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Osborne plans billions in 'credit easing' loans | Osborne plans billions in 'credit easing' loans |
(about 2 hours later) | |
Chancellor George Osborne will unveil plans to underwrite £20bn of loans to small businesses when he delivers his autumn statement on Tuesday. | |
Under the "credit easing" scheme, aimed at boosting growth, the government would underwrite banks' borrowing so they could 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. |
But shadow chancellor Ed Balls said access to credit alone would not be enough to restore business confidence. | |
Mr Osborne's scheme would see the government provide a guarantee for banks to borrow on the financial markets. | |
Those institutions would then be obliged to pass on the cheap lending rates to small and medium-sized companies. | |
A Treasury source described the scheme, which is said 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." | |
'Positive move' | 'Positive move' |
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. | |
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 would 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." | |
Are you a small business? What do you think of the scheme? Will it help you? Send us your comments and experiences using the form below. | Are you a small business? What do you think of the scheme? Will it help you? Send us your comments and experiences using the form below. |