Former Bank of England Governor, Mervyn King

The former governor of the Bank of England, Mervyn King, who served as the Bank’s governor between 2003 and 2013, said on Sunday that middle-income earners, rather than the wealthy, will be required to pay more taxes to fund government expenses in the UK.

According to the former banker, Mervyn King, there "isn’t enough money there amongst the rich to get it back" to fund crucial public budgets that are designed to recover the economy from Covid.

King warned that Britons face years of financial hardship that could be far more difficult than those felt during former Conservative Chancellor George Osborne as households would be required to pay more taxes and higher mortgage rates.

King accounts for the ills of the British economy for the following reasons: the rebound from Covid, the conflict in Ukraine, the need for more public spending, and the budget deficit.

During an interview for BBC One's Sunday with Laura Kuenssberg program, King said, "I think everyone can see there is a strong case for higher public spending in certain areas as we recover from the lockdown period, and in many ways, people are very good at identifying areas where public spending should be higher in the longer term."

"The challenge is, if we want European levels of welfare payments and public spending, you cannot finance that with American levels of tax rates. So we may need to confront the need to have significantly higher taxes on the average person. There isn’t enough money there amongst the rich to get it back," he added.

While stressing that the main challenges of the next prime minister will be to tackle inflation and public debt, King said the UK needs to "improve national savings" and that will be "a major challenge for both parties," he said.

It is unlikely that the government will lower public expenditures due to the "gap which is there at present" that needs to be filled with taxpayers' money.

"That doesn’t make a very happy picture for the next few years, but what we need is a government that will tell us honestly there is a reduction in our national standard of living because we’ve decided to help Ukraine and confront Russia, and that means all of us are going to have to share the burden – we can’t just put all of it on our children and grandchildren," he added.

Warning homeowners, King said mortgage rates will also go up - just as they will in other developed economies.

One crucial mistake that the Bank of England and other central banks have committed was "thinking that they should print a lot of money to support the economy" during the lockdown period.

"Whereas in fact with the economy contracting under lockdown, that was the wrong policy, and all central banks – not just ours, but the Federal Reserve, the European Central Bank – are all facing now very high inflation rates of close to 10%. We’re all in the same boat," he added.

Following the dwindling of the UK's economy in light of the announcement of the mini-budget which was in fact reversed but caused massive turmoil in the markets, King said, "Markets are not in charge, governments and central banks are. Markets respond to the announcements made by governments and central banks and central banks have lost control of inflation, and governments have lost control of the public finances, so it is not surprising that markets respond to that."

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As a piece on how to ensure economic stability, King said, "Time to front up, to have a narrative that explains to people the consequence of a), allowing inflation to pick up, b), confronting Russia and supporting Ukraine, which has reduced our national standard of living, and c), the need to help future generations cope with the increased national debt we are leaving to them."

According to UK Labor party leader Keir Starmer, who also happened to be at the same program on BBC One's Sunday, the next government is going to have to "pick up a real mess of our economy of the Tories’ making."

Starmer added that a future Labor government would have to face "tough choices" whereby they wouldn't be able to carry out "some of the things we want to do as an incoming Labour government," declining to further elaborate on the matter.

Yesterday, it was reported that the British economy was downgraded from “stable” to “negative” by the rating agency Moody’s. That is because the UK economy has suffered an accumulation of unprecedented economic shocks in the past two years amid the effects of the Covid pandemic and most recently, its suicidal support to Ukraine.

Despite this, Truss' mini-budget has gotten all the blame. It was already stated before that Truss' resignation wouldn't solve anything.

Hence, it remains unclear how the next prime minister will be able to reverse a situation that was the outcome of an accumulation of bad decisions - not simply Truss' announcing of a mini-budget that was short-lived.