Governor offers Osborne lifeline on debt target

 

The Bank of England Governor Sir Mervyn King threw the Chancellor, George Osborne, a vital political lifeline last night as he said it would be “acceptable” for the Government to miss its debt-cutting target due to slowing global growth.

In his first-ever live television interview, Sir Mervyn faced questions on the Coalition's target of putting public debt as a share of the economy on a downward course by 2015/16.

The Chancellor predicted in this year's Budget that debt would peak at 76.3 per cent of GDP in 2014/5 before beginning to fall back, but is in grave danger of missing this target due to a far slower recovery than forecast by the independent Office for Budget Responsibility.

Figures today are set to underline the impact of the shortfall with more than £20bn in borrowing during August. Borrowing is running nearly £10bn ahead of last year in the first four months of the financial year so far.

When asked whether he was "more relaxed" about missing the debt target, Sir Mervyn told Channel 4 News: "If the economy is growing slowly then, yes, indeed and that was always part of the plan. If [missing it] is because the world economy has grown slowly, so we in turn have grown slowly, then it would be acceptable to be in that position, yes."

He added: "If the world economy were to pick up and we could grow quickly then it would not be acceptable to miss it – if we had no real excuse for it."

Sir Mervyn King has insisted there were "a few signs" of recovery in the British economy, although he avoided using the dreaded "green shoots" phrase. But he warned that any recovery would be slow and that the crisis in the eurozone had cast a "black cloud of uncertainty" over businesses around the world.

"What it (British recovery) will depend on critically, I think, is what happens in the euro area and also the rest of the world," he said.

"The United States is struggling a bit, Brazil and China are slowing. I think our fate in terms of the speed at which we come out of the flat period we're in will depend very much on what happens in the rest of the world."

The Bank of England is midway through a four-month programme of £50bn in money-printing via quantitative easing to boost demand in Britain's recession-hit economy.

Most economists expect the Bank to approve a further £50bn in November, which would take total quantitative easing to £425bn since March 2009.

Minutes to September's meeting of the central bank's Monetary Policy Committee showed that one official – likely to be dovish David Miles – already saw a good case for more stimulus, and that others thought it likely that more would be needed in due course.

Sir Mervyn cautioned the Chancellor not to water down the proposals for reform of the UK's banks proposed in Sir John Vickers' review.

He said the original proposals were "in the right direction" and asked whether the banks would face less stringent conditions on how they fund themselves.

He said: "The banks have lobbied for it, and we'll see what happens when it goes to parliament – you can see why they have lobbied for it. There are very rates of return to pay high bonuses and if it goes wrong, the burden falls back on the taxpayer."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
This weekend's 'Big Hero 6' by Disney Animation Studios
arts + ents
News
i100
News
Budapest, 1989. Sleepware and panties.
newsDavid Hlynsky's images of Soviet Union shop windows shine a light on our consumerist culture
Arts and Entertainment
Eleanor Catton has hit back after being accused of 'treachery' for criticising the government.
books
News
In humans, the ability to regulate the expression of genes through thoughts alone could open up an entirely new avenue for medicine.
science
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee