The “funding for lending” scheme was announced at the City’s Mansion House event last night as the pair said they needed to “deploy new firepower” to avoid a severe credit crunch amid the eurozone turmoil.
The initiatives include activating an emergency scheme that offers six-month liquidity to banks in tranches of at least £5bn a month, further rounds of quantitative easing and cheaper loans to businesses and households, according to the FT.
Osborne said: “It is very hard to argue that monetary policy – in all its forms – has run out of road. The government – with the help of the Bank of England – will not stand on the sidelines and do nothing as the storm gathers.”
He added the UK is able to take advantage of the country’s record of fiscal discipline and credibility to unleash the aggressive monetary policy.
Answering rival party Labour’s calls to abandon the fiscal plan, Osborne said there were “real and significant” risks in doing so.
“Credibility is hard-won and easily lost and losing it is extremely costly,” he said.
