No extra cash says bank boss
LABOUR’S borrow-and-spend economic recovery plans were dealt a shattering blow by the Governor of the Bank of England yesterday.
Mervyn King warned that soaring Treasury debt left little room for another massive injection of cash to boost consumer spending.
His remarks to a committee of MPs undermined the Prime Minister’s hopes of announcing another multi-billion “fiscal stimulus” in next month’s Budget.
Gordon Brown appeared to be isolated in his desire to pump more borrowed cash into the economy to counter recession.
The rift between Number 10 and the Bank of England follows a similar warning from Chancellor Alistair Darling that the Government has run out of cash.
Mr King told the Commons Treasury Committee: “The fiscal position of the UK is not one which says let’s go on another significant round of fiscal expansion.”
The Government has already tried pumping an extra £20billion into the economy, including £12billion with a temporary reduction in VAT. At the same time, the Bank of England has started expanding the money supply. Yet it has had little effect.
Mr Brown is understood to be pressing the Chancellor to unleash more cash in the Budget on April 22. But Mr King warned: “There is no doubt that we face very large fiscal deficits over the coming years. I think it would be sensible to be cautious about going further in using discretionary measures to expand the size of those deficits.”
The Governor’s intervention is likely to strengthen the Chancellor’s resistance to the PM. Mr Darling is understood to be concerned that borrowing is already high, leading to massive tax rises in the future.
Shadow Chancellor George Osborne said: “This is a defining moment in the political argument on the recession.” A spokesman for the PM said: “The Bank of England and the Governor have supported the action this Government has taken in the form of fiscal stimulus.”
