My 2004 S40 Diesel Turbo was working fine when I parked my car up for the night, the following day the turbo isn't working. The car drives fine, there are no warning lights on the dash, I hardly notice the loss of power at speeds up to 40mph. Between 40 and 60 its slower accelerating but above 60 the acceleration is just gone, it takes ages to get up to 70 or 80mph. It cruises along fine at these speeds when it gets there as long as it's on the flat, going up hill the car loses speed and I can not maintain it, even dropping it down to fifth or fourth it just wont pick up.
There is no smoke coming out of the exhaust, no strange noises. A colleague who knows about turbo's claims that it can not have just stopped spinning as there would be smoke belching out.
The garage tells me that it needs a new turbo but they can not explain why it isn't smoking the exhaust and only checked one of three mass airflow sensors.

Has anyone else experienced this?
I'm dubious about what the garage has told me, at £1300 for a new one to be installed I'm wary.