The idea is unusual in the sense that it is the fourth of its type and two of previous ones were also announced this year. Essentially it is another attempt to help businesses borrow funds and so grow.
Leaving aside the previous, presumably inadequate, measures this one involves a new government owned bank. It will have £1bn of public money and some private sector money. It hopes to help small and medium sized businesses to borrow long term (around 10 years).
The problem, as before, is that the high street banks (such as Lloyd's and HSBC) are short of cash and risk averse. They are reluctant to lend to small and medium size businesses long term and so these firms cannot undertake new projects that take years to repay their investment.
The aim is to provide greater certainty.
Certainty for the high street banks - they can pass loans on to this new 'CableBank' and remove the risk from their balance sheets. In this case they will be much happier to agree long term loans as they remove the risk of default.
Certainty for small and medium sized businesses as they can borrow at an agreed rate for a period that makes investing safer. No firm wants to have the risk of losing their funding or seeing a hike in interest rates part way through an expansion.
So overall this will help? Like all supply-side policies it will take time to work. It will be 18 months before this bank can start operating and then more time before enough loans can be made to really make a difference. If the economy isn't growing by then nothing may help!
The BBC report the scheme here and there is a link to Robert Peston's blog where he doubts its effectiveness
This seems like a really good idea because it will allow people and smaller businesses to invest in themselves and each other in order to help grow the economy. It may even revive the dead British industries like Car manufacturing. I think if this is handled correctly, we will not need to import as much from China, as a far higher percentage of consumer products will be produced by British companies and people, hence giving our country more strength in its own economy. (which would be nice also we don't have to be so polite to China when they do things clearly not allowed)
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