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Chancellor set to extend Funding for Lending scheme


Chancellor George Osborne is expected to announce an extension to the Funding for Lending scheme in the coming weeks, according to reports.

The BBC reports an extension to the £80bn scheme, which is currently set to expire in January 2014, may be announced ahead of the International Monetary Fund’s commencement of annual government consultations next month.

Osborne, who will be feeling pressured after Fitch downgraded the UK’s credit rating last week, is likely to face calls from the IMF to ease his austerity programme.

The chancellor first announced a possible extension to the scheme in last month’s Budget but gave no further details. Deputy prime minister Nick Clegg too has reportedly expressed interest in extending the scheme, saying he wants the programme to be “put on steroids” ahead of the March Budget.

Clegg’s comments came shortly after figures released by the Bank of England revealed the scheme was suffering from a net lending deficit of £2.4bn in the fourth quarter of 2012 and a deficit of £1.5bn since launch.

In January, the Treasury select committee criticised the scheme for a perceived “bias” towards mortgages rather than business lending.

Figures from Moneyfacts recently showed the scheme has resulted in significant falls in the rates of two and five-year fixed rate mortgages while arrangement fees have risen.

The scheme allows banks to borrow UK Treasury bills for a period of up to four years against eligible collateral, for a fee. Participating banks will qualify to borrow up to 5 per cent of their stock of existing lending, equating to approximately £80bn across all eligible institutions.


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