UK woes could last years, says Bank candidate
Friday 12 October 2012
The Bank of England contender Lord Turner laid bare the extent of the challenge facing Sir Mervyn King's eventual successor last night as he warned that Britain's economic woes "could extend for many years ahead".
The Financial Services Authority (FSA) chairman, who is battling deputy governor Paul Tucker for Threadneedle Street's top job, struck a desperately downbeat tone in his final speech after four years leading the City watchdog.
Drawing parallels with Japan's "lost decade", he told a Mansion House audience that the financial crisis had left the UK in a "hugely difficult position" as attempts to work off the excess borrowing of a credit boom hinder recovery.
"Post-crisis deleveraging is very, very difficult to manage – and that's the lesson policymakers and economists have increasingly learnt in the last three years. And if we do not carefully design policy in response, the deflationary impact on economic growth could extend for many years ahead," Lord Turner warned.
The FSA boss also hinted he may be ready to throw yet more firepower at the UK economy as Governor with a warning that the effectiveness of quantitative easing could wane over time. He backed the Bank's £80bn Funding for Lending Scheme, but added: "We need to be ready if these measures prove insufficient to consider further policy innovations".
Lord Turner, who has admitted he was wrong in pushing for the UK to join the euro a decade ago, warned that the eurozone "cannot survive" without further integration. He also called for European leaders to press ahead with a banking union as well as commonly held European debt – so-called Eurobonds – to ease the burden on states such as Spain and Italy.
He said: "If the eurozone is to succeed it will have to pursue what George Osborne described last July as the 'remorseless logic of integration', with a common fiscal backstop for banks that cannot be resolved without taxpayer support, with mutual deposit insurance, with banking supervision centralised under the authority of the European Central Bank, and with some category of joint Eurobonds emerging as the undoubted risk-free asset."
Lord Turner added: "The UK does not need to, and will not, be part of that eurozone banking union. But we have an enormous national self-interest in the eurozone either taking the steps required to succeed, or, if that is politically unattainable, dissolving in a controlled rather than a chaotic fashion. We need to use what limited influence we have to help achieve the best possible way forward."
The FSA's responsibilities for financial stability will be absorbed into the Bank of England early next year under the aegis of the Prudential Regulatory Authority, with oversight of retail and wholesale markets falling to the Financial Conduct Authority.
Lord Turner said he was confident that the new structure – as well as the Bank's Financial Policy Committee – would address the "dangerous underlap" which existed in financial regulation before the crisis.
Liam Neeson's Downton dreams
Thriller is set in the secret world of British espionage
Bomber jacket worn by Mary Berry sells out within an hour
- 1 Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
- 2 Scottish independence: What you shouldn't tweet about if you want to avoid jail today
- 3 Scottish independence: Five reasons Salmond is secretly hoping for a 'No' vote
- 4 Isis plan to 'behead random member of the public' in Sydney thwarted by Australian police
- 5 Archbishop of Canterbury admits doubts about existence of God
Scottish independence referendum live: Clackmannanshire blazes the trail as 54% vote No while Yes trails with 46%
Scottish independence: Final opinion polls show undecided voters could swing result either way
Isis plan to 'behead random member of the public' in Sydney thwarted by Australian police
Scottish independence: Andy Murray backs Yes campaign in eleventh hour decision
Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Scottish independence: The Queen breaks silence on referendum debate – as think tank warns of £14bn black hole if Scotland votes Yes
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...
Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...