Bank governor's Conservative critique exposed in US cables

Hague tries to limit the damage

The governor of the Bank of England was urged to quit after it emerged he privately criticised David Cameron and George Osborne in the run-up to the general election.

Mervyn King confided to the US Ambassador to London, Louis Susman, in February that he had "great concern" about the then Leader of the Opposition and shadow chancellor.

Mr Cameron and Mr Osborne, now Prime Minister and Chancellor respectively, lacked experience and tended to view issues merely in terms of their electoral impact, he said.

At pre-election meetings with them, Mr King had pressed the two men for more details about how they planned to reduce the UK's deficit.

He thought they had failed to grasp the pressures they would face to cut spending, the governor told Mr Susman.

His comments - which were relayed to US Secretary of State Hillary Clinton - were revealed in the latest tranche of US embassy cables obtained by WikiLeaks.

They are embarrassing for Mr Cameron and Mr Osborne and threaten to damage the Government's relations with the governor.

A former member of the Bank of England's interest rate-setting monetary policy committee today accused Mr King of compromising Threadneedle Street's independence.

Professor David Blanchflower, who stood down from the MPC in May last year and has clashed with Mr King before, said the governor had a "thirst for power and influence" which had "clouded his judgment one too many times".

"He has now committed the unforgivable sin of compromising the independence of the Bank of England," he added.

"He is expected to be politically neutral but he has shown himself to be politically biased and as a result is now in an untenable position. King must go."

Prof Blanchflower said the leaked cable showed that Mr King had attempted to "co-author the coalition's strategy on the deficit", adding: "That is definitely not part of his job description."

Labour MPs also seized on the governor's remarks as evidence that he had doubts about the Tories' deficit-reduction strategy.

Chuka Umunna, a parliamentary aide to Labour Leader Ed Miliband, said: "Ministers parrot lines wrongly claiming Labour had no plan for deficit reduction, but now we learn the Bank of England governor had grave concerns that it was they who lacked a plan."

The leaked cable showed how Mr King told the US ambassador that Mr Cameron and Mr Osborne "had a tendency to think about issues only in terms of politics, and how they might affect Tory electorability".

"King expressed great concern about Conservative leaders' lack of experience," Mr Susman said in his classified cable to Mrs Clinton.

The governor "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", he added.

A Bank of England spokesman said today: "The governor has a very effective working relationship with both the Chancellor and the Prime Minister."

Mr Cameron's spokesman said the governor was doing a "good job" but refused to respond to questions about whether the Prime Minister had confidence in Mr King.

"The issue of confidence simply doesn't arise," the spokesman said.

Tory MP Patrick Mercer said the governor should be kept in his job as an "experienced hand" at a difficult economic time, even if his independence had been compromised.

"The last thing I think we need at the moment is, first of all, the independence of Mervyn King to be compromised," he told BBC Radio 4's The World At One.

"Well, that might be the case - but the last thing is he must not go: we need him here because he is a firm, steady, experienced hand on the tiller."

Shadow Defence Secretary Jim Murphy said: "There has got to be this sense of independence and that has been called into question so he has to work even harder now to demonstrate that."

The row comes as WikiLeaks founder Julian Assange was confirmed to be on Interpol's wanted list over rape allegations made against him in Sweden.

Mr Assange is wanted by prosecutors on suspicion of rape, sexual molestation and unlawful coercion.

He denies the allegations and his lawyer London-based lawyer, Mark Stephens, said yesterday they were investigating whether the Swedish case was linked to recent US pledges to prosecute those behind the leaks of the diplomatic cables.

Foreign Secretary William Hague insisted Pakistan remained "an important partner" for the UK after leaked diplomatic documents risked damaging relations with Islamabad.

US embassy cables published by WikiLeaks laid bare UK concerns, raised by Defence Secretary Liam Fox with US Ambassador Louis Susman last year, about Pakistan's nuclear arsenal.

Pakistan's high commissioner to the UK, Wajid Shamsul Hasan, acknowledged the potential damage. He said: "It's top secret, it's classified, it harms the relationship."

He has committed the cardinal sin of compromising the independence of the Bank of England.

Grace Hammond

PUT ON THE SPOT: David Cameron at Prime Minister's questions yesterday; a spokesman refused to confirm whether he had confidence in the governor of the Bank of England.