Mr Carney’s remarks came as Andrew Bailey, the current Governor of the Bank of England, warned that lockdown had permanently changed Britons’ attitudes towards work.
He said a rise in long-term sickness, an increase in early retirement and other factors that had contributed to Britain’s shrinking workforce during Covid had been the most “lasting effect” of the pandemic, and was partly responsible for the UK’s lacklustre growth rate.
Speaking at a separate panel in Marrakech, he said: “Participation in the economy fell during the Covid period and in the UK hasn’t come back as fast as elsewhere. And I sit today and say the lasting effect that I judge today from Covid is that it has changed people’s attitudes towards the way in which they participate in the labour market, and we have to come to terms with that.”
Mr Bailey also blamed slow productivity growth for dragging the economy into what he suggested was becoming a low growth trap.
“For much of my career we’ve talked about and thought about the potential growth rate of the economy as being around 2.25pc. Today, I’m afraid it’s 1pc to 1.5pc – at best.”
Mr Bailey said this “complicates the job of monetary policy”, as the economy has less room to grow without generating inflationary pressures, meaning policymakers would have to keep rates higher than in the past to keep a lid on inflation.
Mr Bailey also described wage growth as “puzzling” and had not cooled alongside a rise in unemployment and falling house prices.
Such economic pressures fed into last month’s announcement from Rishi Sunak, who said the UK will push back the deadline for selling new petrol and diesel cars by five years, with the Prime Minister also delaying the phasing out of gas boilers.
On the other side of the Atlantic, more than two dozen Republican-led states sued the Biden administration earlier this year, branding new rules that make it easier for pension funds to account for climate change part of a “woke political agenda” that will steer investment away from fossil fuels.
Mr Carney, who currently serves as UN envoy for climate action and finance, has previously said that the war in Ukraine showed oil and gas “doesn’t provide energy security”, but admitted this week that moving away from fossil fuels could not be done “overnight”.
Speaking on Saturday, he said: “We’re in an age of uncertainty. People are worried about their jobs, their wages, the future of their work, artificial intelligence [AI]. And so the responsibility of political leaders, of governments, is to reduce that uncertainty.”
He insisted the green transition will create jobs and drive growth, but said fossil fuel industries should also be “celebrated” for sustaining communities for generations, including oil sands projects in his native Canada, which are today considered one of the dirtiest fuel sources.
He said net zero policies should focus on promoting investment in new technologies and green jobs while recognising the impact on families. “You have to build in a way that delivers for people today,” said Mr Carney.
