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.”