Plan to back £10bn business loans

26 November 2011 Last updated at 15:31 ET

Mr Osborne will deliver his autumn statement on Tuesday

Chancellor George Osborne will unveil a new government scheme to underwrite at least £10bn 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 will see the government underwriting banks' borrowing, allowing them to borrow more cheaply.

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

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".

Its aim is specifically to help small and medium enterprises (SMEs).

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.