Nothing tolls the bell for Labour governments more often than the devaluation of sterling. Despite months of denials that it would do so, on September 19, 1949, Attlee's Government devalued the pound, which had been pegged to the dollar, by 30 per cent. In the summer of 1966, with the value of the pound falling, the Wilson Government tightened exchange controls. Tourists were banned from taking more than £50 out of the country. Again, after repeated denials, the pound was eventually devalued, by 14 per cent in November 1967.

In 1976, the Callaghan Government was forced to ask the International Monetary Fund for help after a tumble in the value of sterling to a record low against the dollar amid expectations that the budget deficit, the current account deficit and inflation were all set to worsen.

The political lesson from every instance is very clear. Not one of these administrations survived devaluation. Of course, each of these incidents was cataclysmic. Each one was crystallised into a single moment that then gained political notoriety as “the IMF loan” or, in the case of John Major's Conservative Government, “Black Wednesday”, when even a leap in interest rates from 10 per cent to 15 per cent failed to prevent the pound from falling below the ERM limits.

The other salient historical lesson is that nasty medicine works. After the agreement with the IMF, interest rates were soon reduced and the pound quickly appreciated. By the end of 1977, partly as a result of new oil revenues, the balance of trade had improved. After Britain's withdrawal from the ERM, the exchange rate fell quickly and the cheaper pound spurred exports and contributed to the prosperity of the 1990s.

Depreciation may not be so salutary today. Though Europe is the dominant export market for British goods and services, parts of Europe have fallen into recession so rapidly that demand for our goods will be slow, notwithstanding that they are less expensive. More serious still, a weaker pound will exacerbate imported inflation just as prices look set to rise from 2010.

These previous incidents were all, strictly speaking, devaluations. The current depreciation, by comparison, has been glacial. That is true even though sterling fell 32 per cent against the euro in 2008. In 1976 the pound fell 25 per cent in a year but it was Denis Healey's abrupt about-turn at Heathrow airport on his way to a Commonwealth conference in Asia that did all the political damage. So far, this depreciation has not found its Heathrow moment or its memorable soundbite such as Harold Wilson's infamous claim that the pound in your pocket had not been devalued. The question is whether the deteriorating state of the public finances, the source of the depreciating pound, finds the dramatic expression that will damage the Government.

It is clear that fears about sterling are already inhibiting monetary policy. Yesterday's cut of 0.5 percentage points by the Bank of England might have been larger, were it not for the fear that speculation over the pound would intensify. As it is, rates are already getting close to the point where printing money becomes a necessary contingency - a form of devaluation in all but name.

The trouble for the Government is that a repeat of the plea to the IMF in 1976 is now within the bounds of feasibility. If that were to happen, the Prime Minister would become, in effect, a lame duck. In 1976 the Callaghan Government agreed, reluctantly, to cuts in public spending and restraint of the money supply. James Callaghan is the precursor who haunts Gordon Brown. His famous words must be ringing in Mr Brown's ears: “We used to think that you could just spend your way out of a recession. I tell you, in all candour, that that option no longer exists.”