MERVYN King is unlikely to repeat the mistakes of his predecessor.

In 1998 Eddie George, the former governor of the Bank of England, was quoted as saying that the haemorraghing of manufacturing jobs in the North-East was a fair price to pay for keeping inflation rates down in the South.

The comment caused uproar among the region's business community, and Mr George moved quickly to appease North-Easterners who felt they were losing their manufacturing jobs to keep the South's economy buoyant.

Mr King, speaking to The Northern Echo yesterday, was more diplomatic.

Yet some may say that the interest rate rises he has introduced this year have slowed house price growth in the South at the expense of the manufacturing renaissance.

Mr King is quick to reject that, instead saying that the North-South divide is no longer a major issue.

"The economic problems in the North-East are not so different from those facing businesses as a whole,rdblquote he says.

"Differences between the North-East and the rest of the country are at an historical low.

"The region does have a greater reliance on manufacturing and exports, but manufacturing is only 25 per cent of gross output as opposed to 20 per cent nationally.

"The big lesson in the last ten years is that firm control on inflation has led to a fall in unemployment everywhere - in every region in the UK.

"These are not alternatives. Keeping the economy stable goes hand in hand with the prosperity of every region in the country."

Mr King has been in the job for just over a year, and some City economists believed his appointment was a sign that Chancellor Gordon Brown wanted to see the bank taking firmer action to rebalance the economy. King is often described as an inflation hawk.

Next week, homeowners could face another interest rate rise when the monetary policy committee (MPC) meets on Thursday.

Mr King was giving nothing away about its decision, although he said he wanted to avoid surprises when the MPC made its decisions.

"Business will understand if they see the economy moving very rapidly, what needs to be done, and they can understand why we have made that decision," he said.

"The common misconception is that we are targeting house prices, but that is not our job. We are trying to maintain economic stability by targeting consumer price inflation.

"If house prices rise rapidly and people spend more, that will have an impact on our assessment on what is likely to happen to consumer spending in the future.

"At the moment, we do see signs of slowing down in the housing market, and consumer spending has slowed."

Mr King said the "boom and bust" economic patterns of previous decades were unlikely to return as long as inflation was kept in check.

"What happened in the past was that because inflation was allowed to rise to high levels in the 1970s - up to 27 per cent - the only way to get inflation back in control is to have a recession.

"We are instead looking at reacting to the business cycle, the moving around of the world economy, and keeping the economy stable."

Manufacturers have been slow to criticise the MPC's "softly, softly" policy of interest rate rises this year, because despite it having a negative effect on their businesses and curbing the upturn in the sector, many appreciate that a stable economy will allow them to thrive.

Spiralling British debt, which last year passed the 'a31trillion mark, could be seen as a threat to economic stability, but Mr King said the figure did not have "intrinsic significance" .

"One of the main reasons for higher debt is that house prices are higher and more money is being borrowed in the form of mortgages.

"For most people with unsecured debt, ie: credit cards or loans, they are earning enough to pay it back each month.

"People are much less vulnerable than they were in the early 1990s because interest rates are so much lower."

Despite his confidence about the buoyant economy, Mr King said he was uncertain about the future of the housing market.

"Most of the indicators have shown that there has been some slowing. The unknown fact is, will this slowing persist, will it slow and pick up again, or slow and slow even more? No one can answer that question.

"We would expect to see more slowing in consumer spending because it has grown rapidly in the last five years. But although it will slow, we don't expect it to decline.

"On the high street it was still buoyant earlier this year but services were much weaker and car sales fell off in the first quarter."

MPC members visit the regions before each month's meeting to talk to businessmen and get a feel for the economy, something introduced more recently by Mr King, possibly so the MPC could be more in touch with the regions than his predecessor's committee appeared to be.

Last night he addressed members of the North East Chamber of Commerce, visited Sunderland car dealership Reg Vardy, and Oxford Chemicals, on Teesside.

He is cautious about predicting any future interest rate rises, even until the end of the year, but says he will take the information he has gathered during his trip to the region and report back to the MPC on Wednesday and Thursday.