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King says deficit reduction plan is “vital”

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Bank of England governor Mervyn King has reiterated his support for the Government’s deficit reduction plan in front of the country’s trade unions, saying it is “vital” that cuts are made.

Speaking at the Trades Union Congress conference in Manchester today, King said: “I would be shirking my responsibilities if I did not explain to you the risks of failing to commit to a clear and credible plan for reducing the deficit.”

King also told delegates that the only way to reduce the 11.6 per cent GDP deficit will be to increase the national savings rate and shift spending and production away from consumption and towards exports.

He said: “We cannot just carry on as we are. Unless we reform our economy – rebalance demand, restructure banking, and restore the sustainability of our public finances – we shall not only jeopardise recovery, but also fail the next generation.”

King admitted that trade unions and business are “entitled to be angry” about the financial crisis, but urged their anger to be “harnessed for a cool analysis of what happened and why”.

He said: “Before the crisis, steady growth with low inflation and high employment was in our grasp. We let it slip – we in the financial sector and as policy-makers.

“We owe it to the next generation to seize this opportunity to put in place the reforms that will make another crisis much less likely and much less damaging. It will require patience and determination on all our parts, including your members. But the prize of restoring and maintaining economic stability and a return to sustained rises in employment and living standards will be worth the effort.”

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There are 5 comments at the moment, we would love to hear your opinion too.

  1. And do you really think that the unions will take any notice at all. They have been building their war chest for a number of years now and are looking for a fight. This is the perfect excuse for strike action when their members have unaffordable pensions and firms whether government or private need to streamline their departments to survive. I see a very uneasy next year or so with militant unions not prepared to take a step back and work for the long term benefit of their members but try and maintain the status quo which cannot be maintained. Strikes, strikes and more strikes on the horizon! Remember what happened to the miners?

  2. Mervyn King is right the road ahead will be hard but the effort to rebalance our economy to one of more exports and manufacturing will be well worth it. It’s interesting to note that even as early as 2005 Mervyn King was quoted as saying that our economy was to over reliant on Banking and property but the Labour Party chose to ignore these warnings and as the Bank of England back then was powerless to do anything.

    Although getting our budget under control is vital to future success we also need to hear is more hope and aspiration of what the future will look like. It’s so easy to get caught up in the doom and gloom of the present when there is no leader to show you what the future will look like. I personally believe that people will show more support to his necessary changes in our economy if we had a bit more leadership and aspirations given by our political leaders and indeed the media.

  3. We all know that the cuts absolutely must be made but as always; when they affect you directly, you aren’t so accepting. This is true of the public sector attitude but I’m afraid that the time has come for them to suffer the way that the private sector has had to. It is quite horrible but as King says; vital. Simon Chalk Later Life Planner – LaterLiving

  4. We may be heading for another Labour winter of discontent, only this time Labour won’t be in office to handle it. Instead, they’ll just be throwing stones from the other side of the house and saying it’s all the fault of the current government for cutting too hard and too fast. Never mind that Labour got us into this mess in the first place.

  5. I think its time to take control back from the central banking system and denounce their pernicious methods of imposing poverty. All that we have recently witnessed is nothing more than a repeat of the events that led up to the great depression.
    There are far better solutions and they begin with eliminating usury and switching over to mathematically perfected economics.
    The city of London has become the enemy of people and a parasite to most of the world, a place that for too long has lived of the energy of ordinary people. Continued servitude to a system that was designed to concentrate power into the hands of the few is the surest way into another war and I am sure that all those that read this are well aware of the re-emergence of that place of watch towers, walls and barbed wire.

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