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How much have the bank bailouts cost UK taxpayers?

This was a question posed to me by Sky News, and the answer is: however much you want to report.

This is based upon the fact that there are lies, darned lies and statistics, and you can manipulate the spend, exposure and loss for each taxpayer any which way you choose.

For example, the National Audit Office said that we spent £850 billion on the bank crises in 2009.

That would equate to a £26,562 and fifty pence spend by every taxpayer in the UK.

Those figures are broken down into:

  • £76 billion on the shares in RBS and Lloyds;
  • £200 billion for liquidity support through the Bank of England (Quantitative Easing);
  • £250 billion in guarantees on banks’ borrowings;
  • £40 billion in loans to Bradford & Bingley and others; and
  • £280 billion in providing insurance cover for banks’ assets.

But the £26,562.50 figure is a total exposure, not losses or actual spending.

So then we can parry this down and look specifically at figures such as the share prices of RBS and Lloyds.

Again, there are different stats, e.g. £76 billion above, £65.8 billion in other news reports and £62.62 billion according to the UKFI.

These figures vary as the share prices are based upon differing amounts gross versus net, with the UKFI taking the net figures in their annual report (well worth a read), so I’ll do the same (in the Sky interview I was using other stats).

According to those figures, the UK taxpayer owns £45.22 billion of RBS (83%) and £17.42 of Lloyds (41%).

RBS shares were trading at 50 pence per share when the government intervened, and Lloyds were 74 pence.  The shares are now 32 pence and 40 pence respectively.  So you could say that the loss on paper for just these two banks is:

  • RBS is down 34% and so the loss is £13.566 billion; and
  • Lloyds is down 46% or just over £8 billion.

So, on paper, these two banks have lost over £21.5 billion, or around £700 for each UK taxpayer.

Then there’s Northern Rock, Bradford & Bingley et al on top.

So the figures of how much this crisis has cost can vary from anything as low as £700 to over £26,500 per person.

The truth is that it doesn’t actually matter but, for the sake of argument, Sky News put the figure at over £3,500 per person.

This is based upon:

  • £45.22 billion in RBS shares;
  • £17.42 billion in Lloyds shares;
  • £27 billion in loans to Bradford & Bingley; 
  • £20.7 billion owed by Northern Rock; and 
  • £1.4 billion invesated in Northern Rock's high street business.

The figures all come from the UKFI report, and work out to be £3,562 per taxpayer in exposure.

Bear in mind however that these are not losses, but the cost to the taxpayer which may be recouped.

So you can see the lies, darned lies and statistics view of the world.

I could spin the numbers to be anything from a few hundred pounds lost for each taxpayer to over £26,000 exposure for everyone.

The more important question is when will the government and taxpayer recoup these costs, if ever.

I have said in previous posts: just before the next UK general election.

I’m now not so sure as, to recoup the investment made, the UKFI originally stated that the average buy-in price for Lloyds would need to be at £1.226 per share and 50.5 pence for RBS.

Hmmmm … we are a long way from those numbers right now and the question is will they reach these levels any time soon?

I originally thought yes but, with a double dip recession and other clouds on the horizion right now, it’s more likely that this will be a waiting game.

A long one.




About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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