THE pound's collapse worsened sharply today as it emerged Britain's public finances are in their worst state since records began after the Second World War.
Sterling crashed below $1.38 and EUR 1.07 as investors took an increasingly gloomy view of the economy and the increasing likelihood that the Government could lose its AAA credit rating.
At the heart of today's public finances figures for December was the nearnationalisation of Royal Bank of Scotland, which added about Pounds 20 billion to the nation's debt burden. A further Pounds 2 billion was spent shoring up building society Bradford & Bingley and refinancing the financial services compensation scheme loans.
But even without the banks laying waste to the Government's coffers, the picture looked grim, with a Pounds 20 billion deficit. "Public finances are deteriorating sharply. It's another dire day for the UK economy," said Howard Archer of Global Insight.
Borrowing for the financial year so far has reached just over Pounds 70 billion -- more than double its position this time a year ago and the worst since records began in 1946. But the situation will get even worse as Gordon Brown's attempts to refloat the economy through extra spending and tax cuts takes its toll.
With the growing likelihood that RBS and Llloyds will now have to be completely nationalised, the government will plunge even deeper into debt.
Investors are increasingly concerned that credit rating agencies will downgrade Britain's sovereign debt.
The pound's slide today was worsened by comments last night from Bank of England Governor Mervyn King that he was not opposed to the current weakness of the pound. …