Small businesses to benefit from Government scheme Small business-owners are poised to access billions of pounds of state-backed loans after a Government scheme was given the green light by European regulators today. The credit-easing programme will initially see £20 billion made available to small businesses over the next two years under a National Loan Guarantee Scheme (NLGS) and an additional £1 billion to mid-sized firms under a Business Finance Partnership. The initiative, designed to unclog the flow of credit to small and medium-sized enterprises (SMEs), is on track to launch before next Wednesday's Budget after the European Commission (EC) gave state aid approval. The go-ahead from the EC comes as the Treasury announced plans to take advantage of Britain's historically low interest rates by taking out loans which will not be repaid for 100 years or more. But the plans for "super-long" bonds were met with instant criticism from the National Association of Pension Funds (NAPF), which said most funds would not buy them. The Chancellor previously said the credit-easing proposals would allow businesses to borrow at the same "hard-won" low-interest rates at which the Government currently borrows as a result of the UK's perceived safe-haven status from eurozone turmoil. The move will see the Government and Bank of England allocate funding to banks based on how much they boost lending to firms. A Treasury spokesman said: "Now that state aid approval has been granted, we are on track to launch the scheme early next week." Meanwhile, George Osborne is expected to use next week's Budget to launch a consultation on plans to issue gilts, which do not have to be paid off for many decades - or even perpetual gilts, on which the capital is never repaid, but interest continues to be charged for ever. The move would mean that children not yet born will continue to pay interest throughout their lives on debts racked up during the financial crisis of 2008/09. But the Chancellor believes it will benefit future generations by "locking in" low interest rates on a proportion of the UK's national debt, reducing refinancing costs and insulating Britain from some of the risk of future market instability. NAPF chief executive Joanne Segars raised questions over the move. She said: "A 100-year bond would be too long for most pension funds, and we don't think that many would buy them. Most final salary pension schemes are now closed to new joiners and are becoming more mature. Their liabilities are long-term, but not that long-term. Pension funds are looking for 30, 40 and 50-year index-linked debt, and would much rather the Government issue more of those. Even if a 100-year bond were attractive in duration, there would be a question mark over whether it would yield a strong enough return for investors. Britain last issued perpetual gilts at the end of the First World War, rolling over some of the war debt incurred during hostilities. These debts are still held by the Treasury, but inflation has reduced them to negligible significance over the decades. The UK already issues long-term bonds of up to 50 years - double the length of those of many other European states. The option of loans with an even longer maturity is attractive to the Treasury because Britain's "safe haven" status during the current financial turmoil has brought gilt yields down as low as 2%, making borrowing cheaper than it has been for more than a century. The independent Office for Budget Responsibility is expected to release figures next week indicating that a rise of just 1% in gilt yields would increase the burden on the taxpayer of financing the UK's debt by a total of £20 billion over the years to 2016/17. The super-long gilt plan is an unexpected feature of a March 21 Budget whose final details are still being thrashed out by the Conservative and Liberal Democrat sides of the coalition. It is understood that there is still movement on some key elements of the Budget, though it is not clear whether this includes totemic issues such as the 50p income tax rate, the Lib Dem proposals for a mansion tax or tycoon tax, and the possibility of preserving child benefit for some upper-rate taxpayers. Louise Cooper, markets analyst at BGC Partners, said: "Anyone who does buy a 100 year bond from the UK Government must believe that the UK will have a much better inflation record than in the past. Inflation is the biggest destroyer of value of fixed coupon bonds. She added: "If the UK is becoming Japan with deflation and zero growth, then a 100 year gilt may be a buy." But Ms Cooper added there were plenty of "red flashing lights" on inflation, including the high price of oil and the Bank of England's low interest rates and high level of quantitative easing.