The chancellor is set to come under fire over whether he will count the £50bn of bonds – offered to lenders in exchange for assets – as government debt.
Alistair Darling is expected to tell MPs today that the Bank of England will allow banks to make the swap in an attempt to restore confidence and ease the effects of the credit crunch in the plunging house market.
Darling was criticised for keeping Northern Rock's debt off the government's books, preventing the breaking of a key fiscal rule requiring debt to be no more than 40% of GDP.
It is thought that the Treasury is prepared to double its aid to banks from £50bn to £100bn, the Times reported.
Despite the cash injection, there is no guarantee that this will in turn persuade banks to offer cheaper mortgage deals.
British banks have not fully disclosed their individual losses and instead are holding onto their cash reserves to protect their positions.
Darling said he expected banks to 'begin now to disclose the extent of their losses and explain how they are going to rebuild their capital'.
'We believe that this will be an essential step in trying to get the financial market stabilised. That in turn will help the mortgage market too,' Darling said.
Further reading:
Watchdog urged to probe off-balance sheet
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