'This is as bad as a world war': Bank of England boss's grim view of financial crisis which has left a debt 'that will be paid by our grandchildren'

Andrew Haldane: People 'had every reason' to feel 'deeply upset and angry'

George Osborne to admit bringing public finances back to order will take longer than expected

He has to find more than £23bn through further cuts and tax rises by 2017

Institute of Fiscal Studies said era of austerity could last until 2018



The financial crisis has been as devastating for family incomes as a world war, a senior Bank of England official warned yesterday.

It is likely that the costs will still be being paid by our grandchildren, Andrew Haldane added.

He said there was ‘every reason’ for people to feel ‘deeply upset and angry’ about the turmoil inflicted by the crash of 2008 and 2009.

Andrew Haldane's (left) statements come as George Osborne is prepared to unveil another round of cuts In a sober analysis of the scale of the challenge facing Britain Mr Haldane, the Bank’s executive director for financial stability, said: ‘If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren. ‘In terms of the loss of incomes and outputs, this is as bad as a world war – that’s the scale we’re talking about.’

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Next Banks and building societies draw £4.4bn in cheap money from... Osborne to raid pensions of the wealthy and 'raise stamp... Share this article Share George Osborne will tomorrow acknowledge in his autumn statement that bringing the public finances back to order will take significantly longer than the Government had anticipated. The Chancellor is expected to accept that debt as a proportion of GDP will not be falling by 2015-2016, one of his key fiscal targets. To meet his main commitment, to eliminate the structural deficit, he is expected to have to find more than £23billion through further cuts and tax rises by 2017. Key out-of-work benefits are expected to be frozen and the best-off can expect to lose some of their pension tax breaks.

'Devastating': Andrew Haldane said people had 'every reason' to feel 'deeply upset and angry' about the turmoil inflicted by the crash of 2008 and 2009

The Chancellor is expected to unveil a series of measures to stimulate economic growth, including infrastructure projects backed by £40billion of state guarantees, help for smaller businesses that want to export, and a postponement of the 3p a litre rise in fuel duty to put more money in people’s pockets.

Mr Haldane, making his world war comparison, told Radio 4’s the World at One: ‘It would be astonishing if people weren’t fed up on the street, asking big questions about where finance has gone wrong. There is every reason why the general public ought to be deeply upset by what has happened and angry.’

In 2008 the then Chancellor, Alistair Darling, came under fire from allies of Gordon Brown for saying that the economic times Britain was facing were ‘arguably the worst they’ve been in 60 years’ and would be ‘more profound and long-lasting than people thought’.

His warning has proved only too accurate, according to Mr Haldane, based on the fall in the country’s economic output since the recession and in the aftermath of the Second World War.

Output has fallen rapidly since the recession, with real GDP currently 3.1 per cent below its 2008 peak. By comparison, it rebounded fairly sharply after the end of the war.

Mr Haldane said the banking industry reached a pivotal moment in June when the scandal about the fixing of Libor, a key interest rate, broke after a series of other events such as the misselling of payment protection insurance.

He said: ‘It was partly that the public mistrust of the culture of banking had built up to such a point that banking itself said: ‘‘Look, this has gone wrong’’.’