Though Cowards Flinch

As I reported here, Paul Myners, a Labour Lord, is on the case about  the government’s and the Bank of England’s mismanagement of Project Merlin.

On 3rd November he got a reply from Lord Sassoon, Commercial Secretary to the Treasury, to this written question:

To ask Her Majesty’s Government whether data reported in the most recent Bank of England report Trends in Lending have contributed to their assessment of Project Merlin’s performance.

Sassoon gave an entirely evasive response to what is essentially a yes/no question, apparently because he did not want to admit openly that the Bank of England had made absolutely no use of its own readily available data in Trends in Lending, but had relied solely on the five participating banks’ own data.

Myners clearly sensed something was amiss, so followed up with this written question:

To ask Her Majesty’s Government whether bank lending data under Project Merlin, as published by the Bank of England, is collected and produced according to the Bank’s Statistical Code of Practice; and, if not, what are the implications of this for the reliance that can be placed on the data.

On Monday 21st November, Sassoon gave this extraordinary response:

As the Bank of England make clear, the Project Merlin data that it collects are not gathered under the Bank’s Statistical Code of Practice.  However, the Governor stated that the Bank would perform a “light plausibility check” on the data (my italics).

The whole idea that the Bank of England, post-2008, should simply take the banks’ word for it is staggering enough, but that’s not the half of it….

It turns out that the term “light plausibility check” emanates from a letter from Mervyn King himself to Chuka Umunna, then shadow small business minister, and to Chris Leslie, shadow financial secretary to the Treasury.  King’s letter, according to the FT, seems to show that he had major doubts, even at that stage, about Project Merlin, and about the reliability of the data being used to monitor it.

This raises two issues.

First, it raises further doubts about the probity of the Prime Minister, who stated categorically at PMQs on 2nd November that:

the Merlin scheme… is actually seeing an increase in lending to small businesses. 

Either Cameron didn’t know that the Governor of the Bank of England had major doubts about the data being used, or he was content to ignore them. 

Second, if the opposition knew so early that Cameron was effectively lying at PMQs, why have they never raised the matter?  Did Chuka Umunna’s subsequent promotion lead to a loss of transfer or information, or is Labour simply biding its time?

In any event, Paul Myners is not letting up.  Today he asked further written questions of the embattled Sassoon (reply due by 6th December):

To ask Her Majesty’s Government what are the figures for bank lending to small and medium-sized enterprises, after eliminating the simple roll-over of existing credit facilities and netting-off loan repayments by qualifying companies; and what impact those figures demonstrate Project Merlin is having.  

To ask Her Majesty’s Government what action they propose to take in the light of the Bank of England’s Trends in Lending report for October 2011, indicating a continuing decline in business loans, including to small and medium-sized enterprises.   

To ask Her Majesty’s Government why lending reported by banks under Project Merlin differs from that reported by the Bank of England in its Trends in Lending; and whether they will ask the Bank of England to produce a reconciliation.  

The plot thickens, but from Sassoon’s answers to date, and from what we known of Mervyn King’s letter to Labour, it does look increasingly as though the government is trying to blame its skullduggery, and Cameron’s lie to the House, on the Bank of England, but that the Bank of England may be having none of it.