Sir Mervyn King gives green light to miss UK debt goal
King says Chancellor has a good excuse because world economy is in trouble, but claims economic recovery is on its way
SIR MERVYN KING has suggested that it would be acceptable for George Osborne to break his pledge on debt reduction due to the state of the world economy.
The Governor of the Bank of England's support will be well received by the Chancellor, who is under pressure to revise his debt-cutting timetable as speculation mounts it is likely to be missed.
According to The Guardian, many Conservatives fear initiatives that will put the government back on track to meet its debt reduction plan, such as extra welfare cuts and tax rises, will harm the party in the next election.
However, King cautioned: "If it's because the world economy has grown slowly and so we, in turn, have grown slowly then it would be acceptable to be in that position,"
But he added: "It would not be acceptable to miss the debt target if there was no excuse for it."
The Governor was influential in forming economic policy during the coalition’s 2010 budget, when the Bank of England and other forecasters believed the UK economy would grow by around 5 per cent by the end of 2012.
However, growth quickly evaporated and the country entered a second recession.
King also said signs of economic growth for the UK were visible and suggested the longest double-dip recession for more than 50 years might be over, reports the BBC.
He said: "I think the next quarter will probably be up. I think we're beginning to see a few signs now of a slow recovery, but it will be a slow recovery.
"After a banking crisis one can't expect to get back to normal and I fear it will take a long time."
He added that the eurozone was important to the health of the UK economy and its economic future will depend on what happens there. He warned the eurozone crisis was like "a black cloud of uncertainty hanging over British businesses".