Taxpayer guarantees worth tens of billions of pounds are being considered by Alistair Darling to kick-start bank lending to big business, The Times has learnt, while Lord Mandelson will outline plans today to boost lending to small and medium-size companies.

The Chancellor plans to announce within days how he will try to break the log jam in wholesale financial markets that has deterred lending to business and stifled the mortgage finance market.

He is looking at proposals in the Crosby report, published in November, for government guarantees of some £100 billion to back the issue of mortgage-backed securities as a means of helping big companies to raise finance on the capital markets.

The mortgage-backed funding markets have virtually closed since the onset of the credit crunch, and Sir James Crosby, former chief executive of HBOS, proposed direct government intervention through an auction of guarantees.

Lord Mandelson, the Business Secretary, will announce plans aimed at releasing up to £20 billion from the banks to small and medium-size companies.

He will announce £10 billion of taxpayer guarantees to cover loans for the day-to-day financing needs.

The taxpayer would guarantee 50 per cent of the working capital loans, meaning that there would be a credit stream of about £20 billion to companies.

Ministers are hoping that, by reducing the burden of financing working capital, the banks will be more inclined to lend for companies to invest.

The scheme will be targeted to minimise risk to the taxpayer and is aimed at keeping alive companies that are basically sound. Ministers expect the actual cost to the taxpayer, through companies defaulting, to be below £1 billion.

George Osborne, the Shadow Chancellor, said that the scheme should be simpler and available to employers of all sizes who could not get credit. Conservative plans for a national loan scheme were “bigger, bolder and simpler”, he said.

Today Lord Mandelson will also widen the £1 billion small firms loans guarantee scheme, which involves the Government taking a higher risk, sometimes up to 90 per cent, in lending by banks.

Mr Darling was urged yesterday to intervene to help to unblock a looming £40 billion funding freeze at Britain’s biggest companies.

Providing loan guarantees so that big business can roll over billions of pounds of debt that will come due for repayment over coming weeks is one way that the State can help, Richard Lambert, the Director-General of the CBI, said.

Speaking before the Treasury Select Committee, Mr Lambert said that easing the financial strains on blue-chip Britain was among the CBI’s biggest worries, as even healthy companies scramble to secure credit from cash-strapped banks.

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