If the government does not reverse its fiscal plans in the coming weeks, it may be left with little option but to cut public spending so significantly it could result in the end of the National Health Service, according to one of Britain’s leading economic policymakers of recent decades.

Sir Charlie Bean, a former deputy governor of the Bank of England and member of the Office for Budget Responsibility, urged the Bank to carry out an emergency interest rate rise of 1.5 percentage points to help calm to markets.

He warned that the government has begun to lose the confidence of markets.

“The thing about credulity is when you lose it, it can be quite difficult to get it back,” he said. “It takes time.”

Asked whether that was where the country is now, he added: “I would say that we’ve got a few steps down the road. It is serious. And I don’t think the government can really afford just to say, ‘Oh, this is just a little bit of froth in markets; they’ll come to their senses as soon as we lay out our full programme.’

“There are real questions to be addressed about how the government’s fiscal strategy hangs together, and how it can ensure that the debt to GDP ratio is back on to a sustainable path by the medium term.”

Asked what it could do to resolve the situation, Sir Charlie said: “The ideal would be to get a Tardis and go back and undo the errors… I find it implausible that the measures that are presently being contemplated to boost growth… will be anything like powerful enough to obviate the need for some significant spending cuts.”

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He added that the scale of those cuts – potentially as much as £50bn a year – would have enormous consequences for the public sector.

“Frankly, the only way you can really deal with this is with a very fundamental rethinking of the boundaries of the state.

“So if you want to get the share of government spending to GDP down, you have to be prepared, say, to move away from our own health service, which is free at the point of delivery to one funded by social insurance like they do in Germany.”

Sir Charlie said that had he still been at the Bank he would have advised Andrew Bailey, the governor, to hold an emergency interest rate meeting.

“And the evidence from many of these sorts of episodes across the world is that the secret is to go early and go big. So had the bank decided to have an emergency meeting, it would have needed to raise bank rate by at least I think 100 basis points (a full percentage point), or possibly 150 basis points. Anything less than that would have been worse than not doing anything.”

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