UK bailout cost: unlucky 13 for the British taxpayer.

Ignore the bankers’ accountancy spin – they have ruined Britain

After the patronising spin of Eric Daniels (Lloyds) and Bob Diamond (Barclays) the Office for National Statistics this week gave anyone who cared to go to its site the unvarnished truth about what banking idiocy has cost the country – and it’s 13 numbers long.

£1,322,700,000,ooo

(to the nearest billion)

If you took the whole GDP of Britain, and then added another 50% on top, it would still be several billion short of the amount highlighted above. And what it shows quite conclusively is that all the Government guff about ‘making a profit on the shares’ and ‘the purchases only cost £80 billion in all’ is total bollocks. Because the assets purchases, debt liabilities and short-term cash-flow props to stop RBS, Lloyds and others sinking without trace cost over £1.3 trillion – the highest cost per taxpayer of any country in the world.

The comparisons are infinite and shocking. The bank cockup now represents 58% of the total UK national debt. It has given us by far the biggest monthly deficits and debt costs in a thousand years of history. It more than doubled the national debt in four months flat. And not one UK-based banker – absolutely nobody anywhere – is on the streets, dead or in jail as a result of it.

The Labour Government given five separate chances over that period to stick a fiduciary duty charge on those taking the taxpayer shilling failed to do it even once. That and that reason alone is why today the ungrateful recipients – these grotesquely smug clowns – show no remorse, pay themselves fat bonuses again, and once more trot out the spectacularly daft idea that they know best, and all regulation is evil.

Because of Labour naivety, Coalition cowardice and corporate financial greed, libraries and pre-schools are closing, a further 600,000 (at least) have no job, money is being removed from an already hard-pushed hospital service, police numbers are to be cut yet again, the justice system is approaching meltdown, and the UK economy has had an additional strain put upon what was already something of a non-recovery.

Before any more apologists join The Slog’s comment threads to protest that these are unwarranted charges, let me add  few more incontrovertible ONS figures. Each month now, thanks directly to the bailout costs, an average £14 billion is no longer available to spend on British citizens’ welfare. Median-level retired investors using interest-bearing accounts have lost £1.22 billion in income. Britain’s monthly debt repayment bill is on average  in excess of £20 billion. And we could yet lose our Triple A credit status as a sovereign State.

“Every year,” said a senior City gonk the week before last, “British banking puts £140 billion into the Exchequer”. Therefore, he argued, we have to go on paying very high bonuses, or else….

The ‘or else’ is a myth nailed rather well by Simon Jenkins in the Guardian on Monday. And what, pray, is £140 billion in the Exchequer if you just emptied it to the tune of £1.33 trillion?

Obscenely overpaid bank executives display a form of dependency just as sad and ruinously expensive to the country as welfare recipients described as ‘economically inactive’. The difference is, you could double the number of couch-potatoes, and the cost of keeping them would still be under 5% of what the UK financial services sector has cost us since 2008.

It is extremely difficult to forgive reckless, brainless behaviour on that scale. But to lie persistently about the scale, show no remorse about the scale, and then starting behaving in a manner likely to further increase the scale….that is unforgivable, period. And for a Government to allow it is scarcely believable favouritism.

Banker bashing? Revenge? Bollocks: punishment and justice. That’s what the overwhelming majority of citizens want. And they are not getting it.

 

46 thoughts on “UK bailout cost: unlucky 13 for the British taxpayer.

  1. I believe there are many who should have been charged with financial treason! They have done more to bring this country down than any terrorist organisation has ever achieved!

    • John

      You seem to have no understanding of basic finance. Thanks for not providing a link to the ONS.
      Anyway, I chanced upon this document at their website which seems to be relevant as it has the £1.3trn number in it.

      http://www.statistics.gov.uk/articles/nojournal/rbs-lbg-article.pdf

      What has happened is that the ONS has reclassified all of the debt of Lloyds and RBS as government debt which is fair enough as the government owns them.

      This means that the government will back the bonds which RBS and Lloyds have issued over the years to fund their loans. As long as RBS and Lloyds continue to prosper, this will not cost us a penny. And once they are sold off then this liability will vanish from the UK balance sheet (PSND).

