Mervyn King gets his life peerage and a lollipop, the rest of us get more misery

The newly ennobled Mervyn King blames “a collective lack of imagination” for the financial crisis. We, all of us, failed to see the iceberg. The only problem is that most of us were in the engine room shovelling coal.

I have long been convinced that a life peerage is very much akin to a pacifier. If a significant figure is retiring from public life and has the potential to command media attention, give them a nice title on which to suck and stop kvetching, plus the ability to claim £300 a day for spending a couple of hours in the House of Lords. Giving them a formal public platform has the brilliantly counterintuitive effect of diminishing their future risk index by making them one of many within the Westminster bubble.

The success, or lack thereof, in their former post seems a secondary consideration. And so it is with Sir Mervyn King. This week George Osborne announced that the outgoing Governor of the Bank of England would be taking his place within our unelected pantheon of gown and wig after his retirement at the end of the month. Sporting metaphors blinked like newly born rabbits in the lights of the annual Bankers and Merchants dinner. “You had to play on a sticky wicket,” mused the Chancellor. It was “a game of two halves”, added King.

The only problem is that many would disagree with the post-match analysis – even to the basic level of whether team GB won or lost. We are still a long way off from recovering pre-crisis economic activity levels, unlike the US or Germany, for instance. Inflation has been consistently way above the BoE’s target for many months. Solutions like Funding for Lending appear to have had little impact – lending to SMEs has actually decreased under the scheme. Too little of the river of cash being pumped into the system via Quantitative Easing appears to have trickled through to the real economy – the allegation is that banks are using such schemes and cash to shore up their own balance sheets.

Mervyn King's involvement in the more political aspects of economic strategy has also, rightly, been contentious. Documents released in November 2010 showed an oddly keen involvement in the coalition’s personnel and policies. His blessing of the austerity programme, which has now been questioned even by the IMF, could be seen as almost co-authoring it.

There is also significant criticism of King’s running of the organisation in the “first half” – the one he would term the “nice half”. It is suggested, correctly in my view, that his obsessive focus on inflation targeting failed to take into account the downward pressure on prices created by cheap Chinese imports entering the UK market and so, in effect, allowed the economy “to run too hot during the boom years”. Coupled with very light touch banking regulation, this could be argued to have sown the seeds of the crisis which followed.

Arguably, however, the most distasteful and dishonourable part of his legacy is his attempt to absolve himself of all responsibility. His explanation last year on Radio 4 had a distinct whiff of “nothing to do with me, guv”.  This was a failure of “the system”, he claimed. Isn’t that the system which he oversaw from a key position? "With the benefit of hindsight, we should have shouted from the rooftops that a system had been built in which banks were too important to fail, that banks had grown too quickly and borrowed too much."

It was not hindsight that was lacking. It was plain old present sight. The growth of banks, the mergers, the risky ventures, the out-of-control borrowing – these were not things which happened in secret. They happened in plain sight and with state approval.

Mervyn King blames “a collective lack of imagination”. We, all of us, failed to see the iceberg. We are, apparently, collectively blameworthy. The only problem is that most of us were in the engine room shovelling coal. Mervyn King was one of the people on the bridge. More than that, since one of the BoE’s core purposes and strategic priorities is to “maintain stability and improve the resilience of the financial system”, he was specifically in charge of the looking-out-for-icebergs department.

In those circumstances, it is adding insult to injury for him to shout back from his peerage lifeboat to the rest of us, now drowning in a freezing sea of debt and austerity, “well, you didn’t see the iceberg either”. Why wouldn’t we want to keep this sort of expert, constructive and visionary input a part of our legislature for the rest of his natural life? Happy retirement, Sir Mervyn. We look forward to being blamed for future shipwrecks.

Sir Mervyn King gets a life peerage - the pacifier of public life. Photo: Getty

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

Photo: Getty
Show Hide image

The new catchphrase that John McDonnell hopes will keep Britain in Europe

The shadow chancellor's gambit could prove decisive. 

John McDonnell has a new catchphrase: “Tory Brexit”.

It may sound uncomfortably close to the name of a new character in Star Wars but it’s what McDonnell and his team believe is the best route to turn Labour voters out for a Remain vote in the coming referendum.

Shadow ministers and Labour MPs are increasingly worried that Labour voters don’t know what the party’s stance on the referendum is – and even more troublingly, they don’t much care. That much of the media has covered the contest largely through the prism of the Conservative succession has only made matters worse. The government’s message about the dangers of Brexit, too, are calibrated towards the concerns of Tory voters: house prices, security, and the economy.

As I write in this week’s New Statesman, Vote Leave, the official campaign to secure a Brexit vote on 23 June, has long known that the referendum will be won and lost among Labour voters, hence their early focus on putting more money into the National Health Service and the dangers of the Trans-Atlantic Trade Partnership (TTIP).  

Vote Leave have also, quietly and effectively, been putting it about that a Brexit vote would allow fairer immigration rules for non-European migrants, something that, I’m told, is beginning to make itself felt among Labour voters who have relatives in Africa and from the Indian subcontinent in particular. It is families from these nations that have felt the biggest effects of Theresa May’s failed attempts to meet the government’s net migration target, with even short trips to attend weddings, funerals or graduations falling foul of the Home Office.

McDonnell’s “Tory Brexit” line is intended to defuse those lines of attack. As one aide puts it, “the idea you can get away from TTIP by leaving Europe under a Tory government – it’s nonsense. You’d have TTIP max”. Similarly, the party will push back in the minority press against the idea that a Leave vote negotiated by a Conservative Prime Minister to the right of David Cameron would be more liberal on migration from outside Europe after Brexit, with Seema Malhotra, the shadow chief secretary to the Treasury, to play a big role in that enterprise.

(It also has the added bonus of keeping open the idea that Brexit under a leftwing government mightn’t always be the worst thing in the world, which, depending on your perspective, either defangs the minority of Labour politicians who are pro-Brexit, or allows McDonnell and Jeremy Corbyn  to keep the party united while not closing the door on supporting a Leave vote at a later date. Either way, it’s canny politics.)

Will it work? The fear for Remain is that Vote Leave have a strong message to get their voters out, though the Remain campaign are confident that they are out-organising the Leave campaign on the ground. The fear of an unmuzzled Conservative party may prove decisive in getting Labour voters to the polls on 23 June. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.