Jeremy Corbyn: It's right to plan for run on pound

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Jeremy Corbyn says it is “right to look at all these scenarios” after his shadow chancellor suggested that there could be a run on the pound if Labour went into government.

John McDonnell said Labour was doing “war-game-type scenario-planning” for events such as “a run on the pound”.

He made the comments at a fringe event at the Labour conference.

A party spokesman said the preparations were for events that could occur under any government.

Labour gained 30 seats in June’s general election, helping deprive the Conservatives of a majority, and the party says it is preparing for another snap poll.

Mr Corbyn backed Mr McDonnell in an interview with BBC political editor Laura Kuenssberg, telling her that his colleague was “making the point that you’ve got to look at all these things and all these scenarios”.

“John is right to look at all these scenarios because if we’re going to move into government we need to know what we’re going to do… but also look at all the scenarios we might face,” he said.

Mr McDonnell had suggested a “radical” Labour government determined to do things differently would face a range of challenges and was seeking to “answer the question about what happens when, or if, they come for us”.

Asked about the “they” his colleague was referring to, Mr Corbyn said he thought Mr McDonnell was “talking about the people John doesn’t like”, before adding: “I think he’s looking back again to the experience of the past Labour governments.”

Labour governments during the 1960s and 1970s came under financial pressure in the markets, leading them to devalue the pound, by lowering the exchange rate, on more than one occasion.

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A run on the pound refers to a situation in which international investors and market speculators sell sterling and sell sterling assets en masse, forcing its value down.

It last occurred in September 1992 when, on a day known as Black Wednesday, the falling value of sterling forced the then Conservative government to pull out of the European Exchange Rate Mechanism after its attempts to support the currency failed.

Mr Corbyn claimed there had “effectively” been a run on the pound since the Leave vote in the 2016 Brexit referendum, a result which led to a sharp drop in the value of sterling the next day – the pound has remained more than 10% below its pre-referendum levels.

‘Detailed work’

Labour’s last election manifesto contained pledges to bring rail and water companies and Royal Mail back into public ownership as well as a number of other large spending commitments – to be funded by borrowing and higher taxes on business and the better-off.

Speaking on Monday, Mr McDonnell said a future Labour administration would not be “traditional” and “people want to know we’re ready, and they want to know we’ve got a response to anything that could happen”.

Labour, he argued, must “scenario-plan” for all kinds of potential challenges it might face in government “bringing the relevant expertise together at every level to talk through what happens if there is such and such a reaction”.

“What if there is a run on the pound? What happens if there is this concept of capital flight? I don’t think there will be, but you never know.

“We’ve got to start work now… how exactly are we going to manage these industries when we take them back into public ownership? And let’s start doing the detailed work now. Let’s start doing the consultations with consumers or passengers or whoever and also with local authorities and local councils or whoever.”

A Labour spokesman said: “This was an exercise not done by us but by members. The scenarios were to deal with numerous events such as national disasters and acts of terror that could occur under any government.”

Speaking at the same conference fringe event as Mr McDonnell, former broadcaster Paul Mason warned the first six months of a Corbyn government would be “like Stalingrad”, with attacks from the establishment.

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Mark Serwotka, of the PCS union representing civil servants, said Labour would face “huge” opposition if it won power, predicting that “all the usual arms of the ruling class will be brought to bear”.

This included using financial markets to bring “economic pressures” including “the flight of capital” and trying to destabilise the economy, he said at a fringe event organised by the Corbyn-supporting Momentum group.

He also said Labour would have to resist pressure from senior civil servants, “Sir Humphreys”, who wanted to preserve the status quo.

“We have got to be prepared,” he said.

But the Conservatives said Labour’s nationalisation plans, as well as its intention to buy out PFI contracts for the running of schools, hospitals and other public services, would result in “a collapse in business investment and a crash in the value of the pound”.

“Labour’s plans would go too far, and ordinary working people will end up footing the bill,” Chancellor Philip Hammond said.

And the Lib Dems said it was Labour’s support for Brexit which risked an “economic collapse”.

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