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By Peter Hoskin
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It
has to be hoped that the memoirs of the Coalition years, when they are
eventually published, will dwell on George Osborne’s professional relationship
with Mervyn King. After all, it is surely one of the most important in British
politics. The current Governor of the Bank of England is not only affording the
Chancellor some economic covering fire — in the form of the most radical
economic policy around (quantitative easing) and perpetually low base rates —
but also, whether it’s intentional or not, some political covering fire too.

There
are two particular instances in the past when Mr King has supported Mr Osborne’s
political cause. First, around the birth of the Coalition — when, at the very
least*, the Governor backed the cause of deficit reduction in a press
conference
just after the election, describing the fiscal deficit as “the
single most pressing problem facing the United Kingdom.” And then there was the
press
conference
he gave earlier this year, just after Moody’s had put the UK’s
triple-A credit rating on a negative outlook, during which he was even more
explicit:

“I think
[the Moody's news is] a reminder that we are facing a very challenging path to
reduce the scale of our deficit so that at some point the ratio of national
debt to GDP can start to fall back again, which has to be the objective. And
it's an objective which for example Ben Bernanke and the Federal Reserve have
stressed as crucial for the United States. They don't have a long term plan to
achieve that and he's been urging that on Congress for quite a long time. We
do, and I think it's very important that we keep to that, we have that plan.”

The
reason I mention this now is because we may now have a third particularly
significant entry on the list. In his much-heralded live interview with Channel
4 last night, Mr King suggested that it would be “acceptable” for George
Osborne to miss his debt target — provided that this was the result of an
unforgiving global economy, not uniquely British weakness. Of course, this
follows on from speculation that Mr Osborne may do exactly that, as we’ve
discussed on
ConservativeHome
.

Labour
MPs like to claim this sort of thing as evidence that the Mr King is subverting
the independence of his role. But there’s another way to look at it: at a time
of deep economic malaise, when the Bank’s printing presses are on full power,
it is almost impossible for the Governor to avoid overlap with politics. And this
will probably apply even more so in future, when he gains more powers for
regulating the financial system. Rightly or wrongly, the role is becoming more
activist.

This
is not something that Mr Osborne should be complacent about, however. If the Bank
of England is to have an increasingly significant political dimension, then its
leader should also be made more accountable. More television interviews, such
as that last night, would be a start.

*
Some folk suspect
him
of doing more before then, too.

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