Bank of England Governor Mervyn King faced fresh criticism on Wednesday for straying into politics after the disclosure he had said the prime minister and finance minister were poorly prepared for deep spending cuts.
King, in a February meeting with the U.S. ambassador, said the then-opposition Conservative party leaders “had not fully grasped the pressures they will face...when attempting to cut spending” and demonstrated a “lack of depth”, the Guardian said on Wednesday, citing U.S. diplomatic cables.
The newspaper is one of a number of publications worldwide to have had early access to some 250,000 U.S. diplomatic cables obtained by the whistle-blowing website WikiLeaks.
King had already come under fire last week for engaging too much in politics, but Bank of England policymaker Adam Posen's criticism suggested rather that he had been too supportive of the government. Posen said King had crossed a line by endorsing the Conservative-led coalition's austerity plan shortly after the May election.
Prime Minister David Cameron and his finance minister George Osborne have introduced 81 billion pounds of spending cuts over the next four years to rein in a record budget deficit.
A copy of the U.S. cable showed that King, in several meetings with the Conservative leaders before their election in May, had pressed for details about how they planned to tackle Britain's debt, but “received generalities in return”.
According to the ambassador's cable, as published by the paper, King thought Cameron and Osborne had a tendency to think about issues only in terms of politics and how they might affect Conservative electability.
Former BoE policymaker David Blanchflower, who clashed repeatedly with King over monetary policy, called for the governor to quit for compromising the bank's independence.
Cameron's spokesman said the prime minister backed King.
“He (Cameron) thinks he's (King) doing a good job. The issue of confidence simply does not arise,” the spokesman said.
QUIT CALL
The Bank of England, granted independence from the government in 1997 but expected to keep out of party politics, sought to play down the remarks.
“The governor has a very effective working relationship with both the Chancellor and the Prime Minister,” a BoE spokesman said.
Blanchflower called for King to stand down.
“He is expected to be politically neutral but has shown himself to be politically biased and as a result is now in an untenable position. King must go,” he wrote in the Guardian.
In another cable after the October 2008 Conservative conference, a Cameron insider told U.S. diplomats that Osborne had been stopped from making an emergency statement at the height of the financial crisis.
“Private party polling indicated that the public feel Osborne lacks the necessary 'gravitas',” the insider told U.S. officials in a private meeting, according to the Guardian.
“Somewhat unfairly, party officials thought, polling indicated that Osborne was seen as lightweight and inexperienced, in part due to his high-pitched vocal delivery.”
In an interview with the BBC broadcast on Tuesday night, U.S. Ambassador Louis Susman said: “It is the duty of a diplomat to report those conversations.”
“Gossip is not gossip if it's conversations. Gossip is speculation, but there is no speculation.” - Reuters