Lord Turner has green energy plan to get economy back to life

Adair Turner, the economist who became chairman of the City regulator days after Lehman Brothers collapsed, wrote a book based on his ringside seat when the 2008 banking crisis went nuclear. 

Just over a decade later, the man once tipped to run the Bank of England is writing a script he believes will speed up our recovery from the current crisis. 

He says the world is facing a ‘very nasty shock’ to the economy that will be ‘just as bad’ – if not worse than 2008. One obvious difference, he says, is that this time the contagion has delivered a harder blow to the Chinese economy, which bounced back rapidly from the 2008 slump. 

Focus: Lord Turner says crisis must not be a setback to ‘green transition’

Digging out the latest growth forecast from the World Economic Outlook, Lord Turner says its forecast of 3 per cent global economic contraction this year ‘could be a bit optimistic’. 

‘We do not yet know how badly the pandemic will spread in the developing world,’ he adds. So what is his masterplan to rejuvenate the world economy this time around? Believe it or not, green energy. 

The City veteran, who was head of the CBI in the late 1990s, is now chairman of the Energy Transitions Commission, a major international think tank. 

He reveals that in the coming days, the global coalition – whose members include Shell, BP and Heathrow – will send a policy paper to governments in China, Europe and the UK that will set out how to use the recovery from coronavirus to ‘speed progress’ towards net-zero carbon emissions across sectors from aviation and shipping to chemicals and cement. 

With the oil price at record lows, Lord Turner concedes that fossil fuels ‘are suddenly going to look cheap’ as travel resumes – potentially making a switch to cleaner energy less attractive. 

But he is adamant that investment in green fuel would create jobs and give Britain’s post-coronavirus economy a much-needed boost. For instance, a jobs cull in North Sea oil could be offset by transferring workers with marine engineering skills to building bases for offshore windfarms, he says. 

‘North-west Europe is blessed with huge amounts of offshore wind potential, and both the UK and the rest of Europe should be planning for massive offshore wind developments in the North Sea that can give us green electricity at a low price,’ he says. ‘It’s a huge strategic opportunity.’ 

The good news is that Lord Turner doesn’t expect a downturn on the scale of the 1929-1933 Great Depression because governments worldwide are willing to increase the size of their national debts. 

Last week, the Office for Budget Responsibility increased its costing of the Government’s coronavirus policy to £103 billion. 

‘We have to be willing to accept fiscal deficits on the scale of 2009,’ says Lord Turner, who believes in exceptional circumstances central banks should directly fund government debt in a form of so-called helicopter money.

The phrase was coined by renowned US economist Milton Friedman, who suggested scattering dollar bills from a helicopter for people to pick up and spend during economic depressions. 

‘There would be a clarity of assuring people that there is no limit on the money available,’ Lord Turner says. ‘Governments can’t stop it [the downturn] being a very nasty shock, but they can stop it sliding into a global Great Depression.’

In the UK, Lord Turner expects to see the shoots of a ‘cautious and controlled’ economic recovery in three weeks’ time – providing the rate of Covid-19 infections and deaths keeps coming down. 

But the ‘conundrum’ about getting Britain moving again, he says, is that the most job intensive sectors, such as bars and restaurants, will be the most difficult to open up again because of the health risks.

 ‘For the last 20 years we have been able to rely on the employment-making machine of face-to-face services, but that has been shut down,’ he says. 

‘The hit to tactile employment will last several years, so we need to do anything we can to stimulate new jobs in new areas. We may have a period of time where the highly automated parts of the economy will lead growth. For six months following the end of lockdown, there will be a new normal when the economy will start to recover, but it won’t recover to previous levels.’ 

Turner, a crossbench peer known as ‘Red Adair’ during his time running the CBI business trade body due to his Left-leaning views, raised eyebrows in the City when he remarked in 2009 that parts of banking are ‘socially useless’.

Today, firms in big fossil fuel guzzling industries such as aviation have supplanted banks as the pantomime villains of corporate Britain. 

Lord Turner is calling on the Government to speed up airlines’ drive to net-zero carbon emissions by supporting an emerging market for sustainable jet fuel through ‘a careful balance of price incentives and regulation’. 

Like officials in Brussels, Lord Turner believes a ‘kerosene tax’ could encourage airlines to switch to green fuel. Another possibility is introducing regulation for a fuel duty mandate to make airlines run, for example, 10 per cent of their fleet on sustainable fuel by 2030. 

Meanwhile, any airline that receives state support to survive the crisis should be given ‘more stretching’ climate change goals. 

When pressed on whether the Government should bail out struggling companies, rather than letting some firms fail, it’s the first time his smooth theorising is rattled. 

‘I’m not getting into the specifics of individual companies,’ he says testily. ‘But any company that receives a bailout should have green targets attached.’ 

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