OBR: Credit easing will have little impact

Tim Wallace
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TOTAL lending will not be boosted by the government’s credit easing scheme, the Office for Budget Responsibility (OBR) warned yesterday – though the programme should shift the balance of lending towards small firms.

The government’s national loan guarantee programme aims to give £20bn of support to lending, lowering small- and medium-sized enterprises (SMEs) borrowing costs by one percentage point.

However, the credit easing scheme begins with only a £5bn tranche, which the OBR’s Robert Chote said will have little impact on total lending.

“The magnitude does not justify making an adjustment to our forecasts – I’m not saying it is a waster of time, but there will be no material impact from the first tranche,” he told the Treasury Select Committee.

Furthermore, by the time the full £20bn has been implemented, the OBR believes the economy will have recovered and credit will be flowing again, limiting the usefulness of the programme.

However, the OBR did stress SMEs which had planned on borrowing anyway will benefit from lower interest rates on their debts.