Show Hide image

King warns Britain of a "sober" decade ahead

Time to come as one of "savings, orderly budgets, and equitable re-balancing", King says.

The Bank of England governor Mervyn King has warned the country of a "sober" decade of saving more and spending less ahead.

Coining an acronym, he described the time to come as one of "savings, orderly budgets, and equitable re-balancing," as against the just passed "nice" (non-inflationary consistently expansionary) decade.

Recovery, he said, would be slow as "history suggests that after a financial crisis the hangover lasts for a while". He was speaking to an audience in the West Midlands on the eve of the government's Comprehensive Spending Review.

While noting that it may take time for inflation to return to its target of 2 per cent, King said the Bank's key role was to provide stimulus when the economy was in need.

Reports say the governor's speech hints at a possible resumption of quantitative easing (QE), whereby the Bank has injected £200bn into the economy so far.

The Chancellor, George Osborne has given the Bank the go-ahead for further QE in case the economy continues to falter, the Guardian reports.

Getty Images.
Show Hide image

Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.