It’s the credit story, stupid.

No one will admit it. It’s not surprising, really, because if they did they’d also have to admit that this time, the bankers aren’t entirely to blame (although they’re hardly blameless, but more later).

As has been reported to death, the banks are borrowing cheap and lending – erm, not. They’re not lending. Or not as much as they should be. The Bank of England hands out all this cheap money and the banks lap it up like a hungry cat. It’s hardly surprising. I don’t know many people who’d turn their nose up at cheap money.

But the point of this cheap money is for them to increase their own lending by passing it on to consumers and small businesses. Propping up both the housing market and the faltering economy with another stroke of Bank of England genius.

Except it’s not working. Sure, there are some mortgages getting out the door – for now – but all we ever seem to hear about are small businesses failing to get loans.

There are two reasons for this. The first one is the obvious one. If you’re a responsible business owner, and you can see the way the economy’s heading, then unless you’re confident you’ve got a way to buck the trend, why on earth would you even apply for the loan? And that’s the banks’ excuse, the line they’re all peddling at the moment: the better-quality business borrowers don’t want to borrow right now. That’s why small business lending is down.

What they don’t want to talk about, because, frankly, it’s embarrassing, and because they don’t want to be insulting people who might become decent customers eventually, is the other half of the equation. The business owners who aren’t responsible. The ones knocking on the door with an idea for a nursery in a quarry or a five-star hotel in a motorway service station. You can see why the banks don’t really want to lend to them. And you can see why they’re extra-cautious now, because they’ve been told, repeatedly, that they were reckless with their lending in the run-up to the crash.

The irony is that the very people telling them they were reckless and to improve their credit checks a few years ago are the same people now handing them a few billion and telling them to go blow it on whatever they want. Of course, it’s easy for the Treasury and the BoE to say that – the banks will still carry the risk on these hairy, scary loans, even if the money started with the BoE. But the banks can’t be seen to make the same mistake twice. The humiliation would be too much. So what can they do?

Well, here’s what they can do, if I may. If they’re not going to use this cheap money in the way it’s supposed to be used, they can stop using it at all. I’m sure it’s very tempting to stick around at the trough. Cheap money doesn’t usually grow on trees, after all. And sooner or later this Funding for Lending Scheme will come to an end, either because it’s served its purpose, or more likely because the BoE will be sick of giving out and getting nothing in return. Who knows how long the cheap money trough will be around? Best to slurp it up while it’s here, say the banks, best get as much we can before everyone else nabs it. In fact, some of the banks are spinning this one almost cleverly, claiming prudence for diversifying their funding sources, which would be a fair point were it not for the very fact that this particular funding source will eventually have an expiration date. As Northern Rock found, albeit at a different farm, you don’t want to be going back to the trough with an empty belly and find there’s nothing in it.

But really, for once, it would be helpful if everyone would come clean. The Treasury should admit they’re trying to push dodgy loans out in the hope of a lift to the economy, which would be laughable if it weren’t an exact replica of all those stupid short-sighted decisions that got us into this mess in the first place. The banks should admit they’re taking the money and holding onto it, because it’s cheap and there’s no way they’re going to be handing it out to someone whose idea of a business plan is a sketch of an interactive multimedia gallery in the middle of a muddy field with “Build it and They will come” across the bottom in 24-point comic extra bold.

And they should shake hands and quietly wind up the scheme and see if they can come up with something better. Because if they do, I promise I won’t trash it for at least, oh, a week.

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If you liked this, take a look at some extracts from my soon-to-be-published novel Without Due Care here.

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