By Daniel Hunter

Chancellor George Osborne is expected to announce an extension to the Funding for Lending (FLS) scheme in a bid to boost lending to small businesses.

The Bank of England run scheme was launched in August and was due to expire in January 2014. However, as Mr Osborne faces growing pressure over his austerity programme, he will announce the boost.

He is under growing pressure from the International Monetary Fund (IMF), and that fact that last week Fitch Ratings stripped the UK of its triple-A status, becoming the second of the big three rating agencies to do so.

The extension to the FLS may be announced before the IMF arrives in the UK to begin regular annual consultations with the government next month.

The scheme's launch last year was designed to boost lending to small businesses and households by providing banks with cheap loans on the proviso that they pass them on to customers.

The scheme has so far been criticised because Bank of England figures suggest participating banks were lending less money overall in the second half of 2012 than they were in the previous six months.

But it has also been credited with helping lower the cost of mortgages.

Mr Osborne first suggested extending the scheme in his Budget in March, and the Bank of England's Monetary Policy Committee said there may be "merit" in an extension when it met earlier this month.

The government hopes such schemes will help boost growth, which has remained sluggish since the UK first fell into recession during the 2008 financial crisis.

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