Alistair Darling will try to kickstart bank lending next week by offering new taxpayer-funded guarantees for loans to small and medium-sized firms, it emerged last night.

The Chancellor is believed to be planning measures to help struggling companies with a big extension of existing loan schemes under which the Government and the banks currently share the risk of lending. At the same time, he is preparing to send a key signal to the markets that the Government is serious about bringing the books back into balance after next Monday’s package of tax cuts and accelerated spending projects to fight the recession.

The Times understands that he is to cut projections for the growth of government spending beyond 2010-11 to below the already tight figure of 1.8 per cent.

In a speech today, Yvette Cooper, the Treasury Chief Secretary, will say that the Government has achieved £26.5 billion of efficiency savings over the past three years, and will exceed the £30 billion it has already earmarked in savings for the next three years.

Mr Darling is expected to reveal in Monday’s PreBudget Report that up to £5 billion of extra savings has been found for the year 2010-11, giving him more scope than expected in that year to reduce borrowing.

The measures to prompt more bank lending to small firms follow growing government concern and public anger that despite the £37 billion injection into the banks, money is still not flowing to small firms, for whom credit conditions appear to be tightening. Gordon Brown promised “all measures necessary” yesterday to get the banks lending again.

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