Hester: Money has been printed to fund the deficit

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One of the most intriguing things Stephen Hester told me today is what he thinks of the Bank of England's programme of printing money.

We're used to hearing an explanation of how it works from the bank and from the government.

It has been sold to us as an attempt to get the banks to lend out cash to keep the economy afloat.

But the boss of the bank who lends more than any other to businesses in this country - and not nearly enough by many people's accounts - views the programme of printing cash rather differently.

In very simple terms he thinks the Bank has printed money to finance the deficit. This is what he had to say:

“What the Bank of England does in quantitative easing is it prints money to buy government debt, and so what has happened is the government has run a huge deficit over the past three years, but instead of having to find other people to lend it that money, the Bank of England has printed money to pay for the government deficit.

"If that QE hadn't happened then the government would have needed to find real people to buy its debt.

"So the Quantitative Easing has enabled governments, this government, to run a big budget deficit without killing the economy because the Bank of England has financed it.

"Now you can't do that for long because people get wise to it and it causes inflation and so on, but that's what it has done: money has been printed to fund the deficit."

Lots more to come from Hester in my reports later on ITV News.