UK Chancellor of the Exchequer, George Osborne has this week signalled a new Treasury initiative designed to ease the finances of strugging small businesses.

Speaking at the Conservative Party conference, Mr Osborne drew links between what he deemed to be excessive borrowing under the previous Labour administration, the fact that banks in the UK and elsewhere overreached themselves in terms of the complexity and riskiness of the instruments in which they chose to deal, in the interests of maximising profits in the short term, and the "headlong" plunge into the eurozone by many countries which, in hindsight, were not suitable candidates for the single currency.

The Chancellor suggested that there was, currently "...A debt crisis in government. A debt crisis in the banks. A debt crisis in the euro". He went on to argue that proposals from some quarters to increase spending, and from others to cut taxes temporarily, both in the interests of stimulating the economy " are two sides of exactly the same coin - a coin that has to be borrowed".

However, he pledged to "unblock the banks", a statement that critics of the coalition government have taken as a tacit recognition of a lack of confidence in Project Merlin, which was launched earlier in the year, and under which the UK's four biggest banks (RBS, Barclays, HSBC and Lloyds), plus Santander, committed to increasing their lending to businesses in 2011 to GBP190bn (up from GBP179bn in 2010), with GBP76bn earmarked for smaller businesses, a 15% increase on the previous year. In addition, the banks announced in February that they would contribute an extra GBP1bn of equity capital over the coming three years to the Business Growth Fund, and GBP200mn to the Big Society Bank, which is designed to finance community projects.

The newly "credit easing" scheme announced by the Chancellor at the party conference, bears similarities to the Asset Purchase Facility put in place in January 2009, which authorised the Bank of England to purchase up to GBP50bn of private sector assets, including corporate bonds.

However, the Bank has stated that any additional quantitative easing (an issue expected to be discussed at its next Monetary Policy Committee meeting) would be focused on buying government bonds, and that the Treasury itself must focus on the purchase of corporate bonds. Reports have therefore suggested that the Treasury may create a new specially designated agency, or may use the Bank as its agent for such purchases.

The impact of such a move has been questioned by some observers, however, as high costs and low liquidity in the early stages of a start-up make it difficult for many businesses in the UK to participate in the corporate bond market and secure financing in that way. The impact on the Treasury's finances should the small businesses assisted by the new scheme find themselves unable to repay their loans has also been questioned.

Further details on the new scheme are expected to be delivered in the Chancellor's forthcoming budget.