BANK of England governor Mervyn King yesterday described the huge banking bailout as “unfair” and appeared to sympathise with calls for multibillionpound tax evasion to be tackled when he spoke to union activists.

Mr King told the TUC Congress in Manchester that he understood the strength of feeling over the size of bankers’ bonuses and said “radical reform” of the UK’s financial system was needed.

The 62-year-old faced minor protests from some banner-waving delegates and a walkout by the Rail Maritime and Transport union delegation.

As he waited to speak, delegates called for a high pay commission to investigate the “out-of-control” wages of executives and other high earners.

Communication Workers Union general secretary Billy Hayes said: “The blatant double standards lead to dissatisfaction and a divided society of haves and have-nots.”

During his 20-minute speech, only the second by a Bank of England governor to the TUC Congress, Mr King warned that the Government risked plunging the UK back into crisis if it did not reduce Britain’s record deficit.

Amid union fury over next month’s planned public sector spending cuts, Mr King said “vague promises would not have been enough”.

He said it was vital the Government set out a clear plan for reducing the deficit and warned that the UK could otherwise have suffered the kind of woes seen in Greece.

“As a result of a failure to put such a plan in place sooner, some euro-area countries have found – to their cost – a much more rapid adjustment being forced upon them,” he said.

But he told delegates they were “entitled to be angry” as he admitted the financial sector and policymakers were to blame for the financial crisis that had landed the UK with the largest peacetime budget deficit in its history.

Regulation of banks needed to improve and poorly-performing banks should be allowed to fail, without risk to depositors or taxpayers, he said.

He faced tough questions from the audience over the City’s behaviour and the spending cuts as well as the Bank’s failure to spot the financial crisis.

Mr King received a few seconds of polite applause from the delegates.

TUC general secretary Brendan Barber said later: “Congress clearly welcomed the condemnation of the culture of bonus excess and the Governor’s clear recognition that the crisis was caused by banking boardrooms.

“We have to disagree over the timetable for reducing deficit, but were impressed with his willingness to engage.”