Revealed: where Vince Cable got his RBS plan from

The problem is, he isn't really following it to the letter.

Blogger Left Outside thought that the proposals by what the FT called "cabinet ministers" – "it's Vince Cable, everyone knows it's Vince!" – to fully nationalise RBS in order to be able to force it to start lending serious amounts of money to small and medium enterprisise sounded familiar. So they dug around the archives and found Giles Wilkes' paper for Orange Book Lib Dem think-tank Centre Forum from 2010, Credit where it's due: making QE work for the real economy.

What Vince is suggesting is basically creating an independent, government owned bank to finally start an effective policy of credit easing. Although Osborne has used the phrase before, he has been hamstrung by the desire not to do it directly, and the carrot-and-stick approach he has taken up doesn't seem to be convincing the banks to do it themselves.

Wilkes' overview of his paper laid out the plan:

"In deploying quantitative easing, the Bank may have forestalled a total collapse in our financial system. But QE has been less successful at stimulating the real economy. Now it needs reform if it is to restore the confidence needed for sustained growth. Money that is subsidizing the borrowing costs of the state should instead be helping smaller businesses and households.

"The Bank should start by targeting a high level of nominal growth until the economy is performing at its potential. This will reassure the private sector that liquidity won’t dry up in the near future, and so encourage more investment now. The second step should be for ‘credit easing’ to replace ‘quantitative easing’. The Bank’s independence of action on traditional monetary matters should be respected. But by putting taxpayer’s money at risk, QE is as much fiscal as monetary policy. So it is quite right for the government to direct the Bank to deploy the funds in the private economy, which is where it is really needed. For example, the money could help guarantee loans to small companies, or alleviate the dearth of financing for long-term infrastructure.

"With incomes stagnating and huge spending cuts in prospect, the Bank is right to ignore scare stories about spiralling inflation. It should even consider expanding the programme if the economy stays weak. What it should not do, however, is increase the size of QE without changing the way it works. It is time that politicians realised that QE is their business, and that failure to make it work properly will be their failure."

Notice anything strange, though? Vince seems to have jumped straight to step two in Wilkes' plan, skipping entirely the rather cruical first step.

Nominal growth targeting involves switching the Bank's aim from keeping inflation within 1 percentage point of 2 per cent inflation to attempting to keep nominal growth at certain level (usually around 4-6 per cent). The cruicial difference between the two being that it would allow the bank, in times of crisis (like now!) to allow higher inflation.

This matters for Cable's plan because the immediate impact of increasing the number of loans to SMEs would likely be a - temporary - burst of inflation. As companies borrow to expand production, all sorts of macroeconomic effects kick in. Young workers gain employment and move out of their parents houses (increasing the cost of housing), more people drive to work (increasing the cost of fuel), businesses invest in machinery and equipment (increasing the cost of those) and so on. This inflation would be temporary, because eventually the bottlenecks in those industries would be expanded, but it would still be felt.

Yet with the bank's mandate as it is now, it would have to respond to that inflation spike by tightening monetary policy. Interest rates go up, lending gets more expensive, and everything good is bad again. We'll see if that is how it actually plays out. Of course, the political game is, as ever, where the real action lies.

Business Secretary Vince Cable addresses employees at the BMW MINI plant in Oxford. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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To heal Britain’s cracks, it’s time for us northern graduates in London to return home

Isn’t it time for people like me, who’ve had privileges and experiences not open to everyone, to start heading back to our local communities, rather than reinforcing London’s suffocating dominance?

I’m from Warrington. The least cultured town in the UK. My town.

I moved to London almost exactly five years ago. Not because I particularly wanted to. Not because I wanted to depart the raucous northern town that I still call home. Because it was my only choice, really. I’d done my stint in the call centres and had some fun. But that couldn’t, surely, be my lot?

After university, I’d already started feeling a little weird and out of place back in Wazza. There were fewer and fewer people who didn’t look at me like I’d just fallen off a futuristic space flight that’d given me a different accent and lofty ideals.

Of course, that’s because most people like me had already skipped town without looking back and were all in the capital trying to strike beyond the ordinary.

