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Has Lord Mandelson got it all wrong?

As the UK government sits back and lets the marketplace digest yesterday's announcement of a business loan insurance scheme there are claims that the UK government has totally misread the situation. It had been expected that the authorities would step forward with plans to assist small businesses and medium-size businesses across the UK but this has not quite happened as yet.

Under the scheme the government will ensure 50% of existing banking facilities or new loans for companies with a turnover in excess of £500 million year. However, many people are concerned that the banks will use this insurance facility, for which there will be a charge, to wrap up their existing liabilities and also add this insurance to loans which would have gone ahead anyway without this new scheme.

The main problem is that the banking system is likely to benefit more from the scheme than businesses themselves, something which has not gone down very well with business leaders and taxpayers alike. How much money the government is prepared to pour into the banking sector remains to be seen but there is no doubt that all other areas of the economy appear to take second place.

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