Osborne wants loan scheme for businesses

Pressure on Brown to unblock lending freeze from banks to companies

Ten firms will go bust every day unless the Government unblocks the logjam in bank lending to business, the Conservatives have warned.

George Osborne, the shadow Chancellor, announced that the Tories will force a vote in Parliament on their plan for a £50bn scheme of government loan guarantees to ensure banks lend to companies. It will be proposed in an amendment to the Banking Bill, which will be debated in the House of Lords on 20 January.

The Opposition's move could put ministers on the defensive. They promised a £1bn scheme in November but are still working out the details, prompting criticism that their much-trumpeted banks rescue last autumn has failed to get credit flowing.

Mr Osborne said the Tory proposal presented Gordon Brown with a clear choice: "He can support the radical action needed to limit the effects of the recession or he can continue to achieve nothing." The shadow Chancellor cited data showing that the number of company liquidations rose to 304 a week in the third quarter of last year. "That's almost 10 businesses a day going under because of the credit crunch. Every day that Gordon Brown dithers, he is putting at risk people's jobs and livelihoods and futures," he told the Policy Exchange think-tank.

He said that the Tory scheme would not add to public spending because firms would pay a fee to take advantage of the loans to protect taxpayers. Ministers, however, insist the plan would not be "cost free". Lord Mandelson, the Business Secretary, said the Tories were "catching up" with the Government, which had already announced its scheme to help small firms. And Mr Brown that said the Government would meet bank bosses in the next few days. He said: "What we've now got to make sure is that we help savers in the economy, and that banks are consistent in lending."

However, Labour MPs are increasingly worried the banks are not lending. John McFall, the chairman of the Treasury Select Committee, called yesterday for a "state bank" or lending institution to be set up. He warned it that could take two years for banks to stop the contraction in lending. Mr McFall said: "We have seen savers flock to trusted, publicly owned institutions such as Northern Rock, the Post Office and National Savings as well as mutual organisations. The Government is well aware of the level of public trust that exists for these institutions."

Mr Brown will hold a "jobs summit" on Monday and the following day the Government will unveil a New Opportunities White Paper on the "jobs of the future". John Denham, the Skills Secretary, will bring in £500 training grants for people who return to work after taking time out to bring up children or care for a relative.

Mr Denham also revealed yesterday that graduates who are unable to get a job could be offered low-paid internships – earning just above the student income from grants and loans – with large firms, including Barclays and Microsoft. "At the end, they will be more employable ... Employers won't want to let good people go," he told The Daily Telegraph.

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