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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Britain's shrinking democracy

10 million people - more than voted for Labour in May - will be excluded from the new electoral roll.

Despite all the warnings the government is determined to press ahead with its decision to close the existing electoral roll on December 1. This red letter day in British politics is no cause for celebration. As the Smith Institute’s latest report on the switch to the new system of voter registration shows, we are about to dramatically shrink our democracy.  As many as 10 million people are likely to vanish from the electoral register for ever – equal to 20 per cent of the total electorate and greater than Labour’s entire vote in the 2015 general election. 

Anyone who has not transferred over to the new individual electoral registration system by next Tuesday will be “dropped off” the register. The independent Electoral Commission, mindful of how the loss of voters will play out in forthcoming elections, say they need at least another year to ensure the new accuracy and completeness of the registers.

Nearly half a million voters (mostly the young and those in private rented homes) will disappear from the London register. According to a recent HeraldScotland survey around 100,000 residents in Glasgow may also be left off the new system. The picture is likely to be much the same in other cities, especially in places where there’s greater mobility and concentrations of students.

These depleted registers across the UK will impact more on marginal Labour seats, especially  where turnout is already low. Conversely, they will benefit Tories in future local, Euro and general elections. As the Smith Institute report observers, Conservative voters tend to be older, home owners and less transient – and therefore more likely to appear on the electoral register.

The government continues to ignore the prospect of skewed election results owing to an incomplete electoral registers. The attitude of some Tory MPs hardly helping. For example, Eleanor Laing MP (the former shadow minister for justice) told the BBC that “if a young person cannot organize the filling in of a form that registers them to vote, they don’t deserve the right to vote”.  Leaving aside such glib remarks, what we do know is the new registers will tend to favour MPs whose support is found in more affluent rural and semi-rural areas which have stable populations.  

Even more worrying, the forthcoming changes to MPs constituencies (under the Boundary Review) will be based on the new electoral register. The new parliamentary constituencies will be based not on the voting population, but on an inaccurate and incomplete register. As Institute’s report argues, these changes are likely to unjustly benefit UKIP and the Conservative party.

That’s not to say that the voter registration system doesn’t need reforming.  It clearly does. Indeed, every evidence-based analysis of electoral registers over the last 20 years shows that both accuracy and completeness are declining – the two features of any electoral register that make it credible or not. But, the job must be done properly.  Casually leaving 10m voters off the electoral resister hardly suggests every effort has been made.

The legitimacy of our democratic system rests on ensuring that everyone can exercise their right to vote. This is a task which shouldn’t brook complacency or compromise.  We should be aiming for maximum voter registration, not settling for a system where one in five drop off the register.