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Government’s £850bn price banking tag

The stratospheric level of taxpayer support handed out during the credit
crunch was laid bear by the National Audit Office report which found an
unprecedented £850bn was earmarked to prop-up the ailing financial sector.

Part share purchases, part guarantees along with insurance and loans, the
report details the list of government support handed out during the past two
years.

According to the report, government support included:
– £37 billion of shares in RBS and Lloyds Banking Group;
– a further £39 billion of shares in both banks;
– Bank of England indemnity against losses incurred in providing over £200
billion of liquidity support;
– guarantees of up to £250 billion of wholesale borrowing by banks;
– approximately £40 billion of loans and other funding to Bradford &
Bingley and the Financial Services Compensation Scheme; and
– insurance cover of more than £600 billion of bank assets, reduced to just over
£280 billion in November 2009.

The report also included a pointed criticism of the government’s failure to
consult with parliament before committing the funds.

Edward Leigh MP, Chairman of the Committee of Public Accounts, said the
chancellor “transgressed” a long established principle.

“It has been an absolute constitutional principle for centuries that
government does not spend money or issue indemnities without informing
Parliament. That principle was transgressed when the Chancellor decided not use
the established protocol of notifying the Chairman of the Public Accounts
Committee and the Chairman of the departmental select committee,” he said.

“The plea that the information was sensitive is irrelevant since disclosure
to us could easily have been made in confidence, in line with customary
practice. Trust in the discretion of the chairmen has never been misplaced in
the past.

“I am greatly disturbed over this decision to play fast and loose with
Parliamentary rules – and with the feeble explanation for doing so proffered by
the Treasury.”

Further reading:
Maintaining
financial stability across the United Kingdom’s banking system


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