Back on the brink

Back then, it ultimately took £200bn, through quantitative easing, to keep the banks afloat following the credit crunch. Now the Bank is being forced to act because Britain appears to be on the brink of a double dip recession.

However Alistair Darling, who had the misfortune to be Chancellor through the first period of QE, made a key point yesterday. He said it would be a self-defeating exercise unless the money could reach those businesses, and households, who require loans for capital investment.

The problem, said Mr Darling, is getting the money to those most in need. He has his doubts. And so, too, does George Osborne, the current Chancellor who floated the idea at the Tory conference of a state-funded “credit easing” programme, though the details were vague and still need to be clarified.

Perhaps the QE money should be used to buy the nationalised RBS bank so this can be used as the means to fund Mr Osborne’s policy, and help businesses prosper in these uncertain times.

Given Labour leader Ed Miliband’s anecdote about a firm in his Doncaster constituency having to enter a partnership with a German company, and then acquire a loan from a German bank, it does suggest that the availability of credit is one reason why Britain’s recovery has been so sluggish.

Of course, there need to be safeguards – a limitless supply of credit precipitated the financial collapse of three years ago.

Yet the stranglehold that the banks now have on the economy, in spite of their taxpayer support, threatens to bring about a second recession unless this credit logjam can be eased.