The government is trying again to get the credit to small business flowing after plans to offer cheap loans to banks to encourage lending were revealed.
In his Mansion House speech last night the Chancellor George Osborne said that it had already taken steps, which include Project Merlin and measures in the last couple of budgets, but it could do more.
"We have used our balance sheet to support a large programme of credit easing for small businesses through our National Loan Guarantee Scheme," he added "But we can do more."
"In a period of financial stress, when private sector confidence is low, we can also use the credibility of the public sector balance sheet to support investment and the flow of credit now," he added.
The answer he said, devised in conjunction with the Bank of England, was to use the public sector's financial muscle to underwrite lending to the private sector.
"Together we can deploy new firepower to defend our economy from the crisis on our doorstep. Funding for lending to the family aspiring to own their home and the business that wants to expand," he added "The Government - with the help of the Bank of England - will not stand on the sidelines and do nothing as the storm gathers."
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