Government to pump £145m into supercomputing

Tory chancellor George Osborne has promised nearly £300m in funding to support the development of high-performance computing in the UK and expand Britain's mobile telephone network in his keynote speech to the Conservatives' annual conference.

Despite vowing to stand by his plan A to deal with the UK's structural deficit, he also announced a new form of so-called credit easing.

This will enable the Treasury to pump "billions" into the economy through investment in small and medium-sized businesses without increasing public debt.

Osborne said it was an "illusion" to believe Britain could deal with a huge debt crisis by borrowing more to finance higher spending or temporary tax cuts as it would risk the UK's credit rating, which underpins a low real interest rate. Of the £300m, £145m will be invested in high-performance computing (HPC) and associated e-infrastructure to "make the UK a world leader in supercomputing".

The other £150m will be spent expanding the mobile phone network to provide "good coverage" for 600,000 more people. This will amount to 99 per cent of the population, up from 95 per cent in England, 85 per cent in Scotland and 84 per cent in Wales.

Officials said the intention is for new masts to start going up in remote areas next year and improved connectivity to be delivered in 2013.

Aides said Osborne believes that "improving computing infrastructure is vital to driving growth and giving businesses confidence to invest in the UK."

Detail on how credit easing will work was lacking, but it is similar to the process used for quantitative easing during the bank crisis: the Bank of England pumped liquidity into the financial system by printing money to purchase securities.

In this case, however, the transaction will be on the Treasury's account, using the Bank of England as agents to purchase company bonds and encourage the development of alternative sources of capital.

This is a reflection of the government's exasperation at the failure of commercial banks to lend to business. Sources said it will be particularly effective providing finance for high-tech companies engaged in "sustainable development".