Taxpayers' short-term loans to business
The government will tomorrow announce three kinds of financial support for small and medium-sized businesses.
And the first thing to point out is that the potential cost to the government of the measures in respect of public spending is just a few hundred million pounds - even though taxpayer guarantees for loans will be at least £10bn. So it would be wrong to get carried away with the significance of all this.
But if the schemes work, they would help small and medium-sized companies to refinance some £20bn of debt that falls due for repayment this year.
They are designed to reduce the risk that large numbers of companies will collapse as a result of the reluctance of banks to extend credit.
The government wants to persuade banks, for as little cost as possible to taxpayers, to keep afloat, through the current recession, those businesses that are fundamentally sound.
Help will be targeted at companies of a middling size, with turnover of up to several hundred million pounds a year: not the very smallest businesses and not those big enough to be able to raise funds directly on capital markets.
And it's all quite technical, involving financial engineering that some may see as too complicated.
Probably the most eye-catching of the measures will be the provision of perhaps £10bn of taxpayer guarantees for short-term corporate loans provided by banks. These loans would cover medium-size companies' working capital requirements, or their day-to-day financing needs.
These loans aren't particularly risky. And although they have become harder for companies to retain, the withdrawal of working-capital finance by banks isn't the biggest problem faced by most businesses.
So some may see it as odd that the government is providing substantial working-capital finance. But here's where the financial engineering comes in.
Taxpayers would guarantee around 50% of these working-capital facilities, so they would support around £20bn of credit to companies.
The tit-for-tat that the Business Department and the Treasury is imposing on banks is that if they take advantage of these taxpayer-backed facilities, they will then be obliged to provide longer-term loans to sound, relevant, needy businesses.
Or, to put it another way: ministers hope that by reducing the requirement of banks to finance companies' working capital, the banks will be prepared to take a few more risks in financing companies' investment and longer-term needs.
Some will argue that the scheme does the opposite of what the public sector should do. They would say that only the public sector and taxpayers have the stomach for taking serious amounts of credit risk right now - so we as taxpayers should do this, rather than providing these relatively risk-free loans.
That said, the Business Department will enlarge a separate scheme, called the Small Firms Enterprise Guarantee, which will involve the public sector taking quite significant risks in financing firms regarded as vital to the long-term needs of the economy.
These would be companies involved in developing products and services with what's known as a high "knowledge" content - or those with the potential to generate significant exports and to underpin the competitiveness of the UK.
Right now, these businesses are having extreme difficulty raising finance. So the government will guarantee up to 80% of loans to them.
These would be riskier loans, which could total several billion pounds in total over time. And therefore the eventual cost to the taxpayers from providing them will run to several hundred million pounds, because some of the loans will go bad.
Finally, the Business Department is making available a few tens of millions of pounds of equity capital to help the survival of strategically important small businesses that foolishly borrowed too much during the years of the debt bubble.
And in the coming few days, there will be an announcement that the government will co-insure trade credit - which is another vital component in companies' financing needs.
Because it's all pretty complicated, there may not be many big headlines out of all this.
It's a lot less easy to understand and possibly less ambitious than the Tory proposal to guarantee up to £50bn of loans to companies. (See also Friday's post, Nationalising Tories.)
But ministers would argue that they are targeting help where it's most needed - and that the Tory plan could result in credit being provided either to big businesses that don't really need it or will generate big losses for taxpayers on loans that companies won't be able to afford.
There is a philosophical difference here, between a Tory Party that would trust the banks to use very substantial taxpayer guarantees wisely and a Labour government that would be much more prescriptive in the deployment of much smaller guarantees.