FORMER Financial Services Authority (FSA) chairman Lord Turner has warned that the UK has failed to rebalance its economy and is simply repeating the errors made in the run-up to the 2007/8 financial crisis.
Turner, (pictured) who was chairman of the City regulator until last April, likened the domestic economy over the last five years to Japan in the 1990s, the Telegraph reports.
The former FSA chief said that although the economy was now showing obvious signs of growth, there was the potential that it will not be sustained due to the continued build up of credit in the system.
“The concerning thing about the UK economy is that from 2009 until early last year, a lot of the debate was around the need to rebalance, from being over focused on financial services and the housing market,” Lord Turner said.
“In the last year we’ve started to grow again, but it’s all down to consumer expenditure and real estate again. In the UK we haven’t got the answers to rebalance the economy.”
“In essence where the UK has been for the past five years is where Japan was in the 1990s,” he went on.
“The interesting thing in all these debates is how little we learnt the lessons of Japan,” he said, referring to the stagnation of the Japanese economy in the 1990s, often dubbed the country’s ‘lost decade.’
The regulator cum academic – he is now a fellow of George Soros’s Institute for New Economic Thinking in New York – was speaking ahead of a speech in Frankfurt on the world’s “debt addiction” and the need for tighter financial regulation.
“Already-agreed reforms to financial regulation, though undoubtedly valuable, are inadequate to prevent a future repeat of a 2007-8 style crisis,” he cautioned.