The Coalition's Plan B for the economy: the Bank of England

Plan B? The Bank of England (Photo: DANIEL JONES)

A lot of debate these days about what the Coalition will do if the economy nosedives. Will George Osborne give ground and water down his spending cuts? Despite contrary hints from Chris Huhne, Mr Osborne has insisted he's not for turning, that there is no Plan B.

Or does he? Listen closely to comments from Mr Osborne and, this morning, Vince Cable, and you'll hear that ministers are happy to discuss an alternative source of additional stimulus if the outlook darkens. And that alternative is the Bank England's Monetary Policy Committee.

This morning on Radio Four, Mr Cable said there are alternatives: "There's an opportunity to use monetary policy to stimulate demand."

Last week, Mr Osborne told the same station: “There is of course the freedom for the Bank of England to deploy monetary policy tools as well.”

Which strike me as fairly clear messages to the BoE not to be too quick to put rates back up or to rule out another dose of quantitative easing. The Bank may be politically independent, but I'm sure those messages have been heard loud and clear on Threadneedle Street.

What makes this all the more interesting because CPI inflation remains well above the Bank's 2 per cent target, a target, let's remember, set by Government. So on one hand, ministers tell the Bank to bring inflation down. And on the other, they tell them to keep the monetary throttle wide open. Who would want Mervyn King's job these days?