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UK to aid small firms with US$31b loans
Source: Agencies |
November 28, 2011, Monday
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Print Edition
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BRITAIN will underwrite 20 billion pounds (US$31 billion) of loans to smaller companies to boost the economy, while sticking to a strict austerity program, Finance Minister George Osborne said yesterday.
Osborne is under pressure to find ways to revive a stagnant economy and avoid a return to recession without affecting a deficit-cutting spending squeeze.
The "credit easing" program is expected to form the centerpiece of Osborne's autumn budget statement to parliament tomorrow, which will also detail plans to funnel billions of pounds of private investment into infrastructure projects.
The government will back loans to be made by banks to small- and medium-sized companies to cure a shortage of credit that has hampered Britain's economic recovery.
"We are making available 20 billion pounds for the National Loan Guarantee Scheme, however it sits within an envelope that could be as large as 40 billion pounds," Osborne told BBC television.
He said the government's backing would help cut the interest rates firms pay on their loans by 1 percent.
Osborne and his coalition government have staked its reputation on eliminating a budget deficit that was a record 11 percent when it came to power last year by implementing the deepest spending cuts in a generation.
That has limited his room for manoeuvre, cutting off the route of greater deficit-funding to stimulate growth and drawing criticism from the Labour opposition who say the austerity programme is too tight and should be relaxed.
The neighbouring eurozone crisis has compounded the challenge, with the government's fiscal watchdog expected to follow other forecasters next week by slashing its growth outlook for 2012 by more than half.
The British economy has barely grown over the past 12 months, with households cutting spending as wages fall behind inflation and unemployment rises.
The Ernst & Young ITEM Club, which bases its quarterly report on finance ministry models, downgraded its 2011 growth forecasts on Sunday to 0.9 percent from the 1.4 percent it predicted three months ago.
Osborne is under pressure to find ways to revive a stagnant economy and avoid a return to recession without affecting a deficit-cutting spending squeeze.
The "credit easing" program is expected to form the centerpiece of Osborne's autumn budget statement to parliament tomorrow, which will also detail plans to funnel billions of pounds of private investment into infrastructure projects.
The government will back loans to be made by banks to small- and medium-sized companies to cure a shortage of credit that has hampered Britain's economic recovery.
"We are making available 20 billion pounds for the National Loan Guarantee Scheme, however it sits within an envelope that could be as large as 40 billion pounds," Osborne told BBC television.
He said the government's backing would help cut the interest rates firms pay on their loans by 1 percent.
Osborne and his coalition government have staked its reputation on eliminating a budget deficit that was a record 11 percent when it came to power last year by implementing the deepest spending cuts in a generation.
That has limited his room for manoeuvre, cutting off the route of greater deficit-funding to stimulate growth and drawing criticism from the Labour opposition who say the austerity programme is too tight and should be relaxed.
The neighbouring eurozone crisis has compounded the challenge, with the government's fiscal watchdog expected to follow other forecasters next week by slashing its growth outlook for 2012 by more than half.
The British economy has barely grown over the past 12 months, with households cutting spending as wages fall behind inflation and unemployment rises.
The Ernst & Young ITEM Club, which bases its quarterly report on finance ministry models, downgraded its 2011 growth forecasts on Sunday to 0.9 percent from the 1.4 percent it predicted three months ago.
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