The pound has plunged to an all-time low against the US dollar amid hammered market confidence in the UK Government’s economic plans after the UK Chancellor last week unveiled the biggest tax cuts in 50 years and signalled more were on the way.
Sterling hit its lowest level against the dollar since decimalisation in 1971, falling by more than 4 per cent to just 1.03 dollars in early Asia trading before it regained some ground to about 1.07 dollars early on Monday.
The euro also hit a fresh 20-year low amid recession and energy security fears ahead of what is expected to be a painful winter across Europe as the war in Ukraine shows no sign of ending.
Experts warned the pound’s plunge towards parity with the dollar will send the cost of goods soaring even higher, potentially worsening the cost-of-living crisis, while it also means it will be more expensive for the Government to borrow money.
UK Shadow chancellor Rachel Reeves accused Chancellor Kwasi Kwarteng and UK Prime Minister Liz Truss of recklessly gambling with the UK’s finances.
The Labour MP told Times Radio: “Instead of blaming everybody else, the Chancellor and the Prime Minister, instead of behaving like two gamblers in a casino chasing a losing run, they should be mindful of the reaction not just on the financial markets but also of the public.”
She added: “They’re not gambling with their own money, they’re gambling with all our money, and it’s reckless and it’s irresponsible as well as being grossly unfair.”
Mr Kwarteng has previously brushed off questions about the markets’ reaction to his mini-budget – which outlined the biggest programme of tax cuts for 50 years – after it was announced on Friday using more than £70 billion (€77 billion) of increased borrowing.
He claimed on Sunday the cuts “favour people right across the income scale” amid accusations they mainly help the rich.
But financial markets continue to be spooked and there are fears the Bank of England may even be forced to step in with an emergency interest rate hike to rein in soaring inflation fuelled by the tax cuts.
