Mervyn King yesterday became only the second Bank of England governor to address the TUC, condemning the lavish bonuses still being paid in the financial sector and telling union activists they had every right to be angry over the damage bankers had inflicted on the economy.
He warned that the after-shocks of the banking crisis would be with the country for a generation and argued that there was no alternative to tough action to cut the national deficit.
Mr King faced only muted protests when he addressed the TUC conference in Manchester, apart from a walkout by members of the left-wing Rail Maritime and Transport (RMT) union. During his address some delegates wore T-shirts reading "Make Bankers Pay" and held up banners with the slogan "No to ConDem Cuts".
In a conciliatory speech Mr King said trade unionists were "entitled to be angry" over the position in which the country had been left, accepting that the blame for the financial crisis lay squarely with risk-taking financial institutions and policymakers.
He told delegates he had "enormous sympathies" with public anger over bank bonuses and added: "I understand the strength of feeling. In fact I am surprised it has not been expressed more deeply."
Mr King said people did not object to business leaders being well rewarded as long as it was deserved. But he added: "When large bonuses are paid to people in organisations that only two years earlier were bailed out by the taxpayer it becomes somewhat harder to understand."
Mr King acknowledged the sense of injustice repeatedly expressed by union leaders over the huge sums spent on saving the banks when large companies did not benefit from similar support.
"In 2008, banks were bailed out not to protect them but to protect the rest of the economy from the banks. That may not seem fair – and it isn't – when other companies, such as Jaguar, had to stand on their own feet or go to the wall," he said.
Mr King backed the Coalition Government's rapid action to reduce the deficit, arguing that without it Britain would have suffered a Greek-style economic meltdown.
"As a result of a failure to put such a plan in place sooner, some euro-area countries have found – to their cost – a much more rapid adjustment being forced upon them," he told the conference in Manchester.
He added, however, that deciding the exact balance between spending cuts and tax increases should be left to the politicians.
Janice Godrich, president of the Public and Commercial Services union, asked Mr King if he agreed that more should be done to close tax loopholes and go after the "criminals" engaged in massive tax evasion. He replied: "I hear your points and they seem persuasive."
In the debate following his speech, which was greeted with polite applause, the GMB president, Mary Turner, said: "Mervyn, if you want to know what went wrong I can tell you – the bankers are greedy bullshitters."
The TUC general secretary, Brendan Barber, said afterwards: "Congress clearly welcomed the governor's strong condemnation of the culture of bonus excess and his clear recognition that the crisis was caused by banking boardrooms. We have to disagree over the timetable for reducing the deficit but delegates were impressed with his willingness to engage."
Paul Kenny, the GMB general secretary, said: "His analysis of the excesses of the banking system reminds me of Jessie James warning people in the Wild West about the dangers of train robberies."
Bob Crow, the RMT general secretary, said: "Delegates want to hear from the people suffering from this economic crisis, not waste time being lectured by the people who created it."
A Unite spokesman said: "The governor acknowledges that the banks are not yet under control. This is a message he needs to take to George Osborne, not the TUC."Reuse content