The truth about Mervyn King

A new political cult forms.

"Who would have guessed in late 2007 or early 2008 that an answer to the banking crisis would be to hand more power to Mervyn King?" asks the Guardian's Nils Pratley. King has long been admired in Tory circles and so George Osborne's decision to give the Bank of England the linchpin role in regulating the UK's financial sector came as no real surprise.

I'm no fan of Merv. I think he long ago politicised and abused his position. Remember his public objection to the Labour government's fiscal stimulus? Remember his public approval for the coalition's deficit reduction plan?

He also has rather poor judgement. My colleague Professor David Blanchflower, a former external member of the Bank of England's Monetary Policy Committee and one of the few economists to see the crash coming, outlined King's failures in a devastating piece for the NS in September 2009 ("The story from the inside").

Blanchflower wrote:

So why did the committee get it so wrong? From my perspective, it was hobbled by "group think" -- or the "tyranny of the consensus". Governor Mervyn King, the old iron fist of the Bank of England, with his hawkish views on rates, dominated the MPC. Short shrift was given to alternative, dovish views such as mine. I focused on the empirical data suggesting Britain was heading for recession; Mervyn and the rest of the committee focused on their theoretical models and the (invisible) threat of inflation. In fact, the Bank of England may more suitably be called "the Bank of Economic Theory". Unfortunately, the economic theories failed just when we needed them most.

He added:

Clever as Mervyn King may be, he missed the crash and the subsequent recession, and hence, so did the consensual MPC on which I sat. In August 2008, the MPC's quarterly Inflation Report did not even contain the word "recession"; it saw the economy standing still over the next year. I very nearly quit the committee at that point. In an interview that month with Reuters, I called the forecast "wishful thinking". Mervyn called me into his office to admonish me for that one.

Blanchflower also criticised King's obsession with so-called moral hazard:

We were not told what was happening to British banks such as Northern Rock, Royal Bank of Scotland, Lloyds, Bradford & Bingley or Alliance & Leicester. Or to US banks such as Lehman Brothers or Bear Stearns. We weren't kept in the loop, but we should have been. With hindsight, Mervyn King's focus on moral hazard -- the idea that banks are encouraged to take more risks because they know they will be bailed out -- was a huge mistake.

He reminds us of King's unforgivable failure to foresee the explosion in unemployment:

In the summer of 2008, I warned the Commons Treasury select committee that "something horrible" was going to happen. I was becoming even more worried about recession, and in September I voted alone, as ever, for a cut of 50 basis points (bps) -- or 0.5 per cent -- to the Bank's base rate. At my September appearance before the select committee, King, who was sitting two seats from me at the time, was asked by the MP Andy Love: "On unemployment there have been some suggestions, and Mr Blanchflower has said -- and I think there are quite a lot of people out there who would agree with them -- that it may go up faster than the projections in the Inflation Report. Is that a worry to you?"King replied: "At least the Almighty has not vouchsafed to me the path of unemployment data over the next year. He may have done to Danny, but he has not done to me." To say the least, I was rather surprised.

Hail the King? I'd rather not.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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"Michael Gove is a nasty bit of work": A Thatcherite's lonely crusade for technical colleges

Kenneth Baker, Margaret Thatcher's education secretary, has been in a war of words with one of his successors. 

When I meet Kenneth Baker, once Margaret Thatcher’s reforming education secretary, conversation quickly turns to an unexpected coincidence. We are old boys of the same school: a sixth-form college in Southport that was, in Baker’s day, the local grammar. Fittingly for a man enraged by the exclusion of technical subjects from the modern curriculum, he can only recall one lesson: carpentry.

Seven decades on, Lord Baker – who counts Sats, the national curriculum, league tables, and student loans among his innovations – is still preoccupied with technical education. His charity, the Baker Dearing Educational Trust, oversees university technical colleges (UTCs), the specialist free schools that work with businesses and higher education institutions to provide a vocational curriculum for students aged 14-19. He is also a working peer, and a doughty evangelist for technical education and apprenticeships in the upper chamber. 

But when we meet at the charity’s glass-panelled Westminster office at 4 Millbank, he is on the defensive – and with good reason. Recent weeks have been particularly unkind to the project that, aged 82, he still works full-time to promote. First, a technical college in Oldham, Greater Manchester, became the seventh to close its doors since 2015. In three years, not one of its pupils passed a single GCSE, and locals complained it had become a “dumping ground” for the most troubled and disruptive children from Oldham’s other schools (Baker agrees, and puts the closure down to “bad governorship and bad headship”). 

Then, with customary chutzpah, came Michael Gove. In the week of the closure, the former education secretary declared in his Times column that the UTCs project had failed. "The commonest error in politics," he wrote, quoting Lord Salisbury, "is sticking to the carcasses of dead policies". Baker is now embroiled in a remarkable – and increasingly bitter – war of words with his successor and one-time colleague.

