First mortgages, now the taxpayer underwrites business loans

Graham_Devon

Chancellor George Osborne will unveil a new government scheme to underwrite up to £20bn of loans to small businesses when he delivers his autumn statement on the economy on Tuesday.

The "credit easing" scheme is intended to prevent the British economy falling back into recession.

The plan sees the government underwrite banks' borrowing, allowing them to borrow more cheaply.

This saving should then be passed on to the firms through lower interest rates.

The credit easing scheme will see the government providing a guarantee for banks to borrow on the financial markets, with those institutions then obliged to pass on the cheap lending rates to small and medium-sized companies.

A Treasury source described the scheme, which is thought to be similar to the Labour government's credit guarantee scheme of 2008, as a "game changer".

It would mean that a firm currently taking out a £5m loan at a typical interest rate of 5% would instead be able to borrow at 4%, saving £50,000 a year in interest payments.

http://www.bbc.co.uk/news/uk-politics-15907249

What with underwriting mortgages, underwriting business loans and paying companies to take on staff it makes you wonder where on earth all this tough talk of austerity and cuts is now to be found.

This could be quite a good thing.

Unfortunately however, the risk is again, with the taxpayer. If it doesn't work due to anything outside the UK's control, such as the credit crunch of 2008, taxpayers could be facing a massive bill. Not only for the countries debt, but all this underwriting.

Labour state, again, this isn't enough. Nothing is ever enough for them.

Good news for the minions though! Train fares will now "only" go up 6%. I look forward to the announcement that we are now underwriting train companies.

reweird

You're a doom-monger and all you want to read and hear is about a housing and economy in distress. Thankfully in the real World there are people who think and care otherwise. This is good news. For you to infer it otherwise says more about you and your vested interested in seeing hard working families both jobless and homeless. You are a pathetic individual.

IronWolf

hmmm wait a minute. Allowing someone else to get loans very cheaply using your AAA credit rating, Im sure thats happened before......I cant remember how it ended though.....

What happens if the UKs credit rating goes to hell, all these businesses are screwed

wotsthat

Graham_Devon wrote: »

Unfortunately however, the risk is again, with the taxpayer. If it doesn't work due to anything outside the UK's control, such as the credit crunch of 2008, taxpayers could be facing a massive bill. Not only for the countries debt, but all this underwriting.

The risk is always with the taxpayer. I'm not going to knock the government for trying to get the economy moving.

Whether it works or not is another question. That will come down to who is deciding what loans are worth guaranteeing. Clearly if loans are being guaranteed for the sake of it the scheme will be doomed to failure.

Yorkie1

Didn't the government give the banks lots of money on the condition that they agreed to loan a certain amount to SMEs? And that hasn't happened, I believe. So, instead of getting the money back from the banks, the government just stumps up some more. And the bankers at the top just get richer.

Graham_Devon

Yorkie1 wrote: »

Didn't the government give the banks lots of money on the condition that they agreed to loan a certain amount to SMEs? And that hasn't happened, I believe. So, instead of getting the money back from the banks, the government just stumps up some more. And the bankers at the top just get richer.

Pricisely. £275bn QE not enough?

Begs the question...where did that money go and what did it do?