Just a few weeks ago, Ed Balls questioned whether Mervyn King’s support for the government’s austerity measures was as sincere as it appeared. He told Andrew Marr: “I don’t think that Mervyn King in his heart of hearts really believes that crushing the economy in this way is the right way to get the economy moving.”
But in an interview in today’s FT, Labour’s Keynesian pitbull launches a long-overdue assault on the governor of the Bank of England. He tells the paper: “The last thing you ever want is for the Bank of England to be drawn into the political arena . . . central bank governors have to be very careful about tying themselves too closely to fiscal strategies, especially when they are extreme and are making their job on monetary policy more complicated.”
Balls is right. King’s declaration this week that “there has to be a plan A” (a line first used by George Osborne himself) was his most overtly political statement yet. It amounted to an explicit rejection of Labour’s calls for a “plan B”.
Above all, what I would say to him is what the governor of the Bank of England said this morning: “There has to be a plan A . . . This country needs fiscal consolidation to deal with the biggest Budget deficit in peacetime.”
There are two possible explanations for King’s behaviour. Either he is a highly naive man who does not anticipate that his words will be used for political purposes, or he is a highly partisan man who believes, against all evidence to the contrary, that the coalition’s premature fiscal retrenchment will increase growth. The second seems the likelier explanation, but neither is palatable and both raise the question: is this man fit to lead an independent Bank of England?