George Osborne announces £80 billion move to kick-start bank lending

• The move comes at a time when banks are facing fresh worries in the midst of the credit crisis

• Banks will be granted money on the condition they pass it on to businesses and households, in the form of cheaper loans and mortgages

• The scheme is expected to supersede the £20 billion National Loan Guarantee Scheme, or credit easing scheme

The Bank of England and Treasury’s Funding for Lending scheme (FLS) will make money available to banks on the condition they pass it on to businesses and households in the form of cheaper loans and mortgages.

At a time when banks face a worrying new phase in the credit crisis, Chancellor George Osborne said the scheme would help ease credit conditions throughout the economy.

But he confirmed that the scheme would ultimately supersede the £20 billion National Loan Guarantee Scheme, known as credit easing, which was unveiled in March as a flagship policy to boost lending to businesses.

The Chancellor said the credit easing scheme had “made a real difference” by offering more than 16,000 cheaper loans worth more than £2.5 billion to businesses across the UK and would be kept going in case it was required again.

He said: “In many cases, the money saved has meant an extra person employed who otherwise still might be looking for work.

“The more generous FLS has officially opened for business and will in time effectively take over from the NLGS, delivering credit easing to the whole economy.”

Labour claimed that would be a further blow to Chancellor George Osborne after he announced in June that the scheme was to be extended to allow larger businesses to take part.”