'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 expectedHe 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

By
Becky Barrow and James Chapman

PUBLISHED:

19:13 GMT, 3 December 2012

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UPDATED:

01:59 GMT, 4 December 2012

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 said people had every reason to 'feel upset'

George Osborne is prepare to unveil another round of cuts to Britain's bloated welfare bill

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.’

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

'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’’.’

Mr Haldane said he would be
‘surprised’ if the gold-plated salaries and bonuses enjoyed by City
executives – which have been a source of huge public anger – did not
fall further.