Mervyn's message to the unions
"You can (partly) blame me for the recession - but don't blame me for spending cuts."
In effect, that was Mervyn King's message today for the TUC. "Before the crisis", he said, "steady growth with low inflation and high employment was in our grasp. We let it slip - we, that is, in the financial sector and as policy-makers - not your members nor the many businesses and organisations around the country which employ them."
Perhaps his aides will correct me, but this is the first time I can remember the Bank governor taking some responsibility for the crisis. When he went on to outline the key causes of the crisis, we didn't hear anything that he thought our central bank had done wrong. But it's a nice line. And it was probably wise to start with some humility, given that other parts of his speech were not going appeal to the people assembled in the hall.
"Although a large budget deficit is inevitable for a period after a crisis, it is also clearly unsustainable - our national debt, even relative to GDP, is rising sharply and will continue to do so for several years. It is vital for any government to set out and commit to a clear and credible plan for reducing the deficit. I would be shirking my responsibilities if I did not explain to you the risks of failing to do so."
There was little new in Mr King's argument, but he was even more keen than usual to distance himself from the details of the government's deficit plans, stressing that there was a "perfectly reasonable debate" to be had about the precise speed at which to cut the deficit, and the balance between tax rises and spending cuts. "That is not for me to say; that is for you and the politicians to debate," he said. He did this again in the question and answer, repeatedly dodging questions about spending cuts and their impact on different groups.
This is understandable - and, again, wise, given the audience. But Mr King cannot wash his hands of the coalition's decisions entirely.
For months, leading up to the crisis, he suggested that Labour had not put forward a "credible plan" for cutting borrowing. Then, days after the election, when the coalition agreement was published, he said publicly that its deficit reduction plan was "strong and powerful", and that £6bn in spending cuts this year were a "sensible" start.
The Governor justified his statement at the time, saying that the coalition had asked him to comment, to reassure the financial markets. That may all be right and true. But it was still a highly political intervention, which many took as further evidence that he had been on Mr Osborne's side of the argument all along. If so, his speech today suggests that he still is.
He states baldly that "monetary policy is the best tool for managing the economy in the short run". There is no reference to the possibility - much discussed by the likes of Paul Krugman - that monetary policy could be a less reliable tool today, in the aftermath of a financial crisis (see my posts last week on the case for and against austerity). He also suggested that the government's plan to reduce the deficit is a "more gradual fiscal tightening than in some other countries". That is factually accurate but a little disingenuous.
In fact, there is no major economy planning to cut its deficit by as much as the coalition over the next five years. Naturally, that is because there is no major economy starting out with a deficit as large as ours. But that doesn't make the government's schedule any more gradual.
True, Greece and Ireland plan to cut their deficits more quickly. But these are countries that have been forced - as Mr King admits - into faster cuts by pressure from the financial markets. Perhaps we would have been forced to do the same thing, if Mr Osborne had not stepped up to the plate. But if so, that is a judgment which Mr King shares with the Chancellor. It is not a statement of fact.
Mr King spoke clearly and passionately about the wrongs of the banks and how the financial sector needs to be fixed. He also mentioned several times that the crisis - and the response to it - had not been fair. Perhaps that is why fewer than expected walked out of the hall.
In the circumstances, he was clearly right to accept the invitation to become only the second Bank of England Governor to address the TUC in nearly 150 years. But I wonder whether they will invite him again.