EAST Midlands minister Phil Hope today made clear that banks will pay a price for taking taxpayer money from the Government's £50bn bail-out fund.

He said the Government will drop heavy hints to the banks about how they behave if they decide to dip into the fund.

The fund has been put together to help solve the chronic financial problems that have seen a crisis in inter-bank lending spread to the wider economy.

But it could see the Government taking direct stakes in the banks that sign up for the fund.

Mr Hope said: "As people might expect there are going to be strings attached to these deals.

"We will be taking into account the dividends they pay to shareholders, their executive compensation practices, and crucially these decisions will be made only if we get commitment from these institutions to go on lending."

With the British Chambers of Commerce claiming that the UK economy is already in recession, there are fears that troubled banks could start pulling loans out of struggling businesses – causing company failures and job losses.

But Mr Hope said: "When we reach agreement with individual banks about drawing down this capital from the Government, we will want to be satisfied that the banks are going to be helpful and supportive.

"We expect them to start lending again to small businesses and to homebuyers – if you're running a car parts business then you want to see people being given loans to buy the car you supply parts for."

The Minister said the Government's package was an unprecedented attempt to bring stability to financial markets.

But he admitted it was unlikely to stave off the effects of an economic downturn.

"In all my years in politics I don't think I've known of a situation that required such swift and decisive action from Government," he added.

"But this is not an overnight fix and things may get worse before they get better.

"This is about making our financial system stable so that it helps us through this downturn."