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Osborne unveils new stimulus packages to boost ailing economy

 

The Bank of England and the Chancellor of the Exchequer have announced the launch of two new stimulus packages in a bid to kick-start lending to businesses.

 

The plans include a new ‘bank funding scheme’, which will provide banks with cheap funding in exchange for a commitment to provide cheap loans to ordinary businesses and households.

 

Speaking at the annual Mansion House dinner, the Bank of England Governor Sir Mervyn King said he expected the scheme to be up and running ‘within a few weeks’.

 

The Treasury said it hoped the initiative would increase annual lending by around £80bn.

 

The Bank also intends to activate an emergency scheme that offers six-month liquidity to banks in tranches of no less than £5bn a month.

 

‘Today's exceptional circumstances create a case for a temporary bank funding scheme to bridge to calmer times,’ Sir Mervyn said.

 

It is hoped the plans, worth £140 billion, will help to shelter the UK from the ongoing crisis in the eurozone and prevent the UK economy falling further into recession.

 

The Chancellor George Osborne claimed the stimulus packages would ‘support the flow of credit to where it is needed in the real economy’.

 

‘We are not powerless in the face of the euro-zone debt storm,’ he said. ‘We can deploy new firepower to defend our economy from the crisis on our doorstep. Funding for lending to the family aspiring to own their home and the business that wants to expand.’

 

Yet the shadow chancellor, Ed Balls, said the plans did ‘not go far enough’.