King lacks the firepower, it’s up to Brown

SO now we know why the Bank of England went as far as it did last week — and why talk of a further cut in interest rates is not pooh-poohed by anyone in authority.

Things, to put it mildly, are dreadful. But there's also a worrying sense today of a Bank that has been caught unawares and doesn't have enough in its locker to throw at the problem.

Yes, as the Governor Mervyn King says, "we have seen the biggest banking crisis since World War One" but it's more than a year since Northern Rock hit the buffers and it was a safe bet back then, that it would not be the last. The Governor is making excuses and there are plenty of City organisations where excuses are often regarded as simply not good enough. Only in August, don't forget, the Bank was forecasting "broadly flat" economic growth — this at a time when Bear Stearns had already capitulated and Lehman was on the ropes.

For the Bank to predict the recession may be short and sharp, welcome as that is, does not lift the spirit in the way it would once have done — there's no question the Bank has lost some of its kudos in the last few months.

That impression is reinforced by King's admission that monetary weaponry on its own isn't enough. He's virtually pleading with the Government to step in and use fiscal measures.

The pressure on Gordon Brown to act, to use the forthcoming pre-Budget report to make tax cuts is intense. What began life as the Treasury's forewarning of the main event in the spring has now become very important indeed. This year's PBR carries the hallmarks of being the most significant speech from a Chancellor in recent years.