Upbeat Darling at odds with Bank governor

Thursday 18th June 2009

Alistair Darling has said he is confident the UK economy will return to growth in the new year, while the governor of the Bank of England has urged the government to grant him more regulatory powers.

Delivering his annual Mansion House speech, the chancellor said he was "confident, but cautious" recovery forecasts would be met at the turn of the year.

"If we remain vigilant to these risks, and take action wherever necessary, I am confident there will be a sustained recovery," he said.

"We need to learn the lessons from the events of the last 18 months, and make sure they are never repeated."

But Mr Darling's call for a "change in culture" in the City, a reference to accusations of short-termism in the Square Mile, was earlier given a different interpretation by Bank of England governor Mervyn King.

Mr King, who has repeatedly been at odds with the Treasury over the best way to shore up regulation of the financial markets, is seeking new powers for the Bank.

The governor likened the Bank to a church whose congregation of banks and investors "ignores its sermons".

He also called on the government to show how it intends to cut national debt in the long-term, although Mr Darling did confirm the sale of taxpayer shareholdings in part-nationalised banks would go towards cutting the debt.

On the regulation issue the chancellor said in his speech that he supported US president Barack Obama's sweeping reforms unveiled today, but gave short shrift to the notion of an European Union-wide regulatory authority.

The two men also disagreed on the best option for large banks, with Mr King calling for them to be broken down.

But Mr Darling later said the solution is "not as simple, as some have suggested, as restricting the size of banks".

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