      Note also that the UK also at the same time gets ALL OF THE ASSETS that are owned by RBS and Lloyds. However if you read this press release you will see that this £1.3trn does not subtract the value of “illiquid assets” like business lending, corporate bonds and mortgages. Now maybe if you included these (of which the press release states there is a lot) then the actual additional liability would fall to a much smaller number and could even be positive (possible but unlikely).

      I would laugh if the author of this blog was just your usual pub bore. But as he seems to have a following, I ask you people who read this blog to tread carefully and to take his rants with a pinch of salt.

      Yes the banks f**cked up and bonuses should be cut, blah blah, but this guy blows it out of all proportion.

      • This isn’t in reply to Fred, because I’ve been ignoring his defence of the indefensible for weeks now.
        It is a simple observation to all those who read this blog: who would you prefer to believe on whether the banking farce has been [quote] ‘blown out of all proportion’?
        A bloke who retired at 52 on the basis of shrewdness in entrepreneurial communications, the stock market, commodities and the property market….without ever screwing anyone, and who has now devoted much of his life unpaid to deconstructing unmitigated bollocks?
        Or a comment threader who used to work in a bank, ‘left’, and is now a teacher?
        Only it seems that I’m the one who has no grasp of even basic finance, and Mr Quelch down below and above here is the Master of the Universe.
        The Government gets ‘all of the assets’ says F. Bloggs. What, you mean all those fictitious Russian apartments that RBS ‘owns’? All the disadvantageous gold notes RBS sold now forcing it to pay back on four times to the upside?
        I’m afraid FB demonstrates only too well the problem with his former peers: a superiority complex based on zero evidence of superiority.
        You see Sloggers, this is why The Slog maintains a 0% censorship policy save for obscene invective: it makes for the kind of laughs even a wit of my genius could never conjure up.

      • Hilarious! You can ignore me. I hope your readers don’t.

        The assets to which I am referring to are the hundreds of thousands of loans on the mortgage and corporate loan books of these banks. Let us break it down

        1) First there are all the mortgages which RBS and Lloyds have made to the great British public. For each of these mortgages the banks will have security over the property. That is an asset! These mortgages will be repaid. If not, they take the house. Some of these assets may have negative equity, but most do not. Did you get that?

        2) They will also have hundreds of thousands of loans to companies for which they will also have security. Almost all bank loans to companies are secured.

        Add (1) and (2) up and I imagine you get a trillion or so quid. After all, the debt that RBS and Lloyds have was raised to enable this lending.

        I do hope that is clear.

        I am trying to educate you and the readers of this blog so that you aim your arrows of criticism at the real issues there are with the banking sector (which I have set out repeatedly in this blog comment section), not some false issue created by ignorance.

  2. You seem to have resisted the temptation to suggest treason or malfeasance in office on the part of our rulers. Perhaps as well, since they’d be able to show that although elected by some UK citizens, they don’t actually represent any but a vanishingly small proportion of us.

  3. Your STILL missing the point.
    The Bailouts have already happened, they should not have happened, but they did.

    What good is it to drive Barclays away now?
    Sure, if we could have driven Northern Rock away in 2005 I can see the advantage, but we cant.

    Our only option now is to hope that the banks can one day pay us back at least most of the bailout money.
    Its dirty and distasteful, but thats McBRuins fault.

    The alternative is they all **** off stateside and we are left with a shell company we paid a trillion pounds for.

    Unless I’m missing something?

    • Yes TRT, I think you are.
      Look at Bob Diamond’s new motivation policy aka bonus system designed to make the lab-rats at Barclays work harder still for less.
      Why does he not fear they’ll all go to HSBC?
      Answer:
      Because he doesn’t believe his own bollocks.

  4. It is rather hard to believe that no financial crime has been committed. The extortion of £1.3 trillion from UK taxpayers, so far with the words “hand over your money, or else we destroy the economy”.

    And more support, and more money in interest fees, every month.

    There is no Sheriff in town, and the new mayor and the town council have no interest in assigning culpability to those that went before them. Meanwhile, the townsfolk are having to empty their pockets every month just to stay in town; for the bankers, for the town bureaucrats, and the increasing numbers unemployed.

    I can’t see a happy happy ending to this film. More like El Topo.

