The UK has pumped in an unprecedented £850 billion into British banks, hit by the global economic crisis and the scale of the loss to the taxpayer will not be known for years to come, a watchdog report said today.
The UK National Audit Office has concluded that the public support provided to UK banks by the Treasury was justified, given the scale of the economic and social costs if one or more major banks had collapsed. In providing that support, moreover, the Treasury met two of the government's principal objectives, protecting depositors' money in banks and maintaining the stability of the financial system.
But the watchdog said that the final cost to the taxpayer will not, however, be known for a number of years.
"It is difficult to imagine the scale of the consequences for the economy and society if major banks had been allowed to collapse. The Treasury was justified in using taxpayers' money to safeguard savings and stabilise and restore confidence in the financial system, said Amyas Morse, head of the National Audit Office
Elaborating further, Morse said, "But the big question is what all of this will eventually cost the taxpayer. This will take time to answer. What we do know is that how the eventual sale of RBS and Lloyds is managed will be crucial to protecting the public interest. The structure of the UK banking system has changed beyond recognition. When it comes to selling its stakes in the banks, the government has to be mindful of the proceeds for the taxpayer but also of the implications for competition in the UK market, so that customers get a fair deal.
"As the crisis begins to subside, lessons must start to be learned. The authorities need to put formal arrangements in place to evaluate the effectiveness of the support provided to banks in order to inform future policy makers."