Chancellor Alistair Darling’s £50bn package, coupled with a special £450bn liquidity fund made available by the Bank of England, means the state is prepared to shore up ailing banks to a level greater even than that agreed by the US government.

The aim is to provide stability for banks in the longer term and not just give them a short-term leg-up. It looks as if the plan will offer banks a cash injection in return for preference shares which should benefit the taxpayer if the banks’ balance sheets recover.

Dundee and Angus Chamber of Commerce chief executive Alan Mitchell said it had become clear a massive injection of money was needed to address the problem, and he hoped the Chancellor had accomplished just that.

He said, “I think in terms of whether or not this is the answer — the overwhelming consensus is that it’s absolutely what we were looking for.

“The banking sector is almost paralysed. Dramatic intervention was needed to kick-start the system and give banks the confidence to lend to each other and then to businesses and the public.

“As to whether £50bn is enough, I don’t think anyone has the answer to that, simply because we’ve never been in this situation. It’s a lot of money and one would hope it will be produce the desired short-term effect.”

The credit crunch has had the effect of drastically cutting the amount of money available for lending to companies and the public. A shortage of business capital acts as a brake on company growth, whilst restricted availability of loans and credit cards is felt throughout the economy as consumer spending drops and the housing market grinds to a halt.

Mr Mitchell said, “If more money is available for lending, it should mean some business proposals that might not have been able to proceed can do so. We shouldn’t expect the banks to go back to being completely without caution about who they lend to, but we have to believe the system will identify solid business proposals and make lending available.

“The Government has been very cautious about saying this will be the silver bullet that will make everything right, but it’s a necessary first step.

“If the Bank of England cuts mortgage rates tomorrow, that should give a boost in confidence which will also help. We are not in the situation where the local economy is melting down, but more confidence can only help.”

The FSB, an organisation that represents smaller businesses, said many local companies were concerned ailing banks would hike up charges and interest rates to boost their financial condition.

However, Dundee and Angus chairman Eric Gray said the Chancellor’s intervention had reduced the threat of increased costs of that nature for people who run small businesses.

“I’d say that bank charges and interest rates are the two big worries for a lot of our members right now, “ he said.

“Businesses face a whole lot of charges that private customers don’t have to worry about as long as their account is in credit,” he said. “Every time we deposit money, cash a cheque or pay by standing order we’re charged. This package should at least mean that these charges don’t get any higher.

“The £50bn was more than I had expected and it’s an awful lot of taxpayers’ money but I think it will help small businesses across the board and will be welcomed by our members.”

*The Bank of England dramatically slashed interest rates by 0.5% today along with central banks around the world in response to the global financial turmoil.

The Bank’s half-point cut is the first such move since the aftermath of the 9/11 terror attacks in 2001.

The move was a shot in the arm for retailers. Shares in Marks & Spencer — a major victim of the slowdown — soared more than 7%, while Next rose 5%.

Halifax Bank of Scotland saw shares leap 62% after a 42% fall yesterday, on hopes the Bank’s move could kick-start a housing recovery. Housebuilder Taylor Wimpey rose 27%.

Lloyds TSB later announced it would be passing on the rate cut to mortgage customers in full.

But other banks appeared to have been caught by surprise by the Monetary Policy Committee’s decision to announce the outcome of its rate-setting meeting today rather than tomorrow. All of the UK’s other major lenders said they currently had their rates under review.

Central banks across the world matched the cut in a co-ordinated move. The European Central Bank, the US Federal Reserve, Sweden’s Riksbank, The Swiss National Bank, and the Bank of Canada all cut rates by 0.5%.

The move caused stock markets around the globe to rally.