PM's office denies split with Bank

LONDON (Reuters) - Fiscal stimulus is not the only weapon available to fight the economic crisis, a spokesman for Prime Minister Gordon Brown said on Wednesday, seeking to downplay differences with Bank of England Governor Mervyn King.

“I don’t recognise the reports of a split,” the spokesman said when asked about relations between the government and the Bank of England.

“In the discussions that the prime minister is having about the G20 with other world leaders this week, we are also talking about other measures G20 governments can take to stimulate their economies including through monetary policy and through intervention in financial markets,” he added.

King told a parliamentary committee on Tuesday that the government’s burgeoning budget deficit meant it would have to be cautious about any new fiscal stimulus package to boost the economy.

The timing of the comments was awkward for the government, coming before next week’s G20 summit of world leaders at which the United States, with British support, is expected to push for further stimulus measures.

Related Coverage

It also risks limiting the government’s room for manoeuvre in its April 22 budget.

Brown told the European Parliament on Tuesday he was confident the G20 would do “whatever it takes” to create growth and jobs. He is now in New York and will also visit Brazil and Chile in the run-up to the G20.

In Brown’s absence, opposition parties taunted deputy Labour leader Harriet Harman over King’s comments in parliament.

Vince Cable, finance spokesman for the small opposition Liberal Democrats, said the Bank of England had carried out a “very British coup d’etat,” taking control of economic policy.

Harman responded by saying that King had backed a 20 billion pound stimulus package introduced by Britain last November.

There have been reports of divisions between the prime minister and Treasury over how much more stimulus to introduce in the budget, with the Treasury seen as nervous over the size of the budget deficit.

“The chancellor will take the necessary decisions in the budget on fiscal stimulus,” Brown’s spokesman said.

The spokesman said intervention in the financial markets included “doing what we can to assist lending from and between financial institutions, so that includes schemes like the asset protection scheme.”

The asset protection scheme is the government’s insurance scheme for bad assets designed to clean up balance sheets.

“It is for each government to decide what is appropriate for its own economy, according to its own circumstances. We have done what is right for the UK economy, the challenges that our businesses face and our families face in the UK and other governments will do the same for theirs,” he told reporters.

Reporting by Frank Prenesti; Editing by Keith Weir