Bank of England governor Mervyn King lent his support today to the government's austerity plan, which has come under increasing attack as Britain's economy teeters on the brink of recession and unemployment soars.
The Conservative-led government is slashing public spending over the next four years to help erase a record budget deficit that peaked at more than 10 per cent of national output. The cuts include axing an estimated 400,000 public sector jobs.
Presenting the BoE's latest quarterly forecasts which showed a sharply lower outlook for growth and inflation, Mr King said Britain was on the right path to deal with its debt and rebalance its economy with a combination of fiscal austerity measures and a 25 per cent fall in sterling's exchange rate.
"This is exactly what one would think of as the right macroeconomic response to the position in which we found ourselves. And I think we have to be patient now."
Ministers have said there is no "Plan B" to soften austerity should the economy go into reverse, but they are under pressure to find ways of boosting growth and staunching a rise in unemployment, which hit its highest rate in 15 years in the three months to September.
Britain's finance ministry said the bank's forecasts reinforced the case for taking steps to put the economy back onto a stable footing.
"The Government is doing all it can to protect the UK economy and make sure that it remains a relative safe haven in the face of international instability and uncertainty, whilst also putting in place the longer term conditions needed for strong and sustainable growth," said a Treasury spokesman.
The opposition Labour party and some leading economists argue that spending cuts are choking the life out of the economy.
Mr King's comments, which spell out a long and tough road to Britain's recovery, may revive accusations of partisanship.
Last year, BoE policymaker Adam Posen said he felt Mr King had overstepped the line by supporting the Conservative-Liberal Democrat coalition's plan to cut public spending faster than the previous Labour government had planned.
That forced finance minister George Osborne to defend Mr King, saying he had not taken sides in politics.
Reuters
