Thank you Maxsteam. You confirm my surmise, it's a bit of smoke & mirrors.

One arm of the government will lend a limited amount to a bank at 2%. Anyone else expects between 3.5% and 14% (another arm of the government, forcefeeding unwanted "capital" to meet whimsical rules).

The really depressing bit of this saga is that the opinion polls, and other threads on this site, suggest that the great british public are stupid enough to fall for it.

It is the rate at which the Bank of England will lend to other banks. There is, of course, a limit on how much will be lent. At the moment banks (or anyone else) can lend to the government and get about 3½%.

Banks get a large proportion of their money from savers and in order for this money to keep coming in (rather than being invested in shares, gold, paintings, stamps, etc), they are currently paying over 5%. Much of their profits come from lending money out at a higher interest rate than is paid to savers.

IMHO, the lowering of the base rate and the talk about wanting lenders to lend at around 2% is mainly just to make the government look like the good guys and to set the banks up as the bad guys.