If it hadn’t come from such a well respected source you’d immediately think this was bonkers. Lord Adair Turner, former head of the FSA, appearing on the BBC R4 World at One suggested a very simple but extraordinary move. But he did it in such an understated way that it seemed to pass by his interviewer.

What Turner suggested was that the Bank of England should effectively write off the almost a third (30.1%) of Government debt it holds. The BoE bought £375bn of government bonds with Quantitative Easing (QE) as a way of pumping money into the financial system.

It already gets no interest on these bonds – or rather it does but HM Treasury simply pays it with one hand and then takes it back with the other. This was how Chancellor George Osborne tried to pretend his deficit reduction policies were working better than the are, by including the £35bn of interest payments that HMT had ‘reclaimed’ in his debt and deficit numbers.

Lord Turner suggested that, as these bonds pay no interest, are not going to be repaid by the Government, they are effectively junk and can just be written off. This would reduce Britain’s £1,200bn debt by £357bn with dramatic effect.

Danny Blanchflower, the ex-MPC economist, has already suggested its a good idea on Twitter (after I posted Turner’s suggestion). Time for a serious debate methinks….