, describing him as 'chairman of a club in which he is not even allowed in the dining room', and condemned the 'breathtaking audacity' of attempts to blame the Germans, the Italians and speculators for the crisis.
'Their cheek would do credit to Arthur Daley, who I always thought of as the friendly side of Thatcherism - 'it wasn't us; circumstances beyond our control'.'
The Government should ask themselves why the crisis had not happened in Belgium, Holland or even France with all the uncertainty of the referendum. 'Why Britain? Because Britain's Tory government has left us uniquely ill-equipped to convince anyone that our economy can recover or ministers can be relied upon to look after our currency.'
Mr Beith said there was a real danger of a resurgence of out- and-out Thatcherism. 'The Tory right are baying for blood, and the blood they seek is not really that of Norman Lamont or John Major. They're just pawns in the game. The blood they seek is Britain's relationship with Europe. They want to get rid of it, and we must not let them.'
Representatives gave unanimous approval to a motion calling for voters to be given an early opportunity to pass judgement on the Government's failures, and urged Mr Major to begin immediate discussions with the opposition parties on action to establish economic stability.Reuse content