Economic recovery could take until 2017
Sir Mervyn King, the governor of the Bank of England, does not expect the UK economy to recover until 2017, three years later than his earlier estimate.
The Governor made his gloomy prediction to MPs at a meeting of the Treasury Select Committee (TSC).
“When this crisis began in 2007, most people did not believe we would still be here.
“I don’t think we’re yet half way through this. I’ve always said that and I’m still saying it.
“My estimate of how long it will take to recover is expanding all the time,” he said.
He commented on his surprise at the rapid speed of deterioration in economic outlook as the eurozone crisis worsens, with emerging markets including Asia now experiencing adverse effects despite previously experiencing rapid growth.
A slowdown in the world economy and the eurozone crisis were factors in his recent decision to approve a £50bn increase in quantitative easing, the Governor said.
He also told the TSC that rates could be cut from their current level of 0.5 per cent to zero, even though they are already at a historically low level.
There was also gloomy news from the Office for National Statistics, with the latest official figures revealing that tax receipts are falling and public borrowing is growing.
Net borrowing reached nearly £18 billion in May 2012, a £3 billion increase from £15 billion in May 2011.
Tax receipts were 7 per cent lower in May 2012, than they were a year ago, with welfare payments increasing by 11.7 per cent.
The latest figures throw George Osborne’s plan to reduce total borrowing to £120 billion this financial year into doubt.
A spokesman for the Treasury said “It is too early in the financial year to draw conclusions about the year as a whole, especially as today’s public finances data include a number of one-off factors and temporary distortions.”