    • Steve – maybe we should have let them go bust. That would have been a Lehman x 10 event. Or as they call it in the city, a “shit show”.

      Point is they should never have been allowed to become so large. The solution is to save them and then split them. BTW – saying that the banks “extorted” £1.3trn figure not accurate as I explain above.

  5. I wholeheartedly agree with Mac in addition what miffs me off is the fact that on a daily basis the UK authorities allow the financial mechanism to beat the hell out of the Gold price and by so doing follow instructions from their partner in crime The U S of A.
    It is a bit rich getting comment from Merwyn King as he is as responsible as anyone else in the British financial world for our economic woes.Bring back the stocks.

  6. And the moral hazard still exists.

    If the bankers lose the money all over again they think – not without reason – that they’d be bailed out all over again.

    They always win; we always lose.

    It has to stop.

  7. Totally agree with yourself and Mac on this.
    Gordon Brown & Co should be criminally held to account for culpable neglect of duty – but not only has HE got away with it but his successors are still swaggering about as though they played no part. And many bankers should be held to account for fiduciary malfeasance. As you say, none of this has happened.
    And there are plenty of others I’d like to see dealt with for their part, high on the list is Merv, who I believe was instrumental in allowing it all to happen on his watch…who continues to give pontificating speeches singing the praises of his failed policies.

    • Look, there was a property boom built on cheap money and easy lending. Everyone was loving it watching Sarah Beeney and Phil and that fat bird buying properties and then selling theirs at a higher price, retiring to scotland or france and talking about little else. It had to come to an end at some point. Yeah Gordo did nothing to stop it. It would have been political suicide for him but he could have done a bit. The banks/punter in the street deluded themselves that property prices would rise forever and lent/borrowed accordingly. It was the best of times. Now it is the worst of times. That’s the way the custard cream crumbles. If you want to point the finger then why not include estate agent, rating agencies, al quaeda (interest rates were cut after 911), labour’s house building program, prescott for demolishing 400,000 properties in his pathfinder idiocy, and uncle tom cobbley. Maybe better to move on and figure out how to stop it happening again.

      • Fred says: “Look, there was a property boom built on cheap money and easy lending.”

        Look, since it all went terribly wrong and has virtually bankrupted the country (ie taxpayer), I’m entitled to look beyond that simplistic statement to apportion blame. If people are not held to account for what they do, they never learn and we never learn.

        I am 100% clear that the bulk of blame goes to one Gordon Brown, followed by BoE/Merv, the banks and borrowers in equal share.

        It is irrefutable that Brown was Chancellor and PM during that period and that made him personally responsible for management of the economy. No ifs and no buts. Whether he allowed the credit bubble to inflate knowingly for political gain or thru utter incompetence is neither here nor there because he managed the economy with absolute neglect.

        I hold BoE/Merv responsible for presiding over a period of absurdly low IRs which were increasingly inappropriate as the bubble inflated. Merv should have blown the whistle back in 2003/4 and if necessary quit his job and gone public if Brown took no action to address the BoE’s insanely simplistic remit of keeping CPI at 2% while the credit bubble was inflating out of control.

        The bankers are responsible for the masses of risky lendings they made to people who obviously had little hope of ever paying it back.
        “Self-certification” mortgages. I ask you, whatever next.

        The borrowers are responsible for borrowing too much and getting themselves into debt big time.

        I’m well aware that many people don’t like to be the one who spoils the party, but the simple truth is that some people outside of those circles were blowing the whistle, but were being ignored by those in power. That makes them even more culpable for the mess they’ve created.

        Fred says: “That’s the way the custard cream crumbles.”

        It’s the way this custard cream has crumbled but it doesn’t mean that people are not personally responsible for allowing it to happen.
        The other people you list were not in office with the power to call a halt to the insane party.

        Your argument is no different to the Allies saying after WWII “Oh well, we had a massive war that slaughtered 6-8 million. That’s the way the cookie crumbles. Let’s not bother with the Nuremberg reckonings. Let’s just try to ensure it doesn’t happen again.”
        I don’t think that would have been a good idea.