It wasn't always this way. In 2013, with UTCs still in their infancy, he told the New Statesman the then education secretary was “a friend”, despite their disagreements on the curriculum. The bonhomie has not lasted. In the course of our hour-long conversation, Gove is derided as “a nasty bit of work”, “very vindictive”, “completely out of touch”, and “Brutus Gove and all the rest of it”. (Three days after we speak, Baker renews their animus with a blistering op-ed for The Telegraph, claiming Gove embraced UTCs about as warmly as “an undertaker”.)

In all of this, Gove, who speaks warmly of Baker, has presented himself as having been initially supportive of the project. He was, after all, the education secretary who gave them the green light. Not so, his one-time colleague says. While David Cameron (Baker's former PA) and George Osborne showed pragmatic enthusiasm, Gove “was pretty reluctant from the word go”.

“Gove has his own theory of education,” Baker tells me. He believes Gove is in thrall to the American educationalist E.D. Hirsch, who believes in focusing on offering children a core academic diet of subjects, whatever their background. "He doesn’t think that schools should worry about employability at all," Baker says. "He thinks as long as you get the basic education right, everything will be fine. That isn’t going to happen – it isn’t how life works!" 

Baker is fond of comparing Gove’s heavily academic English baccalaureate to the similarly narrow School Certificate he sat in 1951, as well as the curriculum of 1904 (there is seldom an interview with Baker that doesn’t feature this comparison). He believes his junior's divisive tenure changed the state sector for the worse: “It’s appalling what’s happening in our schools! The squeezing out of not only design and technology, but drama, music, art – they’re all going down at GCSE, year by year. Now children are just studying a basic eight subjects. I think that’s completely wrong.” 

UTCs, with their university sponsors, workplace ethos (teaching hours coincide with the standard 9-5 working day and pupils wear business dress), and specialist curricula, are Baker's solution. The 46 existing institutions teach 11,500 children, and there are several notable success stories. GCHQ has opened a cyber-security suite at the UTC in Scarborough, North Yorkshire, as part of a bid to diversify its workforce. Just 0.5 per cent of UTC graduates are unemployed, compared to 11.5 per cent of all 18-year-olds. 

But they are not without their critics. Teaching unions have complained that their presence fragments education provision and funding, and others point out that hard-up schools in disadvantaged areas have little desire or incentive to give up children – and the funding they bring – at 14. Ofsted rate twice as many UTCs as inadequate as they do outstanding. Gove doubts that the vocational qualifications on offer are as robust as their academic equivalents, or anywhere near as attractive for middle-class parents. He also considers 14 is too young an age for pupils to pursue a specialist course of vocational study.

Baker accepts that many of his colleges are seen as “useless, wastes of money, monuments to Baker’s vanity and all the rest of it”, but maintains the project is only just finding its legs. He is more hopeful about the current education secretary, Justine Greening, who he believes is an admirer. Indeed, UTCs could provide Greening with a trump card in the vexed debate over grammar schools – last year’s green paper suggested pupils would be able to join new selective institutions at 14, and Baker has long believed specialist academic institutions should complement UTCs.

Discussion of Theresa May’s education policy has tended to start and finish at grammar schools. But Baker believes the conversation could soon be dominated by a much more pressing issue: the financial collapse of multi-academy trusts and the prospect of an NHS-style funding crisis blighting the nation’s schools. Although his city technology colleges may have paved the way for the removal of more and more schools from the control of local authorities, he, perhaps surprisingly, defends a connection to the state.

“What is missing now in the whole education system is that broker in the middle, to balance the demands of education with the funds available," he says. "I think by 2020 all these multi-academy trusts will be like the hospitals... If MATs get into trouble, their immediate cry will be: ‘We need more money!’ We need more teachers, we need more resources, and all the rest of it!’."

It is clear that he is more alert to coming challenges, such as automation, than many politicians half his age. Halfway through our conversation, he leaves the room and returns enthusiastically toting a picture of an driverless lorry. It transpires that this Thatcherite is even increasingly receptive to the idea of the ultimate state handout: a universal basic income. “There’s one part of me that says: ‘How awful to give someone a sum for doing nothing! What are they going to do, for heaven’s sake, for Christ’s sake!’" he says. "But on the other hand, I think the drawback to the four-day working week or four-hour working day... I think it’s going to happen in your lifetime. If people are only working for a very short space of time, they will have to have some sort of basic income.” 

Predictably, the upshot of this vignette is that his beloved UTCs and their multi-skilled graduates are part of the solution. Friend and foe alike praise Baker’s indefatigable dedication to the cause. But, with the ranks of doubters growing and the axe likely to fall on at least one of its institutions again, it remains to be seen in what form the programme will survive.

Despite the ignominy of the last few weeks, however, Baker is typically forthright: “I sense a turning of the tide in our way now. But I still fight. I fight for every bloody one.”