Government to boost business loans

The Government is ready to underwrite up to £40 billion in lending to cash-strapped businesses (Getty Images)

The Government is ready to underwrite up to £40 billion in lending to cash-strapped businesses in an attempt to kick-start Britain's flagging, Chancellor George Osborne said today.

Mr Osborne, who delivers his autumn statement on the economy on Tuesday, said that it was "an exceptionally difficult time" for the country,

Speaking on BBC1's The Andrew Marr Show, he said that he would use "every tool at our disposal" to get the economy going again, without jeopardising the UK's triple A credit rating.

Mr Osborne acknowledged that the independent Office for Budget for Responsibility was set to downgrade its predictions for economic growth when it publishes its latest forecasts on Tuesday.

"This is an exceptionally difficult time. We have a slowing economy, a slowing world economy, we have this financial crisis brewing in the Europe," he said.

While he insisted he was sticking to his "Plan A" deficit reduction programme to eliminate the structural deficit by the time of the next general election in 2015, he accepted further measures were needed to boost growth.

"Alongside that we have to lay the foundations of economic success in the future," he said.

"We will be setting out all these sorts of measures on Tuesday to get the private sector into a more competitive place so that actually British companies can compete now, not just against their European counterparts but against companies in China and India and America as well."

He said that initially £20 billion would be made available to business through the new National Loan Guarantee Scheme "but that sits within an envelope that could be as large as £40 billion".

"The Government will underwrite the loans the banks make to small businesses in order to cut the interest rates that small businesses pay. That will help with their cash flow, that will help them retain their workforces, that will help them expand and invest," he said.

While ultimately the taxpayer would stand behind the guarantees, Mr Osborne insisted that the risk to the public purse was low.

"I think this is actually relatively low risk for the Government, given the strength of our balance sheet and our low interest rates and the credibility we have got in the world," he said.

He added: "In all sorts of ways we are trying to, not as a nation deliberately borrow more money and risk our low interest rates, risk our AAA credit rating, but use absolutely every other tool at our disposal to get the British economy moving, to pull us out of the situation that many other countries find themselves in at the moment."

PA