Bank of England’s most senior policymakers were divided over Mervyn King’s support for the government’s austerity measures.
Adam Posen, an external member of the Monetary Policy Committee (MPC), yesterday said the governor’s endorsement of the coalition’s deficit reduction programme was “excessively political”.
“A number of people on the committee [thought he was being]… excessively political in the election,” he told the Treasury select committee
Posen added that a handful of other members of the MPC shared his concerns. “A number of us were concerned… more than me and one other person, but less than a majority,” he said.
In a press conference following the May inflation report – just days after the coalition seized power – King backed the government’s decision to make £6bn of cuts in fiscal 2010.
Posen also said he objected to the wording of one paragraph in the inflation report, although the majority of the MPC did not support him.
The thinly-veiled criticism of King represents a huge challenge to his authority.
Chuka Umunna, a Labour member of the select committee, said that King’s role was becoming overly politicised, although he blamed this on politicians rather than the governor himself.
“It is self-evident that the governor has been drawn into political matters – but it is the fault of politicians,” he said.
“Nick Clegg has cited the governor’s opinions as the reason for his volte-face on economic policy, while George Osborne is relying on him to compensate for his fiscal austerity package with monetary levers,” he added.
Umunna was referring to Clegg’s claim that he decided £6bn of in-year cuts were necessary after a telephone call with the governor – a claim roundly denied by King.