Bank of England governor Mervyn King hails deficit plan

Bank of England governor Mervyn King has backed the new government's deficit reduction plan, calling it "strong and powerful".

Mr King said plans for spending cuts worth £6bn in 2010 were "sensible".

Investors also gave a cautious welcome to the new government - with UK bond prices rising, although sterling weakened.

Meanwhile, earlier Conservative plans to scrap the Financial Services Authority have been shelved.

Mervyn King took the unusual step of praising the new government's plans at the Bank's quarterly Inflation Report media conference.

The Liberal Democrats may have swallowed some extra spending cuts, but the Conservatives have taken on a lot of Lib Dem tax policies in return