Chancellor of the exchequer George Osborne has reached a deal with major banks to raise business lending by £10bn this year.
Osborne says Project Merlin, which involved discussions with Santander, HSBC, Royal Bank of Scotland and Lloyds Banking Group, will mean £76bn of small and medium sized enterprise lending.
That represents an increase from £66bn in 2010 and Osborne says this is higher than banks were planning on their own.
He also says it is anyone could who has been following discussions would have expected.
Osborne says “anger and retribution will not bring an iota of economic growth” and the country must “move from retribution to recovery”.
Total business lending will increase from £179bn in 2010 to £190bn in 2011.
The Bank of England will publish updates on the lending quotas and SME lending will be linked to chief executives’ pay.
Shadow chancellor Ed Balls says the outcome is pitiful and embarrassing for the government.
He says: “For a chancellor who talked so tough in opposition this is a pitiful outcome and embarrassing climbdown.
“A damp squib is something which has the potential to be explosive but gets wet and that is exactly what has happened with this chancellor.”
Yesterday Osborne revealed that the banking levy will increase from 0.05% to 0.075% on balance sheets.
This represents an increase from the original tax of £1.7bn to £2.5bn.