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How did he do then? We evaluate Mervyn King's time in charge of the Bank of England
It’s the end of an era for the British economy. Mervyn King has spent 10 years in charge of the Bank of England and another five as deputy governor. But how did he do? We rate his performance.
Sir Mervyn King has just finished chairing his last ever interest rate setting meeting as part of the monetary policy committee and retirement beckons for the Bank of England governor.
As King plans a life of leisure on his near £200,000-a-year pension, we thought the time was right to take a look at his time in charge of the Old Lady of Threadneedle Street – so here’s his scorecard:
Commitment to the job: A
The lad from Wolverhampton, who went on to become a well-respected global economics professor before joining the staff of the Bank of England in 1991, will be remembered for his hard work. As chief economist he was expected to deliver the Inflation Report to the market every quarter, however he kept up this commitment even after he became deputy governor in 1998 and presented each report as Governor from 2003. Over the last five years these have not been easy reports to deliver. But he’s not hidden behind his chief economist even when he’s had to tell the public they have to deal with persistent above-target inflation and weak growth. For this reason he gets top markets for commitment to the job.
Communication skills: B
While we respect his decision to deliver the Inflation Report himself, his delivery methods left a lot to be desired. King is noted for his gloomy delivery style. In the last five years I believe he only cracked one smile – when he had finished delivering his last report and even threw in a joke. His smile to frown ratio is well out of whack. If your own central banker sounds depressed at the economic outlook it is unlikely to boost consumer or economic confidence. Although we appreciate the fact he didn’t sugar-coat the truth as he saw it, King could have found different ways to deliver less upbeat messages. From what we’ve seen so far Mark Carney is quite smiley, which we like.
[What we know: Mark Carney’s plans for our economy]
Performance: C
Unfortunately the last five years really dragged down King’s grades regarding economic performance. Inflation is too high and growth is too low. Despite some recent positives, the UK’s recovery looks extremely sluggish especially when compared with the US and Japan. The Funding for Lending programme, a joint venture between the Bank of England and the Government, was a good idea, but, so far, it has been a damp squib. If the central bank can’t get banks to lend, then who can?
Voting record: B
Since last five years have been a tough environment to be a central banker, we should probably judge King on his chairmanship of the monetary policy committee. Of late, he has been out-voted when calling for more quantitative easing. In the past, King has also voted for action, but ultimately been knocked down by his fellow committee members who voted against him. Is this a good or bad thing? It’s good that King doesn’t seem to bully other members, allowing them to vote based on their own conscience, however, the head of a central bank needs to be persuasive and his view should also hold weight. We are undecided on this one, as there are pros and cons regarding his voting record.
Value for money: A
King is one of the cheapest bankers in the City, earning £305,000 a year. Added to this he refused a pay rise in 2010 and 2011, in contrast to some in the financial industry. While £305,000 is a hefty sum, it is lower than ECB head Mario Draghi and is dwarfed by the salary being paid to his successor, Mark Carney. He will be taking home a basic salary of £480,000 a year.
Overall: B +
Mervyn gets a B + from us for his time in office, which is not bad considering he had to steer the UK’s economic ship through rough seas in recent years. The market will remember Mervyn as an upright man, who didn’t play to the cameras and who said it like was. Added to that he gets top marks for being value for money for the British taxpayer.
King is leaving the BOE on a “high”, the UK managed to avoid a triple dip and its growth forecast for this year was actually revised higher by King in his final Inflation Report in mid-May. If the economy can stick to this path, perhaps he will be remembered even more fondly in future years.
Kathleen Brooks is author of Kathleen Brooks on Forex, published by Harriman House.
