Mervyn King called for an election and a new parliament to resolve the current impasse, claiming that “most people think that this has gone on for far too long and just have the view – ‘just do it’”.
He added that it did not matter whether people voted to remain or leave the European Union.
Lord King was speaking after MPs voted to delay a meaningful vote on the prime minister’s deal, forcing Boris Johnson to write to the EU to ask for a further extension to the Brexit process.
“It’s frustrating parliament can’t make up its mind and hasn’t been able to vote but let’s hope they do,” Lord King told Sky News after his speech at the International Monterary Fund’s annual meetings in Washington.
He warned the all-consuming nature of Brexit meant politicians were not looking at the UK’s underlying economic challenges.
“We have one of the lowest savings rates in the British economy of any country in the G20 save perhaps for Argentina. We’re not saving enough to finance our pensions or care for the elderly, or to finance infrastructure.
“These are the big challenges. What do we do about the education of 50 per cent of people who don’t go to college or university? It’s a great shame [Brexit] has dragged on so long.”
Although he claimed that Britain was “in the middle of the worst political and constitutional crisis for arguably several hundred years”, Lord King downplayed the impact Brexit could have on the UK and world economies.
“The decision to leave the EU is not likely to have a major impact on the UK economy in any way... I think there’s an awful lot of bogus quantification going on to justify positions held for other reasons,” he said. “I don’t honestly believe that Brexit has any great significance even for the rest of Europe, let alone the rest of the world. I don’t think the long-run economic consequences of the UK leaving the EU are particularly large.”
But he warned the global economy was in “great stagnation”, having grown more slowly and for a longer period than before the Great Depression of the 1930s, with levels of debt higher than they were before the 2008 financial crash.
Lord King, who governed the UK’s central bank for a decade until 2013, asserted the global economy would not be likely to suffer another financial crisis in the next 12 months.
But he warned of a global low-growth problem that wouldn’t be solved by another cut in interest rates, exacerbated by “extraordinary uncertainty”, and admitted “no one knows” whether another financial crisis is on the cards.
“We need a much wider set of policies to get out of this,” Lord King said.
The UK economy unexpectedly shrank 0.2 per cent in this year’s second financial quarter – its first contraction since 2012.
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