The young, the cities, the metropolitan elite are still reeling after last week’s vote and wondering how people, half of our people, have got it so horribly wrong. We’re different, divided, done for.  

One thing I’ve clung onto while I’ve been in London is the fact that I’m from Warrington and proud. It might not be a cultured town, but it’s my town.

But I wasn’t proud of the outcome of the EU referendum that saw my town vote 54.3 per cent to 45.7 per cent to leave.

To be fair, even in my new “home” borough of Hackney, east London, the place with the third-largest Remain vote, one in five people voted for Brexit.

Yes, in one of London’s hottest and most international neighbourhoods, there are quite a lot of people who don’t feel like they’re being taken along to the discotheque.

Perversely, it was the poorest places in the UK that voted in largest numbers to leave the EU – that’s the same EU that provides big chunks of funding to try to save those local economies from ruin.

In many ways, of course, I understand the feelings of those people back in the place I still sometimes think of as home.

Compared to many suffering places in the UK, Warrington is a “boom town” and was one of the only places that grew during the last recession.

It’s a hub for telecoms and logistics companies, because, ironically, its good transport links make it an easy place to leave.

But there are many people who aren’t “living the dream” and, like anywhere else, they aren’t immune from the newspaper headlines that penetrate our brains with stories of strivers and scroungers.

Warrington is one of the whitest places in the UK, and I’m sure, to many locals, that means those immigrants are only a few towns away. There’s already a Polski sklep or two. And a few foreign taxi drivers. Those enterprising bastards.

We have never seriously addressed the economic imbalance in our economy. The gaping north-south divide. The post-industrial problem that politicians in Westminster have handily ignored, allowing the gap to be filled by those who find it quick and easy to blame immigrants.

When schemes like HS2, which is plotted to smash right through the place I grew up, are pushed against all of the evidence, instead of a much-needed, intercity Leeds to Liverpool investment to replace the two-carriage hourly service, it’s like positively sticking two fingers up to the north.

But I am also a big problem. People like me, who get educated and quickly head off to London when things aren’t going our way. We invested in ourselves, sometimes at state expense, and never really thought about putting that back into the places where we grew up.

There weren’t the right opportunities back home and that still stands. But, rather than doing something about that, people like me lazily joined the gravy train for London and now we’re surprised we feel more kinship with a 20-something from Norway than we do with someone who we used to knock on for when we should have been at school.

That’s not to suggest that our experiences in the capital – or mine at least – haven’t made us a thousand, million times better. 

I’ve met people who’ve lived lives I would never have known and I’m a profoundly better person for having the chance to meet people who aren’t just like me. But to take that view back home is increasingly like translating a message to someone from an entirely different world.

“You know, it’s only because you live in a country like this that a woman like you is allowed to even say things like that,” assured one of my dad’s friends down at the British Legion after we’d had a beer, and an argument or two.

Too right, pal. We live in what we all like to think is an open and tolerant and progressive society. And you’re now saying I shouldn’t use that right to call you out for your ignorance?

We’re both Warringtonians, English, British and European but I can increasingly find more agreement with a woman from Senegal who’s working in tech than I can with you.

It’s absolutely no secret that London has drained brains from the rest of the country, and even the rest of the world, to power its knowledge economy.

It’s a special place, but we have to see that there are many people clamouring for jobs they are far too qualified for, with no hope of saving for a home of their own, at the expense of the places they call home.

It’s been suggested in the past that London becomes its own city-state, now Londoners are petitioning to leave the UK.

But isn’t it time for people like me, who’ve had privileges and experiences not open to everyone, to start heading back to our local communities, rather than reinforcing London’s suffocating dominance?

We can expect local governments to do more with less, but when will we accept we need people power back in places like Warrington if we want to change the story to one of hope?

If this sounds like a patronising plan to parachute the north London intelligentsia into northern communities to ensure they don’t make the same mistake twice... Get fucked, as they say in Warrington.

It was Warrington that raised me. It’s time I gave something back.

Kirsty Styles is editor of the New Statesman's B2B tech site, NS Tech.