20 April 2011
MPs have called on the government to end its support for the banks.
A report by the Public Accounts Committee, published today, says moves to bail out the banks in 2007 were justified but they should not remain dependent on taxpayer support indefinitely.
The report notes that the level of Treasury subsidy has gone down from almost £1 trillion to £512bn. However, it says that in the event of further bank failure, there are still no other options than to pass the costs on to the public purse.
Even banks that had not received capital injections from the government benefited from the explicit implication that they would be bailed out if necessary, according to the committee’s report Maintaining the financial stability of UK banks:update on the support schemes.
PAC chair Margaret Hodge said: ‘The peak of the financial crisis may have passed but taxpayer support for UK banks remains extensive and the risks to the public finances from the banking sector are great. There must be an end to the dependence of the banks on taxpayer support.’
Whether or not the taxpayer obtains value for money from ending public support for the banks will depend on a successful sale of government shares in RBS and Lloyds Banking Group.
The group of cross-party MPs said the Treasury would need to ‘balance the legitimate desires to maximise proceeds against its other objectives of preserving financial stability and enhancing competition’. At the time of taking evidence the bailed-out banks’ share values were still £8.4bn below the price paid by the taxpayer.
Hodge added: ‘This committee feels that it is inappropriate for banks dependent on taxpayer support to be generating excessive incomes, unnecessary bonuses or dividends at the expense of exiting public support.’
