Though Cowards Flinch

On November 29th, in his Autumn statement, Chancellor Osborne announced a credit easing programme to replace the failed Project Merlin:

We are launching our national loan guarantee scheme…….New loans and overdrafts to businesses with a turnover of less than £50 million will be eligible for the scheme, so that it stays focused on smaller companies. We expect that it will lead to reductions of 1 percentage point in the rate of interest being charged to these companies so a business facing a 7% interest rate to get a £5 million loan could instead see its rate reduced to 6% and its interest costs fall by up to £50,000 (my emphasis).

On 6th December, HM Treasury published some initial details on how the National Loan Guarantee Scheme will work.  These include:

In many cases the scheme will lead to a reduction in the cost of business loans of up to 1 percentage point.

So 0.75%? 0.5%?

That looks a lot like rowing backwards to me, following discussions with the banks on how the scheme is going to be implemented.

As with Project Merlin, the devil will be in the detail, but the initial signs are not good. Watch this space.