Finance News

Northern Rock sale could leave taxpayers £2billion out of pocket

Right at the beginning of the financial crisis, the government used billions of pounds to stop banks going bust, pouring a total of £66billion into RBS and Lloyds and spending £37billion on Northern Rock, which hit the headlines repeatedly for its dire financial situation.

However, a report from the House of Commons Public Accounts Committee has revealed that the tax payer is unlikely to see a return on these investments, and is likely to lose money instead. They criticised the speed of reactions of those in government, saying that quicker action could have averted the loss: “The Treasury was unable to respond promptly when the banking crisis hit because it lacked the right skills and understanding,’ the report says. ‘It was slow to nationalise the bank and that made a loss difficult to avoid.”

RBS and Northern Rock were split into ‘good’ and ‘bad’ banks, with the good section of each holding the profitable retail banking portion of their business and the bad holding the toxic loans and debts that they had built up through their investment arm.

Whilst the good sides of each bank have been or are being sold off, which itself has been at a loss, the bad sides now look to totally fail to generate a return on their investment.

Currently, it looks like the tax payer will see a £2billion shortfall on the Northern Rock bailout, whilst it is also being warned that RBS and Lloyds are unlikely to see a full return of the £66billion that was given to them, with the Public Accounts Committee commenting on their situation and saying that “there is a risk that the £66billion invested in RBS and Lloyds may never be recovered.”
Of course, it’s far easier to make these decisions in hindsight, but it does mean that the financial crisis is still having big effects on the amount of money the government has access to.