Former City regulator Lord Adair Turner says the UK is “stuck in a very deep economic malaise” and “radical policies” are needed to get out of it.
In an interview with Wake up to Money, the former chairman of the Financial Services Authority (FSA) also warned that without these radical policies, the UK economy could be stuck with low interest rates “almost indefinitely”.
The Bank has kept the base rate at 0.5 per cent since March 2009.
Turner told the BBC: “We don’t have adequate growth. We don’t have adequate inflation to support adequate growth, or to grow our way out of the debt problems.
“It may not come to a crisis like 2007/8 at all. We may simply be stuck in a chronic malaise which never becomes hyper acute in the same way that it did in 2007/8 but it equally problematic for the global economy.
“Because we don’t have adequate growth, we don’t have adequate inflation to support adequate growth, or to grow our way out of the debt problems.
“In that environment, the crisis may come more on the political side. It may come more that the reaction of people to the failure of the capitalist system to deliver adequate growth is populist movements and political instability.”
As a result, he said policymakers need to look beyond the current policies of zero, and negative, interest rates and quantitative easing.
He added: “Although they are better than nothing, and if I had been on the Monetary Policy Committee of the Bank of England, I would have voted for them, I have become convinced that they are simply not working enough and they’re not going to work.
“I don’t think there are any reasons to believe that we are on a path which is taking us back to what we thought was normality any time in the next two, three or maybe five and even ten years.”
He also voiced grave concerns over the future fallout of peer to peer lending.
He said: “The losses which will emerge from peer to peer lending over the next five to 10 years will make the bankers look like lending geniuses.”
Lord Turner also said that the possibility of the UK leaving the European Union was already “causing major destabilisation at a global level”.