AT a dinner recently I got into conversation with Lord Macpherson of Earl’s Court, formerly Sir Nicholas Macpherson, permanent secretary of HM Treasury from 2005 to 2016 and so the closest adviser to three Chancellors: Gordon Brown, Alistair Darling, George Osborne.

In Scotland, Macpherson is most famous or infamous for the damning way he pricked, during the referendum campaign in 2014, the SNP’s claim that the independent nation might maintain a currency union with the remaining UK.

At a crucial juncture he prompted Osborne to come to Edinburgh and denounce the very idea: it was just not on because independent Scotland and rUK would move further apart over the whole range of policy, whereas a currency union would work only if they stayed close together. From that blow the Yes side’s arguments on the currency never recovered.

At my dinner I had expected to encounter the usual kind of renegade Scotsman, for I knew Macpherson’s family has its origins in the West Highlands, where his parents and sister still live. Yet this expectation was disappointed. I think the Earl’s Court part of the noble title must be its holder’s little joke, for he is a waggish kind of fellow, not the remote and autocratic mandarin at all: bit of a lefty besides, also the father of Fred Macpherson, lead singer with the indie rock band Spector. Macpherson senior has grown a modish beard since he left the civil service, and flaunts a Dr Who scarf. He was easy to get on with. After some banter I felt bold enough to ask: “And what currency should an independent Scotland use?”

He came straight back: “It should have its own currency – the Scottish pound, or whatever we choose to call it.” He thought the only real difficulty might lie in the transition from sterling, which would require careful management. On this aspect I found that his views coincide pretty well with my own, as I have set them out in my column before.

This week, then, let’s turn to a different angle of an interesting and versatile fellow’s outlook. Still young at heart, Macpherson is at home in the world of Twitter and a few days ago he put up a post in his best hip style: “QE like heroin: need ever increasing fixes to create a high. Meanwhile, negative side effects increase. Time to move on.”

QE here means quantitative easing, the centrepiece of policy in the Treasury while Macpherson was running it. A response to the great financial crisis, it meant in its crudest form that as much money should be printed as the commercial banks might need in order to bolster their balance sheets and save themselves from bankruptcy. The UK Government’s hope was that in turn they would become readier to lend the money to their hard-pressed customers, and ease the squeeze on these that had followed on from the financial meltdown. If businessmen, they might invest for the future, hire workers and produce more. If consumers, they might go out and start spending, and in this way get the economy on the move again.

Ten years later, the hope has proved vain, though not for want of trying. The Bank of England’s original £200 billion injection of cash quickly escalated to peak at £435bn last year following the Brexit vote, after which it coughed up an extra £60bn. By the old theories of monetarism, this should have sparked off a huge boom, with raging inflation to match. Instead the whole exercise has fallen flat.

We do not really have grand economic theories any more, or at least none very clearly explaining anything. What we can see is the behaviour of the banks sitting on all that money, those very banks which put us in this hole in the first place. For operations of their own they use the money with impunity and free of charge. That is, they pay no interest to depositors, while in the worst cases demanding 28 per cent from the holders of credit cards who exceed their borrowing limits. At the same time top bankers, often in charge of loss-making operations, get huge bonuses. They refuse to hear of any separation between their investment and their retail activities, so that they remain in theory entitled to gamble their customers’ small savings on the international money markets once again. If the Government argues, they threaten to leave the City of London for Dublin or Frankfurt.

The original ideal of QE was different. As Macpherson conceived it, it would have brought a sort of stand-off between government and people, where the maintenance of austerity on the one side found its compensation on the other side in interest-free borrowing and the expenditure it financed. And so the UK economy might have come back from its slump and started to prosper again. Instead there has just been stagnation. Business has hardly pulled out of the doldrums, and is investing little. Consumers have suffered a fall in their real wages, and remain too scared of the future to go on any spending sprees.

Macpherson’s negative side effects are especially obvious among two social groups. The pensioners are one, especially those needing to rely on the savings they built up during their working lives. These savings now yield no income, while the capital value is being eroded by the post-Brexit rise in inflation. Before long the signs of pensioner poverty will again become distressingly obvious. Yet the UK government views the plight of these people, so far as I can see, with total indifference.

A second policy that desperate UK governments have followed has been the deliberate creation of asset bubbles, especially in housing, which are meant to make homeowners feel rich enough for a splurge – but this has not worked either.

Such a distortion of the market has the obvious downside that, however many houses we build, they do not after their completion make the economy produce more, while a new factory does.

The main result of the policy has been rather to render it all but impossible for young couples to follow their elders on the housing ladder. They may remain stuck in rented accommodation while they defer marriage and children. If they ever win through their log-jam of problems, they have now not even a guarantee they will get a pension at the end of their working lives.

This is because private pension funds often put the income they receive from their premiums into gilt-edged stock, that is, into the bonds issued by governments to fund their own deficits. These are rock-solid investments but, in an era of zero interest rates, they have also seen their yields cut to the point where they no longer keep the pension scheme valuations in surplus. More then needs to be invested to prop up the funds and ensure they are solvent.

As a result the contributing companies have less money available to improve their own productivity, in other words, for capital investment in the modern plant and technology that will increase output and jobs. QE, which appeared to be our salvation 10 years ago, turns out to have starved the UK economy of fresh capacity. We end up with less efficient industry, lower output and a deskilled workforce. This is what Macpherson means.

For Scotland, my solution is that we should get the hell out of this mess, and start over again on our own. Economic growth is what will eventually crack all the problems bequeathed to us from the lost decade of stagnation: the faster the growth, the quicker the solution. At least the Scottish government, having been during the same decade nonchalant on the need for growth, now seems to be waking up.

The First Minister, instead of just glorying in her expenditure, has even spoken of reducing her deficit to the 3 per cent of gross domestic product which will be the limit set by the terms of the independent nation’s entry to the EU. At least some positive words can be faintly heard. Next there needs to be positive action.