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| Osborne plans billions in 'credit easing' loans | |
| (40 minutes later) | |
| Chancellor George Osborne will unveil a new government scheme to underwrite up to £20bn of loans to small businesses when he delivers his autumn statement on the economy on Tuesday. | Chancellor George Osborne will unveil a new government scheme to underwrite up to £20bn of loans to small businesses when he delivers his autumn statement on the economy on Tuesday. |
| The "credit easing" scheme is intended to prevent the British economy falling back into recession. | The "credit easing" scheme is intended to prevent the British economy falling back into recession. |
| The plan sees the government underwrite banks' borrowing, allowing them to borrow more cheaply. | The plan sees the government underwrite banks' borrowing, allowing them to borrow more cheaply. |
| This saving should then be passed on to the firms through lower interest rates. | This saving should then be passed on to the firms through lower interest rates. |
| The credit easing scheme will see the government providing a guarantee for banks to borrow on the financial markets, with those institutions then obliged to pass on the cheap lending rates to small and medium-sized companies. | |
| A Treasury source described the scheme, which is thought to be similar to the Labour government's credit guarantee scheme of 2008, as a "game changer". | A Treasury source described the scheme, which is thought to be similar to the Labour government's credit guarantee scheme of 2008, as a "game changer". |
| It would mean that a firm currently taking out a £5m loan at a typical interest rate of 5% would instead be able to borrow at 4%, saving £50,000 a year in interest payments. | It would mean that a firm currently taking out a £5m loan at a typical interest rate of 5% would instead be able to borrow at 4%, saving £50,000 a year in interest payments. |
| Ministers hope the scheme will be in operation by the start of the new year, and it is envisaged it will run for the next two years. | Ministers hope the scheme will be in operation by the start of the new year, and it is envisaged it will run for the next two years. |
| 'Not enough' | 'Not enough' |
| A second smaller scheme will see the establishment of an investment fund with private sector investors, such as pensions funds, to provide a source of loans for larger firms which is not bank-related. | A second smaller scheme will see the establishment of an investment fund with private sector investors, such as pensions funds, to provide a source of loans for larger firms which is not bank-related. |
| In a joint letter to Mr Osborne, shadow chancellor Ed Balls and shadow business secretary Chuka Umunna warned that the credit easing alone would not be enough to revive economic growth. | In a joint letter to Mr Osborne, shadow chancellor Ed Balls and shadow business secretary Chuka Umunna warned that the credit easing alone would not be enough to revive economic growth. |
| "At the current rate, over 1,200 people a day are entering unemployment," said the letter. | "At the current rate, over 1,200 people a day are entering unemployment," said the letter. |
| "Businesses are going bankrupt at a faster rate than a year ago - despite your expressed wish for a private sector-led recovery. Access to credit will not in itself restore the confidence of business to invest. The country urgently needs a plan for growth and jobs." | "Businesses are going bankrupt at a faster rate than a year ago - despite your expressed wish for a private sector-led recovery. Access to credit will not in itself restore the confidence of business to invest. The country urgently needs a plan for growth and jobs." |
| Mr Osborne is also due to announce a cap on rises for regulated rail fares, such as peak fares and season tickets. | Mr Osborne is also due to announce a cap on rises for regulated rail fares, such as peak fares and season tickets. |
| A planned rise of 8.2% - RPI inflation of 5.2% +3% - will be restricted to 6.2% (RPI +1%), with the cap also covering bus and tube fares in London. | A planned rise of 8.2% - RPI inflation of 5.2% +3% - will be restricted to 6.2% (RPI +1%), with the cap also covering bus and tube fares in London. |
| The Association of Train Operating Companies described the plan as a "positive move" for passengers. | The Association of Train Operating Companies described the plan as a "positive move" for passengers. |
| "Train companies are ready to work hard to ensure that a government decision on fares is able to be implemented in time for the New Year," said a spokesman. | |
| The Treasury said its credit easing plan will not add to the country's deficit, according to BBC political correspondent Carole Walker. | |
| Our correspondent said: "They are sticking to that deficit reduction plan, but I think the chancellor does still face a lot of questions about how he is going to pay for things like those lower than expected rail fares and that plan to tackle youth unemployment that we heard about." |