1.67 Shocks to confidence and credit conditions stemming from the euro area crisis are affecting the UK recovery. These problems are most acute for smaller and mid-sized companies that are most reliant on the banking system for finance. To complement the action taken by the Bank of England to support demand, the Government is launching a package of interventions worth up to £21 billion to ease the flow of credit to businesses that do not have ready access to capital markets, with scope to increase the scale of this package in future if necessary. The package includes up to £20 billion for the National Loan Guarantee Scheme and an initial £1 billion for the Business Finance Partnership. These measures are described in more detail in the next section of this chapter.
1.68 Credit easing will provide support to the economy. In the short term, it will relieve constraints on the supply of bank lending and enhance the demand for credit by reducing the price of loans for eligible companies. In the medium term, it will help to tackle the long-standing problems in the supply of finance to smaller and mid-sized businesses in the UK. The Government will continue to assess further options to increase the supply of credit to smaller and mid-sized businesses. Further progress will be announced at Budget 2012.
1.69 The impact of these measures on the fiscal aggregates will be determined in due course by the ONS. In this forecast, the OBR anticipate that the main transactions within the Business Finance Partnership are most likely to be treated as financial transactions, which do not directly impact on borrowing but do increase public sector net debt. For the National Loan Guarantee Scheme, the guarantees are expected to be recorded as contingent liabilities, which do not directly affect borrowing or debt unless they are called. The most likely outcome is that these schemes make a small positive return for the Exchequer.