Mervyn King: Election win will be poisoned chalice

The Bank Governor apparently thinks that any new Government will end up becoming unelectable for a generation.

Last Updated: 31 Aug 2010

Bank of England Governor Mervyn King is supposed to be completely neutral politically, which means he’s basically not allowed to say anything at the moment in case it appears to endorse one of the main parties. But David Hale doesn’t seem to have got that particular memo. The US economist told an Australian TV show today that in a private chat he had with Merv recently, the Governor told him that whoever wins the Election will end up being so unpopular, as a result of all the cuts and tax hikes they’ll have to bring in, that they won’t win another Election ‘for a whole generation’. Nice for the future Prime Minister to know that one of his most important civil servants has so much confidence in him…

Hale – an economist with his own consultancy – was talking to ABC about the UK’s dodgy finances, in light of the recent credit downgrades to Greece, Portugal and Spain. When he got onto our burgeoning national debt, and the potential impact on the election, he cited a private conversation with King during a recent visit to London, in which Merv ventured the opinion that the public backlash against the post-Election cuts will be so fierce that whoever’s in charge will rapidly become deeply unpopular – to the extent that it could be years before people are willing to vote for them again.

Although the Bank refused to admit publicly that King actually said this, they didn’t actually deny it either – and they did confirm that the two men had met privately last month. Which to us, sounds about as close to an admission as we’re likely to get during pre-Election purdah. And let’s be honest: it’s not an implausible scenario. King has already spoken of the need for ‘significant fiscal consolidation’ – and we can’t imagine that there’ll be dancing in the streets when the new Government hikes VAT/ closes hospitals/ sacks police/ abolishes free stuff for old people etc.

The whole debacle reinforces two points in particular. One, there’s a reason why they have this purdah period: it makes life much easier after the Election if the civil servants preserve their neutrality beforehand. How will the (new?) PM feel going into a meeting with Merv, knowing the Governor has no confidence in his ability to present these cuts in a palatable way? And second, it’s a reminder that this Election may turn out to be a good one to lose...

In today's bulletin:

Leaders ignore 30% tax hike predictions
Barclays cashes in on investment banking as profits leap to £1.8bn
Tesco and Sky off the hook with regulators - for now
Mervyn King: Election win will be poisoned chalice
Marks & Spencer has brief encounter with Which?

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