By Lucy Phillips
4 December 2009
The government was ‘justified’ in using billions of pounds of taxpayer money to bail out the banks, according to the National Audit Office.
A report published today by the spending watchdog said the Treasury had spent an ‘unprecedented’ sum of £850bn to rescue the banks. While the scale of the loss to the taxpayer will not be known for years to come, the report concluded that the economic and social costs of allowing the banks to collapse would have been far greater.
Amyas Morse, head of the NAO, said: ‘The Treasury was justified in using taxpayers’ money to safeguard savings and stabilise and restore confidence in the financial system.’
The report, Maintaining financial stability across the UK’s banking system, also revealed the government expects to have spent £107m on financial advisers by April. Two sets of advisers, from Credit Suisse and Deutsche Bank, were appointed on retainers of £200,000 a month for a year, and have the potential to earn an additional £5.8m in ‘success fees’.
The NAO was highly critical of the lengthy contracts offered to advisers and the failure of the government to set out a definition of ‘success’, although it emphasised that £100m of the costs were expected to be refunded by the banks.
In addition to the support provided for Northern Rock, the NAO noted the government had purchased £37bn of shares in Royal Bank of Scotland and Lloyds Banking Group and, in November, agreed to purchase up to £39bn additional shares in both banks. The Treasury indemnified the Bank of England against losses incurred in providing over £200bn of liquidity support.
4 December 2009
The government was ‘justified’ in using billions of pounds of taxpayer money to bail out the banks, according to the National Audit Office.
A report published today by the spending watchdog said the Treasury had spent an ‘unprecedented’ sum of £850bn to rescue the banks. While the scale of the loss to the taxpayer will not be known for years to come, the report concluded that the economic and social costs of allowing the banks to collapse would have been far greater.
Amyas Morse, head of the NAO, said: ‘The Treasury was justified in using taxpayers’ money to safeguard savings and stabilise and restore confidence in the financial system.’
The report, Maintaining financial stability across the UK’s banking system, also revealed the government expects to have spent £107m on financial advisers by April. Two sets of advisers, from Credit Suisse and Deutsche Bank, were appointed on retainers of £200,000 a month for a year, and have the potential to earn an additional £5.8m in ‘success fees’.
The NAO was highly critical of the lengthy contracts offered to advisers and the failure of the government to set out a definition of ‘success’, although it emphasised that £100m of the costs were expected to be refunded by the banks.
In addition to the support provided for Northern Rock, the NAO noted the government had purchased £37bn of shares in Royal Bank of Scotland and Lloyds Banking Group and, in November, agreed to purchase up to £39bn additional shares in both banks. The Treasury indemnified the Bank of England against losses incurred in providing over £200bn of liquidity support.
