Call to boost small firm loans

The government should make it a priority to ensure banks lend to small firms to prevent a wave of healthy companies going out of business, the Liberal Democrats have said.

The party's leader Nick Clegg has called on the government to lend directly to small firms through the Post Office, local authorities and should even consider creating a new bank specifically for this purpose.

He also urged the nationalised bank Northern Rock to lend to small businesses once the risky loans that put it into financial trouble have been cleared from its balance sheet.

The government has said £4bn will be made available to small businesses and made restoring lending to 2007 levels a condition of its bank bailout.