Vince Cable on bank nationalisation

Vince Cable was one of the first to call, rightly, for the nationalisation of Northern Rock - and he received justified credit for that. He has a piece in The Times today arguing the position that Ken Livingstone and Socialist Economic Bulletin have been putting forward since last autumn regarding the extreme seriousness of the economic situation and that, therefore, if a counter-cyclical increase in bank lending is to be achieved the core of the UK banking system must be nationalised now.

Vince Cable argues: 'there is also widespread scepticism about whether the Government is still on the right track - it now looks like someone giving the kiss of life to a corpse. Yet it is only a few months since the Government “rescued” failing banks with interbank lending guarantees and a £37 billion recapitalisation package for RBS/NatWest and Lloyds/HBOS.

'The new bank lending that was expected to materialise has not done so. Large numbers of perfectly sound small, medium and large companies are being starved of working capital, aggravating the recession. The withdrawal of foreign banks is clearly a factor. But, in addition, UK banks have broadly taken the view that capital should be held against future losses, a strategy that may reassure shareholders but undermines the economy.'