[Pounds Sterling]20bn Loan Plan for Struggling Firms

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Byline: JOE MURPHY

A MAJOR increase in taxpayer-backed lending to firms is being considered by ministers.

Schemes to underwrite up to [pounds sterling]20 billion of loans to struggling firms could be unveiled in a new bid to get the banks lending again.

It could release billions of pounds through high street banks to companies suffering from the credit crunch.

More dramatic action than previously expected has suddenly become possible because the number of job losses, business failures and gloomy warnings about the severity of the downturn.

And a new poll today suggested the deterioration in the outlook has finally thrown Gordon Brown's political recovery into reverse. Populus in the Times found that David Cameron has regained a double-digit lead, rising four points to 43 per cent, while Labour dropped two points to 33.

Announcements designed to boost lending are expected to begin tomorrow when Business Secretary Peter Mandelson will build on a [pounds sterling]1 billion scheme to underwrite loans made by the banks to small firms and exporters. He is expected to go further than an expansion already promised in the pre-Budget report last year and allow more loans to bigger companies to qualify.

But there are signs of more drastic action being considered after the pumping of tens of millions of pounds into the banks as fresh capital failed to improve the level of lending to small firms. …