Page last updated at 17:11 GMT, Friday, 27 March 2009

Martha Kearney's week

By Martha Kearney
Presenter, BBC Radio 4's World at One

Bank Governor Mervyn King
Mervyn King's comments caused ripples around the world

In the wake of the credit crunch, many people have been yearning for the era when a twitch of the Bank of England Governor's eyebrow would be enough to make the banks fall into line.

Those days are long gone.

In fact this week Mervyn King did the political equivalent of streaking up and down Threadneedle Street with a sign round his neck reading "The End is Nigh".

In response, a lot more than eyebrows were twitching behind the scenes at No 10.

The governor's warning about a second fiscal stimulus may well have been one factor in the government's much less ambitious language about spending plans towards the end of this week.

Another reason was the failure of the gilt auction on Wednesday which must have raised the frightening possibility of the government being unable to finance its growing mountains of debt.

A third factor is the opposition to a large fiscal stimulus which Gordon Brown has encountered in the European Union.

On the day of the prime minister's visit to the European Parliament, I interviewed the German MEP Elmar Brok who echoed his leader Angela Merkel's criticism of Britain.

He expressed his anger by saying that if Brown continued to press for more spending, then the rebate which the British get from the EU budget would have to end.

There was blame too for the credit crunch which he said was the fault of the Anglo-Saxon model of light regulation.

So does that opposition mean that Gordon Brown will back away from any more spending?

I think not.

He and his chancellor keep quoting from Mervyn King's remarks which did allow for a "targeted stimulus" aimed at the labour market - very different from the VAT tax cut which affected everyone.

Budget clues

The prime minister gave a real clue about his Budget targets in his interview from Brazil with Nick Robinson.

He talked about mortgages, jobs and climate change.

I think we can expect a Budget with a "green" tinge but as I have written before, there is scepticism in the Treasury about whether any environmental measures can create jobs in the short term.

King's remarks dominated Prime Minister's Questions this week but the other big political story of the week didn't receive a mention.

But then MPs' allowances are probably far too close to home.

The former head of the Senior Salaries Review Body told us that MPs should no longer have control of allowances and that the right to claim for a second home should probably be take away from MPs whose seats are in outer London.

He believes that many of them don't realise the damage which is being done to the reputation of Parliament.

Inside Westminster and far beyond the main focus next week will be on Thursday's G20 meeting on which so much depends - not just for the global economy but also Gordon Brown's own political future.

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