By Vivienne Russell | 29 November 2011
An ‘ambitious’ programme of credit easing will give small businesses access to loans at lower interest rates, the chancellor announced today.
Over the next two years, a National Loan Guarantee Scheme will provide £20bn of guarantees for bank lending to businesses with a turnover of less than £50m.
It will operate on the ‘simple principle’ that the low interest rates the government enjoys will be used to help stimulate the domestic economy, George Osborne said.
‘A business facing a 7% interest rate to get a £5m loan could instead see their rate reduced to 6% and their interest costs fall by up to £50,000.’
The Treasury has worked out a mechanism with the Bank of England to allocate funding to banks based on how much they increase lending to firms. An audit trail will ensure the banks comply.
Alongside this, a £1bn Business Finance Partnership will invest in small and mid-sized businesses through non-banking channels.
Planned rail fare and fuel duty increases are also to be deferred to help people cope with rising living costs.
Osborne said rail fare increases of 3% on top of the Retail Prices Index were ‘too much’. He limited any rise to RPI plus 1%, across all National Rail fares, and the London tube and buses.
Plans for fuel duty to be 3p higher in January and 5p higher in August ‘would be tough for working families at a time like this’, the chancellor said.
‘So despite all the constraints that are upon is, we are able to cancel the duty increase planned for January and for fuel duty from August to be only 3p higher than it is now.
‘Taxes on petrol will be a full 10% lower than it would have been without our action in the Budget and this autumn.’
Free nursery care is also to be expanded. The offer of 15 hours free education and care for disadvantaged two-year olds is to be extended to cover another 130,000 children, doubling the number previously eligible.
Osborne said education and early years learning was ‘how you change the life chances of our least well off and genuinely lift children out of poverty’.
Alison Garnham, chief executive of the Child Poverty Action Group, said the extension of early years education was welcome but criticised Osborne’s decision to cancel the increase in Child Tax Credit, which was also announced.
Nursery education was ‘no silver bullet for ending child poverty if children are made poorer at home’, she said.
