The Libor rate is the average interest rate charged by banks when lending to each other. It should be near the Bank of England inter-bank rate, which was cut by 0.5% the other day. The result: Libor actually went up, not down.

It does strike me that one way to fix the problem would simply be to ban UK banks from borrowing from each other, and force them to borrow from the Bank of England (BoE). To some extent that's what is already happening, so why not formalize it, and make all that lending to be at a commercial rate from the BoE. The volume of bank lending becomes controlled, as does the rate, and the measure of risk considered acceptable.