GOVERNMENT 'WILL NOT SUPPORT POUND'

Chief Secretary to the Treasury Yvette Cooper said that attempts by previous administrations to target exchange rates had been unsuccessful.

The Government will continue to plot a course aimed at keeping inflation under control and supporting the economy, she said.

The plunge in the base interest rate to just 2% over the past few months, coupled with an increase in Government borrowing, has prompted a collapse in the value of sterling, which is now trading at just 1.12 euros or 1.49 US dollars. As recently as last December, £1 would buy 1.40 euros or 2.06 dollars.

Reports suggest that some holidaymakers are receiving less than a euro for each pound they change because of commission charges at bureaux de change in High Streets and airports which are offering rates as low as 1.05 euros to the pound.

Ms Cooper acknowledged that British tourists were suffering as a result of sterling's weakness, but said that the low pound was also good for UK exporters.

She left little doubt that the Treasury was sticking to its policy of targeting inflation, rather than the currency. With economists warning of the danger of deflation as prices for fuel, food and consumer goods fall, this is unlikely to permit the interest rate hikes that might bolster sterling.

Ms Cooper told BBC1's Andrew Marr Show: "We have never had a policy of targeting the pound. Our policy has been to target inflation and that, I think, has been the right way. It has paid off over the last 10 or 11 years."

Asked if she was concerned about the effect of the weak pound on families and businesses in the UK, Ms Cooper said: "It does have different impacts on different sectors of the economy. When you see the sort of changes that we have seen in recent months, that has an impact on people who are about to go abroad, tourists who are about to change their currency and go on holiday.

"But it does also have benefits for exporters as well."