Years of hardship to come, says Bank of England

The recession may be almost over but British families are set to face years of pain, the governor of the Bank of England has warned. In fact, our suffering will only get worse over the next two years as salaries remain frozen and inflation rises.

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The comments of Mervyn King are unlikely to be welcomed in Downing Street whose hopes of a quick recovery have been dashed. According to the latest figures, inflation is rising almost twice as quickly as our wage packets and the end of the VAT tax cut has done nothing to help. And with many employees accepting pay cuts or working part-time rather than face unemployment there will be more tough times ahead for UK households.

Mr King's comments will come as something of a shock to Chancellor, Alistair Darling who told a newspaper this week that he was "totally relaxed about the governor talking about the wider economy."

Far from the recovery predicted, the governor used his speech at the University of Exeter to warn that, unless this year's Budget clearly details spending cuts, the Monetary Policy Committee could raise interest rates sooner rather than later.

With the general election looming, shadow chancellor George Osborne seized the opportunity, by promising to cut public spending faster than the current Government. "This is a very important warning from the governor of the Bank of England, spelling out the consequences for this country of not having a credible plan to deal with the budget deficit," Mr Osborne told The Telegraph. "I agree with him."

It's hardly a surprise. But is there anything that the Labour government can do to win back your confidence?