Diplomatic memos reveal Bank governor thought top Conservatives lacked experience to deal with deficit
Mervyn King told the US ambassador, Louis Susman, he had held private meetings with the two Conservative politicians before the election to urge them to draw up a detailed plan to reduce the deficit.
He said the pair operated too much within a narrow circle and "had a tendency to think about issues only in terms of politics, and how they might affect Tory electorability". He also predicted that economic recovery would be "a long drawn-out process", since Britain had not been through an economic restructuring.
His apparent pressure on the Tories, a few months before the election, gives further credence to the claim that King was central in persuading leading coalition figures to back a far more dramatic deficit-reduction programme than any politician advocated during the election campaign. He has recently been criticised by members of the Bank's monetary policy committee for straying into politics.
The cables released today also disclose:
• Internal Tory polling found Osborne lacked gravitas with the public, partly due to his "high-pitched vocal delivery". As a result, Cameron, not Osborne, made the special address on the economic crisis to the party conference in the autumn of 2008.
• The defence secretary, Liam Fox, told the Americans that the Tories would be tougher on Pakistan because they were less reliant on votes from the Pakistani community than Labour.
• King believes Europe's sovereign debt crisis will accelerate political union. "Leaders in Germany and France have recognised that allowing monetary union to happen without corresponding political cohesion was a mistake and one that needed to be rectified," King told American diplomats.
• The Liberal Democrats' two top strategists, Polly Mackenzie and Chris Saunders, now both working in government, planned to run a fierce anti-Cameron election campaign, describing him as "out of touch with real life". The death of Cameron's son Ivan forced them to drop the plan since it "eliminated these vulnerabilities".
• Referring to Muslim extremists in Britain from Pakistan, Cameron told the Americans at a meeting in April 2009 that under Labour "we let in a lot of crazies and did not wake up early enough".
There is a broad expectation that the governor of the Bank of England will behave with political neutrality, and will not seek to interfere directly in macro-economic policy, the preserve of the Treasury and politicians. Yet the cables reveal he pressed Cameron for details of his deficit plan.
"King expressed great concern about Conservative leaders' lack of experience," Susman wrote in his classified dispatch to the US secretary of state, Hillary Clinton, after his 16 February meeting with the governor. "[He] opined that party leader David Cameron and shadow chancellor George Osborne have not fully grasped the pressures they will face from different groups when attempting to cut spending.
"In recent meetings with [Cameron and Osborne], he has pressed for details about how they plan to tackle the debt but received only generalities in return. Both Cameron and Osborne have a tendency to think about issues only in terms of politics and how they might affect Tory electorability.
"King also expressed concern about the Tory party's lack of depth. Cameron and Osborne have only a few advisers and seemed resistant to reaching out beyond their small inner circle."
In a section headed "Conservatives: not prepared", the ambassador said King had stated that "hundreds of government officials will make pleas of why their budgets should not be reduced".
A Bank spokeswoman responded tonight: "The governor has a very effective working relationship with the prime minister and the chancellor."
King's defenders would argue he was not seeking to press the Conservatives to follow a specific deficit path, but given the state of the markets it would be legitimate for him to ask them to put detailed plans in place. Arguably this scepticism over the ability of Osborne and Cameron to press ahead with a strong deficit reduction plan has proved unfounded since they have announced a programme far more ambitious than expected.
King told Susman he had fears the "Cameron/Osborne partnership was not unlike the Tony Blair/Gordon Brown team of New Labour's early years, when both worked well together when part of the opposition party, but fissures developed – for many reasons – once Labour was in power. Similar tensions could arise if Cameron and Osborne disagreed on how to handle the deficit, and the lack of depth in their inner circle would aggravate the situation."
The governor was gloomy about economic prospects, Susman reported. "It was hard to be optimistic about recovery in 2010," King argued, and noted "a double-dip recession was still a possibility".
It is known that King, in the wake of the coalition's formation, played a role in persuading the Liberal Democrat leader, Nick Clegg, that major steps were needed to prevent bond traders pulling the plug on the British economy after the collapse of confidence in other debt-ridden countries, such as Greece.
Accounts of the coalition negotiations have also revealed that Osborne, in his talks with the Lib Dems, said he had the support of King for his deficit programme. But it is the first time it has been revealed King pressed for a detailed plan.
The cables also reveal King was not the only source of disobliging remarks about the Tory leadership, according to Susman.
The rightwing Conservative MP for Sevenoaks and now Conservative deputy chairman, Michael Fallon, also confided his doubts to US diplomats.
His remarks were detailed in a cable sent in October 2008 titled: "Conservative party caught flat-footed by Brown's quick manoeuvres on financial crisis, says senior Tory MP".
It stated: "The Tories' response to the crisis has been regrettably tepid … The Conservative party felt the absence of a strong shadow chancellor and the party's counter-proposals to Labour's plans have been 'all over the place'. Fallon particularly criticised Osborne's op-ed piece in the October 28 Daily Telegraph as a 'weak', almost laughable, response to the economic crisis."
Mark Tokola, the embassy's economic minister at the time, concluded: "Fallon's comments to us reflected Conservative frustration – and some grudging admiration – for prime minister Brown's skill in seizing the high ground during the economic crisis.
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