We let it slip, Bank governor Mervyn King tells unions

Bank of England governor Mervyn King has blamed financial firms and policy-makers for the economic crisis, admitting: "We let it slip."

Addressing the TUC's annual congress, Mr King told unions they were "entitled to be angry" about higher unemployment and the bail-out of banks.

He is only the second Bank of England governor to speak to the TUC in its 142-year history.

RMT union members staged a walk-out ahead of the speech.

The TUC congress, taking place in Manchester, has heard strong criticism of the Conservative-Liberal Democrat coalition's economic policies, with delegates voting on Monday for joint industrial action if "attacks" on jobs, pensions and public services go ahead.

On Wednesday, the congress also backed plans to set up a "shadow commission" to monitor the salaries of the highest-paid company workers, similar to that established by the government to look into public sector wages.

'Affecting everyone'

In his speech, Mr King told delegates: "Recent times have indeed been turbulent. After a decade-and-a-half of stability, with rising employment and living standards, came the crisis and recession - the biggest economic upheaval since the Great Depression.

"Before the crisis, 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.

"And although the causes of the crisis may have been rooted in the financial sector, the consequences are affecting everyone, and will continue to do so for years to come."

Mr King added: "An unprecedented degree of policy stimulus, here and abroad, prevented another world slump. Even so, around a million more people in Britain are out of work than before the crisis. Many, especially the young unemployed, have had their futures blighted.

"So we cannot just carry on as we are."

He also said: "Your members, and indeed the businesses which employ them, are entitled to be angry.

"But however legitimate, anger will not produce change unless its energy is harnessed to a cool analysis of what happened and why."

'Cost of crisis'

The governor called for more international co-operation to prevent a repeat of the crisis.

Deputy Prime Minister Nick Clegg has cited the governor's advice as having been key to his Liberal Democrat party changing its approach to spending cuts during the period in May when it was negotiating the coalition agreement with the Conservatives.

Mr King has denied that he passed any new information to Mr Clegg at the time.

However, some trade unionists blame him for helping to usher in a cuts programme they regard as unnecessary and counter-productive, but which ministers say is vital for safeguarding the UK's economic future.

In his speech, Mr King defended his comments, saying: "It is vital for any government to set out and commit to a clear and credible plan for reducing the deficit.

"And I would be shirking my responsibilities if I did not explain to you the risks of failing to do so."

He added: "The costs of this crisis will be with us for a generation. And we owe it to the next generation to seize this opportunity to put in place the reforms that will make another crisis much less likely and much less damaging.

"We at the Bank of England and you in the trade union movement should work together."

During the speech, several delegates held up placards saying "No Con-Dem Cuts", but Mr King received a short round of applause when it ended.

Afterwards, TUC General Secretary Brendan Barber said Mr King's recognition that workers were paying the price for a crisis that was not of their making was "welcome".

But senior GMB official Paul Kenny said Mr King had "failed" to condemn excessive risk-taking in the banking system when it was at its height.

"The truth is that he presided over the Bank of England and he never spoke out when he should have done, he said.

'Persuasive points'

In a question and answer session, Mr King was asked whether too many wealthy people were avoiding paying taxes and whether more should be done to combat this.

Mr King replied that it was not his responsibility as governor, but added, to laughter: "I hear your points and they seem persuasive."

He said there was "plenty of room for disagreement" on how the budget deficit, which was £155bn last year, should be reduced, and urged delegates to "come up with an alternative plan".

Earlier, RMT leader Bob Crow told BBC Radio 5 live: "I'm not going to listen to Mervyn King at our congress. I'm all in favour of listening to Mervyn King after we finished but I believe it is to decide our own policy, our own platform and this is our opportunity to listen to workers."

The only other occasion on which a Bank of England governor has spoken to a TUC congress was in 1998, when Eddie George did so.

No member of the government will address the gathering this year. Prime Minister David Cameron turned down an invitation because it would have clashed with his paternity leave.

Business Secretary Vince Cable had been due to attend but his invitation was withdrawn in July.

Meanwhile, Mr Cameron's unions envoy, Richard Balfe, has urged the government to treat workers who lose their jobs as a result of cuts in a "humane" way, with ministers "listening and empathising".

He told the Guardian newspaper that many posts could go as a result of "natural wastage", adding that the coalition's plans did not amount to "cutting the state to nothing".