Tories' exaggerated claim looks like a scare tactic

HAVE the Conservatives hit the panic button? Judging by the apocalyptic language deployed yesterday by the party's three big hitters – leader David Cameron, shadow chancellor George Osborne and shadow business secretary Ken Clarke – a note of desperation is creeping in.

They warned of an economic meltdown if voters failed to give them an outright victory and that the country would be at risk of losing its Triple A credit rating. The economy would pass into the hands of creditors, replacing democratic rule.

There is certainly market apprehension in the wake of polls showing the UK on course for a hung parliament and possibly a return of Gordon Brown to No 10. The pound has fallen to a nine-month low against the dollar and weakened against the euro. But it is hardly a rout, on three counts. First, the US currency has been strengthening on prospects of a gathering recovery. Second, the stock market has notably strengthened, led by exporters for whom a weaker pound will act as a tailwind for recovery. And third, the actual cost of borrowing is lower now than on 1 January. Ten-year gilts yield 4.05 per cent, down from 4.11 per cent. This is not to minimise the risk of a rout if a hung parliament does not spell out action on the deficit. But we are not there yet. Might it be that the Tory leadership, desperate to take attention away from "non dom" Lord Ashcroft and their own ambiguities as to whether they will or will not cut in a post-election budget, are seeking to win by scare tactics? It is to play with fire.