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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Today's immigration figures show why the net migration target should be scrapped

We should measure different types of migration separately and set targets that reflect their true impact.

Today’s net migration figures show, once again, that the government has raised expectations of tackling migration and failed to deliver. This is a recipe for disaster. Today’s numbers run far in excess of 300,000 – three times over what was pledged. These figures don’t yet reflect the fallout from Brexit. But they do show the government needs to change from business as usual.

It has been the current strategy, after all, that led the British public to reject the European Union regardless of the economic risks. And in the process, it is leading the government to do things which err on the side of madness. Like kicking out international students with degrees in IT, engineering or as soon as they finish their degrees. Or doubling the threshold for investor visas, and in the process bringing down the number of people willing to come to Britain to set up business and create jobs by 82 per cent. Moreover, it has hampered the UK’s ability to step up during last year’s refugee crisis - last year Britain received 60 asylum applications per 1,000 people in contrast to Sweden’s 1,667, Germany’s 587 and an EU average of 260.

The EU referendum should mark the end for business as usual. The aim should be to transition to a system whose success is gauged not on the crude basis of whether overall migration comes down, irrespective of the repercussions, but on the basis of whether those who are coming are helping Britain achieve its strategic objectives. So if there is evidence that certain forms of migration are impacting on the wages of the low paid then it is perfectly legitimate for government to put in place controls. Conversely, where flows help build prosperity, then seeing greater numbers should surely be an option.

Approaching immigration policy in this way would go with the grain of public opinion. The evidence clearly tells us that the public holds diverse views on different types of migration. Very few people are concerned about investors coming from abroad to set up companies, create jobs and growth. Few are worried about students paying to study at British universities. On the other hand, low-skilled migration causes concerns of under-cutting among the low paid and pressure on public services in parts of the country that are already struggling.

The first step in a new approach to managing migration has to be to abolish the net migration target. Rather than looking at migration in the aggregate, the aim should be to measure different types of migration separately and set targets that reflect their true impact. In the first instance, this could be as simple as separating low and high skilled migration but in the long term it could involve looking at all different forms of migration. A more ambitious strategy would be to separate the different types of migration - not just those coming to work but also those arriving as refugees, to study or be reunited with their families.

Dividing different flows would not only create space for an immigration policy which was strategic. It would also enable a better national conversation, one which could take full account of the complex trade-offs involved in immigration policy: How do we attract talent to the UK without also letting conditions for British workers suffer? Should the right to a family life override concerns about poor integration? How do we avoiding choking off employers who struggle to recruit nationally? Ultimately, are we prepared to pay those costs?

Immigration is a tough issue for politicians. It involves huge trade-offs. But the net migration target obscures this fact. Separating out different types of immigration allows the government to sell the benefits of welcoming students, the highly skilled and those who wish to invest without having to tell those concerned about low skilled immigration that they are wrong.

Getting rid of the net migration target is politically possible but only if it is done alongside new and better targets for different areas of inward migration – particularly the low-skilled. If it is, then not only does it allow for better targeted policy that will help appease those most vocally against immigration, it also allows for a better national conversation. Now is the time for a new, honest and better approach to how we reduce immigration.

Phoebe Griffith is Associate Director for Migration, Integration and Communities at IPPR