THE Treasury will today launch its £20 billion scheme to provide cheap loans to Britain's struggling businesses, stressing it is only possible because of the strength of the UK's fiscal credibility.
The money would almost certainly not be available to businesses north of the Border if Scotland were independent, the UK Government department will add.
It comes on the eve of Chancellor George Osborne's Budget, which will involve a political trade-off between the Conservatives and the LibDems. The former looks set to succeed in scrapping the 50p top rate of income tax with a drop to 45p next year and then to 40p by 2015. The latter seems certain to secure a "tycoon tax" plus a tax-free allowance of £10,000 a year earlier than planned in 2014.
Simon Hughes, the LibDem deputy leader, yesterday softened up his party grassroots by making clear the leadership was not committed to "hanging on" to the 50p top rate.
He said: "The whole priority is to make sure we have a Budget for the millions not for the millionaires."
One senior LibDem Coalition source told The Herald: "What we want is a Robin Hood Budget."
However, Ed Miliband insisted David Cameron's Coalition seemed more interested in cutting taxes for the rich than helping most low and middle income earners. "We would be concentrating on jobs and growth and we would be using every penny of scarce resources to help millions of hard-pressed families, who are struggling to make ends meet," said the Labour leader.
Today, as a precursor to his annual economic statement, Mr Osborne will launch the Coalition's National Loan Guarantee Scheme (NLGS), otherwise known as credit easing.
Four high-street banks will be taking part in the first phase – Royal Bank of Scotland, Lloyds, Santander and Barclays. HSBC, which offers loans not through the markets but through its deposits, is not taking part.
During the next two years, the four big banks will be able to take advantage of the low rates currently enjoyed by the UK Government and will make available £20bn in loans with £5bn offered in the first tranche.
Businesses with an annual turnover of up to £50 million will be able to apply for an NLGS loan at a discount of one percentage point compared with the interest rate they would otherwise have received from that bank outside the scheme. As an example, a business receiving a loan of £1 million could receive a discount up to £10,000 a year.
The Chancellor said: "The Government promised to help small businesses get access to lower interest rates; today we deliver on that promise with a nationwide scheme.
"It's only because we have earned credibility with our deficit reduction plan that we have low interest rates and it's only because of this scheme that we can pass the benefits of those low rates on to businesses."
Danny Alexander, the Chief Secretary to the Treasury, sought to place the new scheme in the context of the Scottish independence debate, saying: "From today thousands of Scottish small businesses will be able to seek out cheaper loans thanks to the UK Government's NLGS. This will help businesses save money and is only possible because the UK's fiscal credibility and record low interest rates."
A Treasury source added: "This is a benefit of being part of the UK. There is a massive question mark over whether an independent Scotland would be able to have the same low interest rates because it would be a new country with no track record."
Under the scheme, the UK Government will not guarantee individual loans to businesses but it will be the insurer of last resort should any bank fold.
The allocation of guarantees to each participating bank will be at the Treasury's discretion and based on factors such as market share, lending amounts and a bank's track record of lending to small businesses.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article