Though Cowards Flinch

I’ve been following the National Loan Guarantee Scheme.  Well, someone has to.

In his Autumn Statement, announcing the scheme, Osborne was specific about the reduced costs for businesses:

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.

Paul Myners (Lab) has been following it too in the Lords.  Hence his written question:

To ask Her Majesty’s Government whether they expect their proposed programme of credit easing to lead to a reduction of one percentage point in the rate of interest being charged to companies, as forecast in the Autumn Statement on 29 November 2011, or to lead to a small reduction as indicated in HM Treasury’s publication of 6 December 2011 on the national loan guarantee scheme.

 Commercial Secretary to the Treasury (Lord Sassoon) replied:

The national loan guarantee scheme, as announced in the Chancellor’s Autumn Statement, will lead to a reduction of loan interest rates to smaller businesses by up to 1 percentage point.

Lord Sassoon is lying.  Osborne didn’t say “up to 1 percentage point”.  He said ”1 percentage point.”  That small difference makes thousands of pounds difference to small companies.*

So did Osborne also make a false statement to the Chamber?  Time will tell, but I think he probably did.**

*A quick calculation on the loss of savings to businesses suggests that if the interest rate cut ends up at, say, 0.5% rather than 1% on the £20bn scheme, this will cost businesses £100m, at presumably crucial times in their survival/growth.

** It will be interesting to see if the 1% rate cut forecast by Osborne is actually accounted for in the guarantee part of the scheme, but lowered en route to businesses up as banks charge administration costs etc..