Living standards may never recover

Mervyn King has warned that living standards may never recover from the current economic crisis: Crisis

He is surprised that people are not angrier, but they may just be despairing. The global economic balance is shifting against countries like the UK and the hope of each generation's living standard being better than the last one may no longer be achievable.

Each day I drive past a petrol station and each day the price seems to have gone up by a penny a litre. Of course this is partly a consequence of an overreaction by the markets to events in Libya which only accounts for 2 per cent of world oil production.

It's difficult for families to cut down their use of petrol in the short run as most journeys are more or less essential, particularly at this time of year. As a consequence, budgets can stretched and even low end retailers like Primark are now feeling the pinch.

On economic and political grounds the Government would probably be advised to suspend the increase in fuel duty planned for April even though it will cost them £500m. The notion of an automatic stabiliser is more problematic as it could punch a big hole in the public finances.