King tellsTUC thatbankingbail-outwas unfair

Mr King told the TUC Congress in Manchester yesterday that he understood the strength of feeling over the size of bankers’ bonuses and said “radical reform” of the UK’s financial system was needed.

The 62-year-old faced minor protests from some banner-waving delegates and a walkout by the Rail, Maritime and Transport Union delegation, who retreated to their exhibition stand to watch children’s TV.

He was also told bluntly that bankers were “greedy bull********” and that he had failed in his job.

As he waited to speak, delegates called for a high pay commission to investigate the “out of control” wages of executives and other high earners.

The Communication Workers Union said a commission should examine the difference between the highest and lowest pay in leading companies.

General secretary Billy Hayes said: “The blatant double standards in pay for those at the top of companies compared to those at bottom is outrageous and leads to dissatisfaction and a divided society of haves and have-nots.”

During his 20-minute speech, only the second by a Bank of England governor to the TUC Congress, Mr King warned that the Government risked plunging the UK back into crisis if it did not reduce Britain’s record deficit.

Amid union fury over next month’s planned public sector spending cuts, the central bank boss said “vague promises would not have been enough”.

Mr King said he believed it was vital the Government set out a clear plan for reducing the deficit and warned that the UK could otherwise have suffered the kind of woes seen in Greece.

“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 said.

But he told delegates they were “entitled to be angry” as he admitted the financial sector and policymakers were to blame for the financial crisis that had landed the UK with the largest peacetime budget deficit in its history.

Regulation of banks needed to improve and poorly performing banks should be allowed to fail, without risk to depositors or taxpayers, he said.

“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. So banks too must face market discipline.”

Mr King said there was a “perfectly reasonable debate” about the speed at which to reduce the UK’s financial deficit and said the onus was on critics to come up with a better way.

Mr King said in a question and answer session that he had “enormous sympathies” with public anger over bank bonuses, adding: “I understand the strength of feeling. In fact I am surprised it has not been expressed more deeply.”

He agreed it was hard to understand how the City could start paying big windfalls again just two years after the taxpayer bailed out the sector.

But he said the country needed to address the root cause of why banks felt they were able to pay such large bonuses to take risks rather than ban payouts.

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 tackle the 120bn of uncollected tax revenues as well as go after the “criminals” engaged in massive tax evasion.

Mr King said the Bank of England was not involved in tax collection, but he added: “I hear your points and they seem persuasive.”

In a following debate, GMB president Mary Turner said: “Mervyn, if you want to know what went wrong I can tell you – the bankers are greedy bull********.”

TUC general secretary Brendan Barber said later: “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.”

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