Interview: Lord Turnbull

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Last Modified: 13 Feb 2009
By: Krishnan Guru-Murthy

Krishnan Guru-Murthy interviews Lord Andrew Turnbull, former head of the civil service about lavish hospitality invitations received by civil servants; and also about his view of the current banking crisis.



"We used to be criticised for being introverted and out of touch. Nowadays we have tried to develop people who are outward facing, listening, explaining - in contact with their constituencies but not captured. The business constituency is obviously one of those, if you are going to be touch with them - they make extensive use of hospitality.

"You have a choice. You can either stay in your cell and pray, or you can go out and join them.

"You need to think clearly. It must not be too lavish.

"A good starting point is to stay away from private yachts."

Lord Turnbull on the banking crisis



"You're making the mistake of starting in the middle of the story. The perception that it started with greedy, wrongly incentivised bankers. This story, as Adair Turner's excellent economy lecture tells you, starts way, way back.

"It starts with the global imbalances between the US and China; it starts with inflation targeting which took no account of asset prices and it goes right back to the Clinton administration's active promotion of sub-prime lending. All that happens before you get to the banking story.

"Now what it is, is a collective failure that all sorts of people - the regulator, the bankers, the economic policy makers. They believed in a particular view of the world and the things which should have acted as restraints in all this - the regulators, rating agencies, accounting, corporate governments - none of that worked, because of the power of consensus.

"It was a bit like Y2K. Why did we all believe Y2K? We all went along with each other. A very strong collective belief came about.

"The best source of this is Alan Greenspan. He had a view that banks would not be so foolish as to destroy themselves. But then he said in a rather plaintive sense, 'I'm terribly sorry but that was not right.'

"And that was the collective view that things were all going well. There was a sense that a bubble was developing (although Greenspan said 'you cannot prick bubbles you can only pick up the mess'). But no-one believed that it was a bubble of the proportions that we now have.

"And so to focus solely on the banking centres is a pretty inadequate discussion.

"Go and read Adair Turner's lecture, go and read the Group of Thirty report, chaired by Paul Volcker and then you will get a much wider appreciation of this whole story."