Chancellor Alistair Darling has announced a £1bn Small Business Finance Scheme to ease the effects of the credit crunch on employers and safeguard jobs.
Small firms will be able to borrow sums between £1,000 and £1m on flexible terms through the scheme, Darling said in the Pre-Budget Report.
He also cut VAT from 17.5% to 15% from Monday 1 December until the end of next year as the government bids to help employers with cashflow problems and boost consumer demand.
Meanwhile, the government will help fund the tax cuts and spending bost with an extra £5bn of efficiency savings in 2010/11, which raises the prospect of more civil service job cuts.
Darling was jeered as he began his speech – which lasted about an hour – by saying the causes of the financial crisis were global and that the UK was in a position of relative strength.
“Even today, employment remains near record highs. There are still half a million unfilled vacancies in this country,” he insisted.