A Government-backed ‘economy cure’ scheme to increase mortgage lending and loans to small and medium enterprises has failed to deliver its promises for the seventh month in its existence.

Lending fell a further £100 million in February, adding to the £400 million drop in January - a six per cent decrease on figures published this time last year, prior to the scheme’s introduction.

The Funding for Lending scheme was designed to boost credit in the economy by allowing banks to borrow at cheaper rates from The Bank of England, on the proviso that they lend it out to businesses and individuals.

However, businesses outside of the financial sector secured £1.8 billion less in February, with an average of £1.3 billion in each of the previous six months

Figures would suggest that despite the Government encouraging banks to regain confidence in lending, the money is not reaching businesses as originally intended and that homeowners are the only people benefitting from the scheme.

Nick Clegg, Deputy Prime Minister, claims that the scheme needs to be “put on steroids” in order to see the economic prosperity that was originally intended.

The Funding for Lending picture remains one of generally flat bank lending to the real economy, particularly when there are now nearly 50 participants in the scheme.

According to the Monetary Policy Committee: “Bank by bank analysis revealed that this weakness was largely confined to those banks undergoing significant balance sheet restructuring, much of which reflected plans agreed with the authorities to reduce noncore business.”

Earlier last month, The Bank of England reported that net lending to businesses and individuals fell by £2.4 billion in the last quarter of 2012.

Introduced as a replacement for the short-lived National Loan Guarantee Scheme (NLGS) to increase lending to SMEs, the FLS immediately failed within its first month of operation, research showed that lending dropped by £2.2 billion.

Prime Minister David Cameron's official spokesman said that the government and the Bank of England had always made clear that it would take some time before the implications of the funding for lending scheme were felt, and that it was not expected as early as the fourth quarter of 2012.

The Bank of England claimed the scheme, which had so far provided £14 billion of funding to the banks, had yet to influence the market because banks have to scrutinise and approve loan applications.

The data from the Bank of England shows strong variations in lending between the different banks that operate in the UK:

When considering that all of the UK banks have set aside a combined amount of over £13 billion to rectify the PPI compensation, Lloyds Banking Group, which is 40 per cent-owned by taxpayers, reduced its lending by over £3 billion during the final quarter of 2012.

Santander, cut back its lending by slightly less than Lloyds with £2.8 billion, whereas Barclays and Nationwide both increased lending by more than £1.5 billion a piece.

Business Secretary Vince Cable has publically said that the figures were a “disappointment” and that the system may need to be “adapted”.

George Osborne’s Budget being somewhat of a disappointment, there were hopes he would address the dramatic improvements that are needed on FLS.