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Growing doubts are already emerging in the City over the Government’s new multibillion-pound bank bailout.

Economists said last night that the effectiveness of the complex rescue scheme could be undermined by huge uncertainties over key details, and the timetable for putting it into action.

Business leaders welcomed the proposals as an essential response to the credit drought hitting companies and consumers. In Westminster, however, opposition parties claimed that the costs to taxpayers could spiral out of control if the recession causes the banks’ bad debts to grow.

Vince Cable, the Liberal Democrat Treasury spokesman, attacked the Government’s moves as “another blank cheque for Britain’s banks”.

The biggest questionmarks over the bailout plan emerged from the City when it became clear that officials had yet to thrash out the details.

The focus of City concerns was over the heart of the proposals — the Treasury plan to insure banks against potential future losses on past “toxic”, risky loans that are clogging their books and preventing new lending.

Economists pointed out that further details of how this asset protection scheme will work will not emerge until next month. The Treasury conceded that the measures will not take effect until April.

There was further anxiety in the City that officials had not spelt out which past lending will be covered, what fees will be charged for the insurance and what proportion of any losses banks will have to shoulder before the taxpayer guarantee applies.

Analysts suggested that the proposals were half formed and warned that the lack of detail would do nothing to boost banks’ confidence and readiness to lend in the meantime, while credit conditions could rapidly worsen while details were worked out.

“The scheme was long on intentions, short on details, meaning that the impact is impossible to gauge and won’t come in for a number of months,” said Paul Mortimer-Lee, of BNP Paribas, the leading French bank. “This has all the hallmarks of the Government feeling an urgent need to do something, and to be seen to be doing something, but being way behind in terms of being on top of the detail needed to put the plan into action.”

Malcom Barr, of JPMorgan, said: “This package is a work in progress, with lots of questions remaining about the details, and how ambitious it really is.” He said it was a “disappointment” that so many questions remained.

A key concern is that the only direct and immediate injection of new cash into the banks comes through a £50 billion fund for the Bank of England to buy up higher-quality loan assets from the banks. This is intended to leave the banks more capital to spare, which they can then use to fund new lending. Mr Mortimer-Lee noted, though, that £50 billion amounts to only 2 per cent of total bank lending, compared with a 10 per cent fall in lending seen in the past year.

While the City fretted that the new measure might not be enough, others expressed concern over the threat of a huge ultimate bill for the taxpayer.

Mr Cable warned that with the government insurance of the banks’ bad debts expected to total between £100 billion and £250 billion, this “could result in enormous losses for taxpayers, since these assets are being insured in a falling market, and there are still further big losses to come in the property market”.

Because key elements of the Government’s new and previous emergency measures are only in the form of guarantees of loans and banks’ fund-raising, they do not yet count towards the Treasury’s borrowing and debt totals. With the Chancellor already deep in the red, however, and the national debt rising rapidly, there are fears that if an economic slump saddles banks with billions in bad debts the cost of taxpayer guarantees could balloon.

“We support today’s announcement with a heavy heart, given the massive exposure for the taxpayer, and the fear that if the guarantees are ever called there could be a fiscal catastrophe,” Miles Templeman, the Director-General of the Institute of Directors, said. However, Richard Lambert, the CBI Director-General, said: “This is exactly what we were asking for. It is the kind of large scale intervention that was necessary.”

The measures

— The architects of yesterday's package of measures billed them as “a work-out, not a bailout” but they add up to at least seven ways in which banks are being encouraged to sustain lending

— Asset protection scheme Toxic assets will be partly guaranteed by the Government in return for a fee, putting a floor on the amount banks can lose on them. This should help to free up capital

— Guarantee scheme for asset-backed securities The Government will guarantee investors in securities backed by new UK mortgages. This should help the wholesale funding of mortgages

— Asset purchase facility £50 billion fund will be set up to buy corporate bonds, commercial paper and other company debts. The ultimate aim is to help stimulate the supply of loans to companies

— Capital regulation Rules on balance sheet strength are to be interpreted liberally by the FSA to allow banks in difficult times to run down capital buffers built up in good times

— Northern Rock It will abandon its policy of reducing its book of outstanding mortgages

— Bank of England liquidity facilities In essence, banks will continue to have access to long-term liquidity from the Bank of England, through a mechanism called the discount window facility

— RBS Up to £5 billion of government-owned preference shares are to be converted into ordinary shares. This cuts the interest RBS has to pay the Treasury by up to £600 million

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