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The Bank of England will also be given an extra £50 billion to use purchasing assets to boost the amount of cash banks have.
It has also been announced that the government's share in Royal Bank of Scotland (RBS) will be increased from 58 per cent to almost 70 per cent after a share swapping deal was agreed with the Treasury.
The chancellor of the exchequer, Alistair Darling, commented: "What we've said in return is 'you've got to lend about £6 billion more to businesses and to people' and the RBS Group have agreed to that."
RBS is heading for a record UK loss of up to £20 billion.
The previous record, which was set by Vodafone in 2006, was £14.9 billion.