        HTH

      • I think to compare what happened with WW2 is a tad extreme. Gordo, the BofE, the banks, the rating agencies, the property speculator etc… were all deluded and incompetent. Apart from some mortgage fraud, I do not believe there was criminal intent or anything that you could try someone for. If there was a crime for idiocy then sure, they would all be locked up along with half the population.

        That’s why I say we need to look forward and we need a system that works and that does not repeat this mess. We need tighter lending criteria for mortgages, more capital held by banks, more and smaller banks etc… and this has to be enshrined in law so it cannot be easily undone. My concern is that this is unravelling as we blog.

      • Fred says: “I think to compare what happened with WW2 is a tad extreme.”

        Not at all. Both events were massive in scale and wrecked the lives of millions. Exactly the same principle applies: Should people in power and control be held to account for their actions. I say Yes, it is essential.
        This is not a vindictive desire but unless they are, they will never pay the price for their greed/corruption/dishonesty and the same mistakes will be made time and time again.

        I do believe that a legal case could be brought against Gordon Brown, if only for culpable negligence of his duties in public office. He could not use ignorance as a defence because he installed the appalling City oversight system. As for the rest of them – I dunno – perhaps a few bankers for fraud or negligence.

        The best way of finding a new oversight system for the future is to understand and learn from what went wrong this time. What we are seeing is the same old same old attempts by those in power to shrug their shoulders and move on w/o adequate investigation. IMO that is wrong.

  8. Thank you,pity our MSM can’t be bothered to point out these minor irritations.
    Ben Bernanke.the pimp of Washington,with his whores and rent boys,has had the audacity to by pass congress and lumber the tax payer with more additional debt WITHOUT recourse to congress.Not a whimper.The FASB whores,have flung themselves on feather beds and pronounced NO MARK TO MARKET EVER.The banks are full of even more evil bonds greater in number than has been realised,yet the fantasy of the accountants allows payouts for FRAUD-nice!
    In this time of the “ancien regime”more fraud and deceit is obvious and accepted by “decent”people without a peep.How can this end well?

    Her Majest in visting the London School of Business,asked “Who could’a known?”to which the learned liars shrugged their collective shoulders.Yet many were screaming in the financial industry in the US and somewhat here in the UK,that a disaster awaited.Also many grand finance houses were even shorting their own dross,indeed”who could’a known?” and yet we are expected to be compliant and silent whilst what little we have is removed to save the TBTF who seemingly are too big to jail.
    Yes,I shall return to washing floors for off-shore oligarchs who pay less tax than me,but this is expected to end well?The French thought so as well!
    Thanks again for your civilised insight,I unfortunately have a lot stronger language to use about these thieves and charlatans.

  9. Dont care,wont care,and cannot be made to care.I dined with two of the top guys last week and they are only interested in themselves and nobody else,and the sad thing is they are right,and some of them are already leaving for America where the taxes are more lenient.Rats off a fast sinking ship comes to mind.

    • Going to America in their position is like being airlifted off the Titanic by the Hindenburg.
      They’re far more likely to end up decorating a lamppost over there than here in the UK.

  10. You write as though the entire £1,322.7 billion is sunk money – crystallised losses which we have no option other than to accept in full. I may be wrong, but I think this is not quite an accurate description of how things are. It seems more likely to me that this is an accounting position in which the UK states its liabilities in full, and its assets written down on a prudent basis to estimated current realisable value. This , I reckon, is an artificial position, because the assumptions covering the write down of assets are not consistent with the assumption of a zero write-down of liabilities. In other words, the scale of the write-down of UK assets assumes that there will be some level of default in the settlement of our liabilities. Remember, our liabilities are someone else’s assets – why should it be that we are required to write down our assets while others are allowed to continue to hold theirs at full value?

    • But they are not even writing down a full account of the liabilities!
      Pension liabilities, PFI etc etc etc, they have just kicked the can further and further down the road and by doing so don’t include these sorts of figures.

    • Because, dear boy, your lot want to hype what you make for the Treasury, and minimise what you cost.
      Somebody has to restore the balance, and I’m your man.

      • John

        All I’m saying is that £1,322.7 billion is the value of about 10.5 months production of value for the entire population – 60 million people – and that if these are the crystallised losses of the nationalised banks then someone, somewhere would be creating the biggest stink that this country has ever experienced. There isn’t any way the nationalised banks could generate enough profit even to cover the interest cost of such a colossal debt, let alone make any inroads into repaying it.

