THE party that wins the election will be out of power for a generation because of the scale of spending cuts needed to slash Britain’s yawning £163bn budget deficit, according to Mervyn King.
American economist David Hale said the Bank of England governor told him the next government will jeopardise its political survival because of the severity of the fiscal tightening.
“I saw the governor of the Bank of England 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,” Hale said.
A spokesman for the Bank refused to say whether King had made the comments, although it is understood that he met Hale some months ago – not last week.
Hale cited the high debt levels of the major developed economies, including the UK, and then went on to comment on the election campaign currently underway.
At just under 12 per cent of gross domestic product for fiscal 2009-10, Britain’s budget deficit is approaching that of embattled Greece, which stood at 13.6 per cent last year.
But King has previously said Britain is much more secure because the average maturity of its government bonds is far longer than Greece and its economy is larger.
Sterling has also been hurt by opinion polls showing that the 6 May election could deliver a hung parliament and force the Labour Party or Conservatives to woo the Liberal Democrats into a rare coalition government.
Earlier this week, the Institute for Fiscal Studies said that the Conservatives would need to make the deepest sustained spending cuts since World War Two.
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