Sir Mervyn King told MPs, slightly wearily, at the end of today’s Treasury Select Committee hearing, that this was his 100th appearance before a parliamentary committee since he joined the Bank of England. It was as rigorous a session as any of the 99 others that the Governor has sat through in his time, with the committee members choosing in particular to attack the decision to transfer £37 billion from debt interest in the Asset Purchase Facility from the Bank’s QE budget back to the Treasury.
As Jonathan blogged on Monday, the Institute for Fiscal Studies warned George Osborne against using that transfer to meet his debt target, and MPs were unimpressed, not just with the substance of the decision, but also the way in which it was announced. They even elicited a rare apology from the Governor for this. He said: ‘I accept it is a matter of regret these announcements were not made at the same time.’ He added that he was unsurprised by the outrage from some commentators, Coffee House included, saying: ‘I think any move of this kind is likely to attract a good deal of cynical comment from our press.’
But King did make clear to the committee that he disagreed that this move would allow the Chancellor to ‘cook the books’, saying:
‘This does not give anyone the option: it is merely taking cash one year with the clear commitment to repay it in the next… it doesn’t have any impact on the long-term fiscal position.’
He took great exception to Andrea Leadsom’s claim that the way the Bank had handled the decision on the QE switch was ‘highlighting really that the Monetary Policy Committee is operating really in a complete silo’.