Desperate to find new weapons to combat a second credit crunch, Osborne felt forced to propose that the Treasury intervene directly partly because the governor of the Bank of England, Sir Mervyn King, has refused to take the step, insisting the Bank cannot take on the risk.
"Because banks are damaged they won't lend at current rates," Osborne said. "Everyone knows Britain's small firms are struggling to get credit and banks are weak. So as part of my determination to get the economy moving I have set the Treasury to work on ways to inject money directly into parts of the economy that need it, such as small businesses."
Either banks aren't lending because there are no good projects to lend to in a recession, or the system is fundamentally broken and the banking system has forgotten how to be in the lending business. Austerity for the people, and some half-baked program for supposedly small and medium sized businesses which will, of course, be large. There are existing channels to funnel free money to people which would help now, and something like this will take months set up, all in the name of being pro-business and pro-austerity.