        I find it difficult to believe that any government would be prepared voluntarily to accept such losses as public debt, when it had the option of re-crediting retail deposits and just allowing the receivers to deal with the rest.

        There isn’t anything about 90% of modern banking that is in any way necessary to the functioning of an efficient economy, so there’s very little of any real value that would be lost by just letting it sort out the imbalance between assets and liabilities that it has created itself.

  11. I, too, agree with every word.
    If the bailed out bankers ‘could not forsee this coming’, then perhaps they cannot forsee their come-uppance. They seem to forget that they are no longer dealing with deferential citizens who, unquestioning, obey their every word. The World is now inter-connected by flows of information as well as money. The information feeds dissent, and if the system of representation does not give a voice to this dissent, it will be heard in other ways.

  12. I agree with the blog and most of the comments. However at the same time its leavse me with a feeling of helplessbess. If all those financial fellows are in cahoots and the government is not willing to act, what do we do??
    20 years or so ago, I read abook the title of which I have lost which in fact forecasted the present crisis and the resulting world chaos/war. I then dismissed it as fanciful thinking, I niw wish I had kept the book.

  13. Why do none of the media report on the percentage contribution by the Financial services sector to this quarter’s GDP figures? I went to the ONS website (http://www.statistics.gov.uk/cci/nugget.asp?id=192) and saw that there was no figure there either although the sector accounts for quote” .. The largest contribution to the decline in this quarter was from business services and finance … Business services and finance decreased by 0.7 per cent, compared with zero growth in the previous quarter” so this essential sector is contributing less and paying more bonus?
    Does this sector include banking?
    Was it too cold to do banking?
    The sure conclusion must be they are so busy ripping money out of someone else they make little contribution to GDP?
    If that is true why are they essential?
    Why is nobody on BBC or in the Torygraph / Indi or where ever questioning this?
    I think Simon Stephenson’s comment is valid and fair but how to quantify it without any available accounting honesty? It opens the door for more bankers to escape instead of facing the damage they have done.
    I’m very confused.

    • I mentioned in another response the other day that the banking system is an integral part of Britain’s economy and of most other developed countries.

      By this I meant that all monies in the economy go round and round via the banking system and all payments (national and international) are processed thru the banking system. IOW banking is the lifeblood of the economy. Take it away and the economy will crash overnight.

      That may not be what many people would like to see after the shambles they’ve made of it, but it is a fact and its monopoly has been strongly enforced and/or encouraged by successive governments for a variety of reasons, including surveillance. Eg: try buying a new car or house with cash! It is no exaggeration to say that govt and banking are in bed together and both fail to operate in the public interest.

    • We should also remember that apart from their foreign earnings any financial organisations profit is money removed from elsewhere in the UK economy. Therefore to say this increases the tax take is too simplistic, as someone else’s profits (manufacturing for example) are less by a balancing amount.

      • Exactly so. And mention of this fact was consistently withheld when Brown & Co announced their intention to raise NI Contributions of employers/employees to fund more state spending to save the economy.

        Every pound of the planned rise would be a pound taken out of the pockets, and therefore not available for spending by those who had earned it.

        And of course, exactly the same fact applies to every other pound taken in tax.

    • Singjim

      “Why is nobody on BBC or in the Torygraph / Indi or where ever questioning this?”

      I think the answer to this is that mainstream media all obey the unwritten rule that they will only take up those things that are already out somewhere in the mainstream arena. Unlike, say, Spiked or Private Eye, they are never prepared to stick their heads above the parapet with an idea that runs contrary to the whole of “accepted” thinking. Only when an idea breaks though the boundary of acceptability/unacceptability do mainstream writers consider it legitimate to write about it. I don’t believe it’s a conspiracy, as some might allege, it’s more a personal pledge that the only acceptable change is gradualist, and that boat-rocking causes more problems than it solves.

      I believe that there is an explanation of our financial/economic situation, and its development over the last 20-30 years, that would be readily understandable to anyone with financial training, and also to many clear thinkers even if they have not had such training. I think though that the thinking of the media and the establishment is that it would be unhelpful if this explanation found its way into public awareness, and so the policy is to obfuscate and, where the divulging of information is unavoidable, to present it in snippets that cannot be knitted together to show the whole.

