Both the Tories and Lib Dems reportedly want the scheme, which has failed so far to improve net lending, to be extended beyond 2013 and skewed in favour of business rather than mortgage lending.

Nicholas Mockett, partner at Moorgate Capital, said: "As we predicted most of the FLS seems to be going into the residential mortgage or home loans market thereby prolonging the property bubble.

"Although cheap mortgages and house price confidence can boost the economy through consumer profligacy, the benefits could be ephemeral as they may buy imported goods and services, providing only a short-term VAT boost to the Revenue."

He added that business spending on capital expenditure would be of greater benefit to the economy over the medium to long term, "as the payback is not instant and the VAT can be reclaimed".

The Bank of England (BoE) has played down the significance of the first two disappointing quarters under FLS, which have seen a £1.5bn contraction in net lending across all participants in the scheme and £1.9bn across those that have specifically drawn money.

The worst offender has been Lloyds Banking Group, which has borrowed £3bn under FLS while reducing its net lending by £5.6bn.

Mockett said: "The BoE needs to find a mechanism to encourage business investment through FLS and stop banks just derisking by transferring existing mortgages to FLS-supported new ones."

Meanwhile, outgoing BoE Governor Sir Mervyn King has claimed that the UK's economic recovery is now "in sight" as the process of rebalancing the economy from consumption to exports gathers momentum.

"We're making good progress towards that re-balancing," he said. "Policies are in place to achieve it. We are on track to achieve it. Recovery is in sight."

He added that the recovery had been held back by "flagging demand for exports and the enormous uncertainty generated by what's happening in the euro area".