Average earners, rather than the wealthy, will be required to pay significantly higher taxes to finance higher public spending in the UK, the former governor of the Bank of England said on Sunday.

Mervyn King said there “isn’t enough money there amongst the rich to get it back” to fund the “strong case” for some additional public spending, designed to help the economy recover from the pandemic.

Delivering a stark message for consumers, Lord King issued a warning that Britons face years of financial hardship that could be “more difficult” than that felt during the age of austerity under the former Conservative chancellor George Osborne. He said households would face both higher taxes and higher mortgage rates.

King, who served as the Bank’s governor between 2003 and 2013, blamed the economic situation on the rebound from Covid, combined with Russia’s invasion of Ukraine, the need for more public spending and the size of the budget deficit.

“I think everyone can see there is a strong case for higher public spending in certain areas as we recover from the lockdown period and in many ways people are very good at identifying areas where public spending should be higher in the longer term,” King said on BBC One’s Sunday With Laura Kuenssberg programme.

“The challenge is, if we want European levels of welfare payments and public spending, you cannot finance that with American levels of tax rates. So we may need to confront the need to have significantly higher taxes on the average person. There isn’t enough money there amongst the rich to get it back.”

Asked if this would feel similar to the austerity introduced by Osborne, King replied: “In some ways it could be more difficult.”

Tackling high inflation and current levels of public debt are among the main challenges facing the next prime minister. King added that the nation needed to save more.

“The big challenge, I think, is the best way to improve national savings is to reduce the size of the government budget deficit, and that’s a major challenge for both parties,” he said.

Public expenditure is not going to go down, and is instead likely to increase, according to King, who noted that taxes will “have to rise to fill the gap which is there at present”.

He added: “That doesn’t make a very happy picture for the next few years, but what we need is a government that will tell us honestly there is a reduction in our national standard of living because we’ve decided to help Ukraine and confront Russia, and that means all of us are going to have to share the burden – we can’t just put all of it on our children and grandchildren.”

In a warning to homeowners, King said mortgage rates were “clearly going to go up”, noting that this was also happening in other developed economies.

In a criticism of the actions of the Bank of England, and of other central banks during the pandemic, King said all central banks “made the mistake” during the lockdown period of “thinking that they should print a lot of money to support the economy”.

He went on: “Whereas in fact with the economy contracting under lockdown, that was the wrong policy, and all central banks – not just ours, but the Federal Reserve, the European Central Bank – are all facing now very high inflation rates of close to 10%. We’re all in the same boat.”

Following the recent turmoil in the financial markets following the government’s ill-fated mini-budget, King said: “Markets are not in charge, governments and central banks are.

“Markets respond to the announcements made by governments and central banks and central banks have lost control of inflation, and governments have lost control of the public finances, so it is not surprising that markets respond to that.”

Delivering a message to politicians on what they should do to ensure economic stability, he said: “Time to front up, to have a narrative that explains to people the consequence of a), allowing inflation to pick up, b), confronting Russia and supporting Ukraine, which has reduced our national standard of living, and c), the need to help future generations cope with the increased national debt we are leaving to them.”

Sir Keir Starmer, speaking on the same programme, said an incoming government is going to have to “pick up a real mess of our economy of the Tories’ making”.

He said a future Labour government would have to face “tough choices”, meaning they could not “do some of the things we want to do as an incoming Labour government”, but declined to give further details.