An old parlour game in Westminster has been guessing the political motives (if there are any) behind Mervyn King’s various interventions in public life.
What has become all too clear today is the serious concerns they have generated in the Bank of England.
At an extraordinary hearing of the Treasury select committee today, an external member of the monetary policy committee spoke out over Mervyn’s “excessively political” statements on the pace of deficit reduction. In genteel Bank terms, this is an uprising.
Adam Posen confirmed that his views were shared by others:
“There was a difference of opinion at the MPC, in particular in the main meeting, over a particular paragraph in the report that was talking about the need for a particular speed with which to deal with the fiscal policy…
“A number of people on the Committee [believed it was]…excessively political in the context of the election”.
“A number of us were concerned…more than me and one other person, but less than a majority.”
Some of these private reservations were reported weeks ago in the FT (much to the annoyance of King – you can read more about it on Chris Giles’ blog). Some of the specific concerns included Kingendorsing the coalition’s plans to accelerate spending cuts, including the £6bn cuts in 2010/11 that became such a feature of the election campaign.
It reminded me that King was primed to play what could have been a pivotal role in the coalition negotiations.
Fearing that the Lib Dems would resist signing up to Tory deficit reduction plans, George Osborne had requested that the Governor be ready to provide a presentation to focus minds.
In the event, his sermon on the economy wasn’t required — the Lib Dems didn’t need any convincing.
Jim Pickard
Kiran Stacey