Mervyn King: Election winner will lose power for 30 years
Paul Waugh, Deputy Political EditorStandard co.uk 29.04.10
Public anger over coming austerity cuts will be so severe that whoever wins the next election will be out of power for a generation, Bank of England governor Mervyn King has warned.
American economist David Hale revealed today that Mr King had confided privately that David Cameron, Gordon Brown and Nick Clegg would face a long-lasting backlash as they squeezed public spending to balance the nation's books. A generation is regarded as being 30 years.
Warning: Mervyn King said that public anger over austerity cuts would affect British politics for a generation
Mr Hale told Australian TV of the remarks when he was today asked about the possible contagion to the UK from Greece's sovereign debt crisis.
He cited the high debt levels of the major developed economies, including Britain, and went on to comment on the British election campaign.
“I saw the governor of the Bank of England [Mervyn King] last week when I was in London and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be,” Mr Hale said.
The Bank of England refused to comment on the claims, but it is understood that the conversation took place in March rather than last week.
The Institute for Fiscal Studies said this week that all of the three main political parties were not being clear with voters over the scale of the cuts needed to get Britain's £167 billion deficit under control.
Among the measures that experts have warned will be needed are public sector pay cuts, frozen benefits, abolition of winter fuel payments and free TV licences for the elderly, VAT rises and a delay of Crossrail. Police and teachers' numbers could be cut and tax credits withdrawn.
The revelations of Mr King's warning came as a leading American academic who forecast the US recession predicted that Britain could soon become embroiled in a Greek-style fiscal crisis. Nouriel Roubini, a New York University professor, said the bond markets were beginning to move against the UK. He told Bloomberg: “The bond vigilantes are walking out on Greece, Spain, Portugal, the UK and Iceland.”
Ahead of tonight's crucial televised election debate on the economy, Labour and the Tories were at loggerheads over the lessons from the Greek crisis.
Labour was boosted by 100 economists praising its stance on the deficit, claiming that to cut spending this year would harm the fragile recovery.
But shadow chancellor George Osborne seized on a new letter from 50 businessmen warning of the dangers of a Lib-Lab coalition.
The entrepreneurs said that the Lib-Dem plans to raise capital gains tax were as bad as Labour's national insurance rise.
Mr Osborne said: “This warning from some of the most successful entrepreneurs that Liberal and Labour policy will make matters worse should be heeded.
“It is the Conservatives who understand that in order to create jobs we need to grow business and allow new businesses to be created.”
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