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.

Getty
Show Hide image

The decline of the north's sporting powerhouse

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Now, things are different.

On a drive between Sheffield and Barnsley, I spotted a striking painting of the Kes poster. Billy Casper’s two-fingered salute covered the wall of a once-popular pub that is now boarded up.

It is almost 50 years since the late Barry Hines wrote A Kestrel for a Knave, the novel that inspired Ken Loach’s 1969 film, and it seems that the defiant, us-against-the-world, stick-it-to-the-man Yorkshireness he commemorated still resonates here. Almost two-thirds of the people of south Yorkshire voted to leave the EU, flicking two fingers up at what they saw as a London-based establishment, detached from life beyond the capital.

But whatever happened to Billy the unlikely lad, and the myriad other northern characters who were once the stars of stage and screen? Like the pitheads that dominated Casper’s tightly knit neighbourhood, they have disappeared from the landscape. The rot set in during the 1980s, when industries were destroyed and communities collapsed, a point eloquently made in Melvyn Bragg’s excellent radio series The Matter of the North.

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Yet today, we rarely get to hear the voices of Barnsley, Sheffield, Doncaster and Rotherham. And the Yorkshire sporting powerhouse is no more – at least, not as we once knew it.

This should be a matter of national concern. The White Rose county is, after all, the home of the world’s oldest registered football club – Sheffield FC, formed in 1857 – and the first English team to win three successive League titles, Huddersfield Town, in the mid-1920s. Hull City are now Yorkshire’s lone representative in the Premier League.

Howard Wilkinson, the manager of Leeds United when they were crowned champions in 1992, the season before the Premier League was founded, lamented the passing of a less money-obsessed era. “My dad worked at Orgreave,” he said, “the scene of Mrs Thatcher’s greatest hour, bless her. You paid for putting an axe through what is a very strong culture of community and joint responsibility.”

The best-known scene in Loach’s film shows a football match in which Mr Sugden, the PE teacher, played by Brian Glover, comically assumes the role of Bobby Charlton. It was played out on the muddy school fields of Barnsley’s run-down Athersley estate. On a visit to his alma mater a few years ago, David Bradley, who played the scrawny 15-year-old Billy, showed me the goalposts that he had swung from as a reluctant goalkeeper. “You can still see the dint in the crossbar,” he said. When I spoke to him recently, Bradley enthused about his lifelong support for Barnsley FC. “But I’ve not been to the ground over the last season and a half,” he said. “I can’t afford it.”

Bradley is not alone. Many long-standing fans have been priced out. Barnsley is only a Championship side, but for their home encounter with Newcastle last October, their fans had to pay £30 for a ticket.

The English game is rooted in the northern, working-class communities that have borne the brunt of austerity over the past six years. The top leagues – like the EU – are perceived to be out of touch and skewed in favour of the moneyed elites.

Bradley, an ardent Remainer, despaired after the Brexit vote. “They did not know what they were doing. But I can understand why. There’s still a lot of neglect, a lot of deprivation in parts of Barnsley. They feel left behind because they have been left behind.”

It is true that there has been a feel-good factor in Yorkshire following the Rio Olympics; if the county were a country, it would have finished 17th in the international medals table. Yet while millions have been invested in “podium-level athletes”, in the team games that are most relevant to the lives of most Yorkshire folk – football, cricket and rugby league – there is a clear division between sport’s elites and its grass roots. While lucrative TV deals have enriched ruling bodies and top clubs, there has been a large decrease in the number of adults playing any sport in the four years since London staged the Games.

According to figures from Sport England, there are now 67,000 fewer people in Yorkshire involved in sport than there were in 2012. In Doncaster, to take a typical post-industrial White Rose town, there has been a 13 per cent drop in participation – compared with a 0.4 per cent decline nationally.

Attendances at rugby league, the region’s “national sport”, are falling. But cricket, in theory, is thriving, with Yorkshire winning the County Championship in 2014 and 2015. Yet Joe Root, the batsman and poster boy for this renaissance, plays far more games for his country than for his county and was rested from Yorkshire’s 2016 title decider against Middlesex.

“Root’s almost not a Yorkshire player nowadays,” said Stuart Rayner, whose book The War of the White Roses chronicles the club’s fortunes between 1968 and 1986. As a fan back then, I frequently watched Geoffrey Boycott and other local stars at Headingley. My favourite was the England bowler Chris Old, a gritty, defiant, unsung anti-hero in the Billy Casper mould.

When Old made his debut, 13 of the 17-strong Yorkshire squad were registered as working-class professionals. Half a century later, three of the five Yorkshiremen selec­ted for the last Ashes series – Root, Jonny Bairstow and Gary Ballance – were privately educated. “The game of cricket now is played in public schools,” Old told me. “Top players are getting huge amounts of money, but the grass-roots game doesn’t seem to have benefited in any way.”

“In ten years’ time you won’t get a Joe Root,” Rayner said. “If you haven’t seen these top Yorkshire cricketers playing in your backyard and you haven’t got Sky, it will be difficult to get the whole cricket bug. So where is the next generation of Roots going to come from?” Or the next generation of Jessica Ennis-Hills? Three years ago, the Sheffield stadium where she trained and first discovered athletics was closed after cuts to local services.

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era