      • Another view is that the bulk of the MSM see themselves today as the prime distributor of Establishment news and information, mostly thru press releases, press conferences and interviews etc.

        The days when MSM considered itself responsible for holding the Establishment to account on behalf of the citizenry have long gone.

        Today, any MSM journo who asks the wrong questions, makes life difficult or makes trouble for those in power will soon find himself barred or uninvited from press conferences and high level 1-2-1 interviews etc. A call to his editor soon fixes the problem. Even if he is still allowed to attend the theatricals, he’ll never be invited to ask a question. IOW, his career as a political journalist/commentator hits the buffers.

  14. Agree with you, Mac + BT on this John, but would suggest that your figure is on the conservative side.

    Mr RagingTory has a point, however. My only disagreement with him is in his use of the word ‘hope’ (and his suggestion that you’re missing the point…). What is required is the metaphorical iron grip on their bollocks to ENSURE the money is repaid. How this would be done I don’t care (I have my own inventive, unsympathetic and probably illegal ideas) but done it must be.

  15. To protect your capital,avoid property(overpriced everywhere)and any government debt(the UK et al. are going to INFLATE the problem away),keep buying boring multinationals with big market shares,dividends,and nice tax structures, have a bit of fun in the art market,make sure the artist is dead,keep writing put options on those boring multinationals,ignore the gold hustlers,repay all bank debt(these people are all under 40 and completely unprdictable), wait for the 2011 selloff, then wait another week,and buy more of those boring solid low growth multinationals,and do not leave it to your children.

    • I agree with your every angry, pissed off, cheesed word John except two… you want “more regulation”.

      Can I remind you of my suggestion. Instead of this:

      £1,322,700,000

      You pay this: £0.00

      What my system is called is the Free Market.

      It’s the thing that makes big bad bags of shit, like bid bad banks, go bankrupt.

      The free market is the only 100% certified 100% guaranteed that you never get put on the hook for shit Chief Executives and rotten to the core politicians.

      Has the penny dropped yet my old bean???

      Freedom & Free Markets…. a work of genius from every angle, never bettered and never will be… EVER

      • Velocity:
        Somewhere between our current system of govt which is top down, corrupt, hugely bloated, overloaded with rules/regulations and excessive state spending often on itself, -vs- your aim of shutting down govt and leaving everything to the free markets, probably lies a solution which is acceptable to a majority of people.
        I cannot see that either of the extremes would work in Britain and I cannot say what the right balance is.
        I prefer minimal constitutional govt.

  16. Great piece again!

    Reading some of the comments here there is a propensity to blame this or that contemporary leader or influencing person. The malaise that exists in the UK was not caused by a Brown, King or any other individual but by the belief that somehow everything British is superior to all others. This has become part of the British culture and it leads us to think that if only we hadn’t had this or that leader things would be better. The fact is that British culture and institutions are no longer fit for purpose in the world as it exists today.

    I admire your passion and desire to articulate the issues that are patently wrong but to reverse the decline will require someone pressing the reset button. Those that represent the status quo will cling on until Britain sinks and sinking it is. We can only hope it sinks quickly so the pain is not too protracted.

    • I agree with what you say, but you’ll have spotted that Britain has no ‘reset button’ or any lawful process of changing our corrupt/incompetent system of govt except from within by those who are already directly involved in it. That amounts to putting bank robbers in control of cash deposits.
      Corruption in Britain is institutionalised. The MPs expenses scandal is plain evidence of that.

      I’m sure that any attempt to impose a new system of govt upon our Establishment elites and its army of State Agencies would quickly cause them to invoke the CCA and dish out some serious violence. And we should never understate the power and influence of unelected Civil Service Mandarins.

      When I step back and compare Britain to the countries we now see on our TV screens each day – Tunisia and Egypt – the principal difference is that our system has existed for much longer without major change and is highly sophisticated after decades/centuries of tweaks and mods to close all the loopholes.

      As you allude, the only real solution is to stand back and watch it sink as it is surely doing.

  17. Pingback: CRASH 2 ANALYSIS: Eric Daniels and the outstanding debt bonus. | The Slog

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