Osborne: Up To £40bn In Loans For Firms

Chancellor George Osborne has said the Government is ready to make up to £40bn in loans available to cash-strapped firms in an attempt to kick-start the UK economy.

Mr Osborne is preparing to unveil a string of measures in his Autumn Statement on Tuesday aimed at easing the pressure on businesses and commuters.

They are set to include credit easing for smaller firms, a limit on rail fare rises and possibly a freeze in fuel duty.

Mr Osborne confirmed plans to underwrite up to £20bn of bank lending to businesses in a bid to avoid Britain sliding back into recession.

He said the money would be made available through the new National Loan Guarantee Scheme "but that sits within an envelope that could be as large as £40bn".

Treasury sources are describing the move, part of which will involve the Government underwriting the cost of banks' borrowing on financial markets, as a "game changer".

The aim is that banks will be able to borrow more cheaply if their borrowing is backed by the Government and that their savings will be passed on to companies.

Ministers hope to get the "credit easing" scheme up and running by the beginning of next year, with the intention that it will run for the next two years.

The Chancellor said it was "an exceptionally difficult time" for the country.

Speaking on BBC1's The Andrew Marr Show, he said that he would use "every tool at our disposal" to get the economy going again, without jeopardising the UK's triple A credit rating.

He is also set to announce help for struggling commuters with a cap on planned increases in peak-time rail fares.

Regulated rail fares - such as peak and season tickets - will rise by 6.3% next year instead of a planned 8.2% increase.

The cap will also cover the London Underground and London bus fares and will cost the Treasury £300m over the next three years.

Details of how the scheme will be paid for have not been set out, although the Government has insisted the overall spending envelope has not been changed.

There has also been speculation Mr Osborne could freeze or delay a 3p rise in fuel duty, which is due to take effect in January, but it is understood this is still under discussion.

The Autumn Statement is seen as crucial as the UK battles to avoid a double-dip recession after weeks of dire economic figures and as the eurozone crisis continues.

But Mr Osborne's measures could be overshadowed by yet more grim data due out on Tuesday as the Office for Budget Responsibility (OBR) publishes its growth forecasts.

Predictions of an extra 100,000 public sector job cuts are expected, which is likely to mean more pain in areas already struggling with unemployment.

And the economic watchdog is set to slash its predictions for gross domestic product (GDP) growth for the next few years and forecast higher Government borrowing.

It is believed GDP forecasts for 2011 will be cut from 1.7% to around 0.9% and from 2.5% to around 1.2% for 2012.

While he insisted he was sticking to his "Plan A" deficit reduction programme to eliminate the structural deficit by the time of the next general election in 2015, he accepted further measures were needed to boost growth.

"Alongside that we have to lay the foundations of economic success in the future," he said.

"We will be setting out all these sorts of measures on Tuesday to get the private sector into a more competitive place so that actually British companies can compete now, not just against their European counterparts but against companies in China and India and America as well."

Shadow chancellor Ed Balls and shadow business secretary Chuka Umunna, in a joint letter to Mr Osborne, have warned the credit easing measures alone will not be enough to kick-start growth.

The pair said: "At the current rate, over 1,200 people a day are entering unemployment. 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."

:: Watch a special two-hour edition of Jeff Randall Live on Monday on Sky News from 7-9pm and the statement live on Sky on Tuesday.