Mervyn King slams Tories on debt

I’m not kidding.

A biased and simplistic headline, to be sure, but no more so than the many ‘Kings slams Labour on debt’ stories running today.

Here are some extracts from the Bank of England Governor’s testimony to the Commons Treasury Committee yesterday. You’ll be able to discern some implicit criticism, as well as praise, of the government position:

[18’05] …there will certainly need to be a plan, for the lifetime of the next parliament, contingent upon the state of the economy, to show how those deficits will be brought down if the economy recovers, to reach levels of deficits below those which were shown in the Budget figures. I think the Budget was commendably honest in setting out the fiscal picture, I think there’s just as good a chance that the picture will turn out to be better than was painted in those single numbers than it being worse. And that’s encouraging that that degree of honesty is there. But I think we have to confront the fact that these numbers are very large and they pose a challenge to the UK which we will need collectively to deal with.
…
[20’55] …it’s likely to be necessary to spell out a path for the reduction of deficit such that if the economy were to recover along the path assumed in the Budget projections for GDP, then I think the time over which deficits need to be reduced is likely to have to be faster than was implied by that projection. But I think what is most important is not to fix an arbitrary timescale for reduction of the fiscal deficit, but to recognise that whatever it is, it will have to be dependent on the state of the economy. But I don’t think we can afford to wait until the parliament after next before taking action to demonstrate credibly that the United Kingdom is going to reduce its deficit and that fiscal policy will be credible.
…
[22’30] …I think we need to recognise that although we are finding it easy to finance those deficits now, by issuing gilts, there could be challenges down the road. And I think all that’s needed is not action now – it would be quite wrong now to take action this year – but what is needed is credible statement of the path that will guide the reduction in deficits over the years, made contingent on the state of the economy.

A fair summary of this would be: deficits need to come down, and should come down faster than projected in the Budget – but only once the economy returns to decent growth.

Now let’s go back to what David Cameron said in April:

Now some people say: let’s get through the recession, let’s get through the election we can keep on spending more, keep on borrowing more, and deal with the debt crisis later. Wrong - seriously wrong.
…
Controlling public spending and delivering more for less must start right now. Not next year, not after the election – now.

Whereas Mervyn King says:

it would be quite wrong now to take action this year