Peter Hoskin

King rains on Brown’s parade

King rains on Brown's parade
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An intriguing little story in the FT about the worsening relations between Gordon Brown and Mervyn King.  Apparently, our Dear Leader doesn't like the downbeat rhetoric that the Governor of the Bank of England is deploying:

"There is growing irritation in Downing Street and the Treasury towards Mr King. The prime minister and Alistair Darling, chancellor, have been left fuming by the governor’s interventions, most notably after his downbeat assessment this month of the economic outlook, a viewpoint pounced on by the Conservatives.

Although Mr King’s forecasts were broadly similar to those set out by Mr Darling in last month’s Budget, the governor’s gloom-laden press conference at the launch of the central bank’s latest quarterly inflation report was watched with dismay in government circles.

'If you’d watched Mervyn on the news you’d have thought the world was a terrible place,' said one official in the Brown administration. Another talked of barely disguised dislike between the prime minister and governor when they met.

...

Mr Brown has been advised by US president Barack Obama’s campaign team – now working for Labour – that he must fight the next election with an optimistic outlook, contrasting with Tory leader David Cameron’s rhetoric on the need for 'an age of austerity'.

Neither Mr Brown nor Mr Darling suspects party political motives but they believe the governor’s willingness to speak out and what they see as his occasional naivety are playing into Tory hands."

Given this Government's track record on forecasts, as well as some of the worrying indicators coming out at the moment - not least the Standard & Poor revelation - I don't think it's too unreasonable for King to take a sober view of things.  In which case, this becomes a telling sign of how Gordo likes his independent bodies: erm, toeing the Labour party line, and helping in the great struggle against the Tories.  And it's rather dispiriting if he's letting these party poltical instincts damage relations with the Bank of England at a time of economic crisis.

As for the Tories, their rhetoric may be about to get even more cheerless.  One of George Osborne's favourite economists (whom he referenced here) warned today that Britain could face two recessions in quick succession.  Seems like gloomy ol' King may be onto something...