It would be nice to be able to say that the deliberations of the Independent Banking Commission were fresh thinking from truly independent authorities. But they are nothing of the sort. On the contrary, Vickers- who was appointed the Bank of England's chief economist on King's personal say-so-shares the same mistaken premises as King and his senior Bank of England colleagues. They all have an obsessive and ideological attitude towards bank capital and the supposed imperative to de-risk the banking system; they do not care enough about the implications of their decisions for the quantity of money. The message must be reiterated. If banks are required to hold more capital relative to their assets, the quantity of money will stagnate and the economy will struggle to grow.

That is a proposition in economic theory; it is also a basic fact for the party political debate. Osborne should be far more pragmatic and easygoing in his approach to the banks than Gordon Brown and Alistair Darling. If he accepts the Vickers prescription of yet further increases in banks' capital and continued shrinkage of their risk assets, two or three more years of sluggish money growth are to be expected. The economy may recover, but it will not pick up enough speed before the next general election to reduce unemployment and establish a feel- good factor for the Conservatives. 

And just how sharp are Osborne's (and Cameron's) political antennae? Risk assets include the bank lending to small and medium-size enterprises about which so many crocodile tears are shed. But they also include mortgage loans for the purchase of houses by the British middle classes. If Vickers's recommendations are adopted in full and without reservation, banks and building societies will be more reluctant to help "middle Britain" to acquire its favourite asset. 

Much went wrong in the 1980s, or so we are told. But much went right too, and Margaret Thatcher and her supporters appreciated the importance of a vibrant housing market and growing mortgage lending to their electoral fortunes.