Speaking to the Treasury Select Committee, Bank of England deputy governor Paul Tucker said that the bank could do more to help small businesses.

"I am worried that our current policies may not be reaching as far into the SME sector as we would like," he added, before suggesting an extension of the FLS to non-bank lenders, such as insurers.

Tucker also said it was "regrettable that the markets for working capital finance are not as good as they were a decade ago" adding that "the Bank could play a role".

Treasury Committee chairman Andrew Tyrie, MP, said: "The Treasury Select Committee has been concerned for a long time about the shortage of lending to the SME sector and whether the Funding for Lending Scheme is effectively combating that shortage.

"It is clear that the Bank of England remains concerned also. The lack of lending to SMEs is inhibiting economic growth in the UK. The MPC is right to be looking at additional tools, or changes to existing tools, that could help."

Tucker also told MPs that the bank was considering ways to cut interest rates further than their current record low of 0.5% without affecting smaller building societies. This could open up the possibility for negative interest rates for financial institutions depositing large sums.

Tyrie described the proposal to move to negative interest rates as "radical" but said it warranted "careful consideration".