Taxpayer contribution towards financial stability 'truly staggering'
Taxpayer contribution towards financial stability 'truly staggering'
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By Darren Estwick. |  |
Tuesday, 09, Feb 2010 12:07
The extent of taxpayer support towards maintaining financial stability in the UK has been "truly staggering", an influential committee of MPs has said.
The public accounts committee has been examining the action of the Treasury to ensure that the taxpayer and wider economy are protected, its capacity to manage the programme of measures, and accountability to parliament.
The committee said the Treasury faced a "formidable challenge" in the wake of the global financial crisis, but the scale of the support required from the UK taxpayer to maintain financial stability, totalling £850 billion, had been unprecedented.
The cost to the British government for bailing out UK banks hit £850 billion, it was announced in December 2009. In moves replicated by other countries, some of the UK's banks were partly nationalised following the collapse of Lehman Brothers in 2007, with considerable support for RBS and HBOS.
Edward Leigh MP, chairman of the committee, today said: "Faced last year with escalating turmoil in our banking system, the Treasury stepped in with an incredible £850 billion worth of support - taking the form of loans to and the purchase of shares in banks; guarantees to support borrowing by banks; and the insurance of assets held by RBS.
"This provision of support maintained financial stability and protected retail depositors. What is highly uncertain is what the Treasury's actions will eventually cost the taxpayer - government estimates vary considerably. Hundreds of billions of pounds are at stake, with much turning on how good a price can be obtained when the shareholdings are eventually sold off."
The committee concluded that the final cost of the schemes, undertaken by the Treasury, to the taxpayer remains uncertain and will not be known for a number of years. They said the priority now is to get the best value for the taxpayer from the huge sums of public money invested in the banks.
"The Treasury does not seem to know why the banks are not lending and has few sanctions available to make them change their minds.
"To those of us who attach the highest importance to adhering to parliamentary procedure, it was of significant constitutional importance that the chancellor failed for 13 months to notify parliament of an £18 billion indemnity his department had granted to the Bank of England, against potential losses in providing emergency support to RBS and HBOS," Mr Leigh added.