King 'in unholy alliance' with Tories

Friday, 26 June 2009 12:00 AM

By politics.co.uk staff

Mervyn King has been accused of entering into "an unholy alliance" with the Conservatives, in a new low in his relationship with government.

The Independent has reported that an unnamed Cabinet source believes shadow chancellor George Osborne has appealed to Mr King's "vanity", and convinced him to undermine Treasury plans.

"King is fighting a turf war with the FSA," the source said.

"The Tories are flattering him, appealing to his vanity and using him to play politics."

Tory HQ is understood to believe the quotes came from business secretary Lord Mandelson.

Chancellor Alistair Darling is understood to be considering beefing up the powers of the Financial Services Authority (FSA) in an effort to limit the Bank of England's power.

The body will be given the task of maintaining financial stability under the new Banking Act, a responsibility currently entrusted to the Bank of England.

Tension between Mr King and the government centres on his belief that there is a lack of strategy for getting public debt to a manageable level.

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