King Calls On Govt To Tackle Debt

The Governor of the Bank of England has said the Government must produce a plan to repay national debt.

At his annual Mansion House speech to the City, Mervyn King said politicians need to get serious about tackling public borrowing.

He said: "Five years from now national debt, as a proportion of national income, is expected to be more than double its level before the crisis.

"So it is also necessary to produce a clear plan to show how prospective deficits will be reduced during the next Parliament, so returning to a gradually declining path for the ratio of national debt to national income."

Mr King also fired a shot across the bows of the City, saying the financial sector would have to work hard to regain the trust of people outside the industry.

He said families and businesses had been told that a market economy was "essential" for prosperity.

"But out of the blue - in this case the financial sector - came a crisis that did not stem from weakness in the real economy," he said.

"It has wreaked havoc on those same businesses and families."

He also warned large banks to avoid high street banking with risky investment strategies, calling the practice "not sensible".

And he revealed that official figures show unemployment has now reached a 12-year high of more than 2.2 million - "yet it is the banking system that has received financial support on an almost unimaginable scale".

The Bank of England has so far taken unprecedented action to kick-start the economy, slashing interest rates close to zero while embarking on a £125bn strategy to boost the money supply.

Mr King said there were signs that the UK economy was "beginning to stabilise" but warned that the road to recovery could be long.