A period of austerity is a necessary evil to restore the UK’s finances back to health, the governor of the Bank of England has said. Speaking in Newcastle yesterday Mervyn King said pay rises must be avoided to counter surging inflation, despite the current rise in the cost of living. The warning came after an estimate of GDP growth for the final quarter of 2010 from the Office for National Statistics showed the UK economy effectively ground to a halt in the final months of the year. It will mean less money in consumers’ pockets in real terms and less cash to spend on activities such as eating out or going for a drink. However, King’s assertion that inflation – currently heading towards 4% under the CPI measure – is the real worry, means calls for a rise in interest rates from their historic low in the next few months will likely go unheeded.