The Chancellor told the House of Commons that £40bn will be made available to underwrite loans for small and medium sized firms, which he predicted will cut the average interest rate faced by those firms by 1%.
He added that a new National Loan Guarantee Scheme will reduce the interest rate that small businesses can borrow at.
The scheme will be up and running in the next few months with an initial £20 billion of guarantees to be available over the next two years.
Alongside it the government will also launch a £1 billion Business Finance Partnership to help fund medium sized companies.
Osborne said: “The Government will invest in funds that lend directly to these businesses, in partnership with other investors like pension funds and insurance companies.
“It will give these mid-cap companies a new source of investment outside the traditional banks. If the Business Finance Partnership takes off, I stand ready to increase its size.
“And we will develop further partnership ideas and ideas for new bond issuance to help Britain’s small and medium sized firms.
“No Government has attempted anything as ambitious as this before. We will not get every detail perfect first time round - but we don’t want to make the best the enemy of the good.
With the strain on the financial system increasing, the important thing is to get credit flowing to Britain’s small businesses.”
Osborne also announced that from April 2012, anyone investing up to £100,000 in a new start-up business will be eligible for income tax relief of 50%. In 2012, any tax on capital gains invested in such businesses will also be waived.
Business Rates
Thousands of pubs are set to benefit from paying no business rates – or have discounted rates – as the Government announced that it is to extend the small business rate relief (SBRR) holiday until April 2013. Under the scheme small businesses with rateable value of below £12,000 will receive up to a 50% reduction in business rates.
Osborne also said that all businesses will be allowed to defer 60% of the increase – set to take place next year – in their bills to the two following years.
He said: “I also want to help existing small businesses who find the current economic conditions tough. Business rates are a disproportionately large part of their fixed costs.
“In the Budget, I provided a holiday on business rates for small firms until October next year. I am today extending that rate relief holiday until April 2013.
“Over half a million small firms - including one third of all shops - will have either reduced or no rate bills, for the whole of this year and for the whole of next financial year too.”
Osborne also announced that the State Pension Age will rise from 66 to 67 in 2026.