A green light for George Osborne to miss the debt target? In his interview on Channel 4 News, Bank of England Governor Sir Mervyn King hints that slow world growth would be an “acceptable excuse”.
During his first ever live extended TV interview, Bank of England Governor Sir Mervyn King was asked whether he was “more relaxed” about missing the national debt target, which is to get it moving down by 2015.
Sir Mervyn said: “If the economy is growing slowly then, yes, indeed and that was always part of the plan.
“If [missing it] is because the world economy has grown slowly, so we in turn have grown slowly, then it would be acceptable to be in that position, yes.
“But if the world economy were to pick up and we could grow quickly then it would not be acceptable to miss it – if we had no real excuse for it.”
If it’s because the world economy has grown slowly, it would be acceptable [to miss the debt target]. Sir Mervyn King
“The rule [the UK’s national debt target] was once the holy sacred cow of the entire fiscal rule that George Osborne had set up.
“He [Osborne] has been beating the drum, preparing the ground clearly for what he thinks is a very possible scenario – when it comes to the autumn statement – that he has to drop the thing.
“This is a kite mark that gives it credibility, that means people won’t run scared.”
“This doesn’t mean there aren’t going to be more cuts,” added Gibbon.
“Part of this beating of the drum [by Osborne] is a floating out of ideas about more cuts down the line.”
Economics Editor Faisal Islam noted that the governor “wouldn’t say the word ‘green shoots'” and the hint on the debt target was “significant”.
He explained: “What the governor did today was suggest that – if world growth was the reason for it – that would be an acceptable excuse to miss it [the target].”
“The chancellor’s got more wriggle room ahead of the autumn statement,” Faisal Islam explained.
“He could choose to spend more on capital investment – a demand not just of Labour, but of the Tory right.
“Really interesting times and a significant intervention from the governor.”
During the interview with Jon Snow, Sir Mervyn also expressed a “personal preference” that the banking reforms in the Vickers report are not watered down by pressure from the banks, saying the original proposals were “in the right direction”.
Asked about whether the limits on whether the way the banks finance themselves with borrowing would move, he said: “The banks have lobbied for it, and we’ll see what happens when it goes to parliament – you can see why they have lobbied for it. There are very rates of return to pay high bonuses and if it goes wrong, the burden falls back on the taxpayer.”
“My preference is for a different ratio, but its better to have some ratio.”
What I would find stressful is if I had a family to support and if I’d been made redundant. That’s stress. I’ve never had to face it. Sir Mervyn King
Asked if he “fired” former Barclays chief Bob Diamond, Sir Mervyn said: “I didn’t fire anybody. I had a conversation which I thought would be helpful about how concerned the regulators were. Sometimes it can be helpful to have a third voice say “do you know how concerned they are?””
And on the stress of the job, he said: “Supporting Aston Villa is much more stressful than being Governor of the Bank of England.
“It’s not stressful in the sense that I have such good support… What I would find stressful is if I had a family to support and if I’d been made redundant. That’s stress. I’ve never had to face it.”
And reflecting on his 10 years in the role, he said: “I’ve been very accountable and I’m happy for others to pass judgment… I will go on doing what I believe is the right thing to do.”