There goes another £10 billion

Not long after we get confirmation that all £20 billion taxpayers put into RBS has been lost in the write offs and trading losses at the end of last year, we hear that HBOS has lost £10 billion. There’s not much left then of the £37 billion we put in so recently to the three banks.

It shows the expensive folly of setting a price and promising the money in a hurry. They then had to wait some weeks before they could actually pay the money in, whilst the documents were drawn up and shareholders agreed. Why not announce the intention to put money in, and then use the following time to get a new valuation of the assets and agreement over a price that was better for taxpayers?

Better still, why not offer cash and short term loans against security but not buy equity? These three banks are too big for taxpayer comfort, and the losses are eye watering. Why didn’t the government realise this? Why didn’t it protect taxpayers more? Never has there been so little pleasure for the expenditure of so much public money. Now we all have to work harder to pay those debts off, as it is all borrowed money they have lost.

This is an amended post. The media first reported a loss of a mere £8.5 billion, but the small print reveals it is £10 billion. No wonder departments in the government now have become even more casual about their budgets when huge numbers swing around in bank loan books owned by the state. This banking crisis is creating an unreal world in public finance. Labour’s dream of limitless spending will turn into a nightmare of debt.

This entry was posted in Blog. Bookmark the permalink. Both comments and trackbacks are currently closed.

18 Comments

  1. Deborah
    Posted February 13, 2009 at 4:54 pm | Permalink

    Total negligence.
    Wherever you look with this government, whether it’s throwing money down the drain with the banks, casually losing personal information or allowing our educational standards to collapse.
    Meanwhile the regulatory agencies, run by their friends and colleagues, turn a blind eye or say say nobody has done anything wrong.

    And the Lords and Ministers continue to fill their pockets with all they can get.

    It’s the hopelessness that is so frustrating. There seems to be nothing we can do about it.

    Why are so few good men prepared to stand up and be counted?

    Keep asking the questions, John. Maybe one day you’ll get some answers.

    • Brigham
      Posted February 13, 2009 at 7:10 pm | Permalink

      Answers are the last thing this government give. All sorts of people have asked questions and they have not seen fit to answer one of them. “I won’t be lectured to……” “The hon member has got it wrong…” “Under his government……” And the implied, “I have saved the world so I am too important to be bothered by lesser mortals”

    • Stuart Fairney
      Posted February 14, 2009 at 12:24 pm | Permalink

      Well said indeed. At what point does such reckless negligence become a criminal matter do you think? I’m prepared to bet that £10B is more than the proceeds of every domestic burglary in the UK in 2008.

      We jail burglars, (supposedly anyway).

      Could not help but notice that this story is absent from the BBC news website mainpage today, but there is room for one about a women with the world’s longest finger nails. Pravda much? Mustn’t let the proles know the economy is dying. Up the revolution comrade etc

  2. Johnny Norfolk
    Posted February 13, 2009 at 5:45 pm | Permalink

    Just how can the Labour government get away with all this. Do you rember how the BBC led the attack on John Majors government.
    Where are the BBC now. Labour and the BBC are one, as far as I am concerned .

    The BBC hates to criticise Labour, they all have a pained look on their faces when they have to, as you do when you have to tell a friend something they dont want to hear.

    Come on media get stuck in we need to be rid of them as soon as possible before its to late.

    • Michael Taylor
      Posted February 14, 2009 at 2:56 pm | Permalink

      Don’t labour under the illusion that Gordon and his BBC chums will be able to dictate the timing of the election, or that they will be able to ‘hang on’ until next May. The money’s going wrong at too fast a pace, and the ruin is accelerating. My guess is they’ll be out by June, regardless of what they ‘plan’ or wish. So what’s needed now is for the Conservative Party to concentrate all its talents and skills to be able and ready to act in full emergency mode from the day they take office. They will inherit nothing less than a struggle for survival.

  3. oldrightie
    Posted February 13, 2009 at 6:23 pm | Permalink

    The wall they use to get rid of all this money must be very damp proof. What a nightmare!

  4. Richard
    Posted February 13, 2009 at 7:18 pm | Permalink

    Good news though – the FSA staff are in line for £33m in bonuses/pay rises for their success this year. I suppose 5 of the 10 biggest UK banks haven’t yet had to be part or fully nationalised which must constitute some measure of success.

    I am not surprised by the lack of care in handing out our money, it’s just another example in a long line of poor decisions and a lack of consideration of the consequences. I take some comfort from the fact that the result of many of these poor decisions can now be more clearly linked to Gordon Brown.

  5. D K McGREGOR
    Posted February 13, 2009 at 7:33 pm | Permalink

    Democracy must be something more than two wolves and a sheep voting on what to have for dinner. — James Bovard, Civil Libertarian (1994)

    Herein lies the problem of the UK today.

  6. THE ESSEX BOYS
    Posted February 13, 2009 at 9:09 pm | Permalink

    Deborah is right…the apparent ‘hopelessness’ is getting to us all after the the Lords, the Bankers, the Home Secretary and now these enormous losses in rapid succession.

    John poses rhetorical questions…”Why didn’t the government realise this? Why didn’t it protect taxpayers more?”

    Time after time we come up with the same reason.
    Commercial inexperience and naievity from a bunch of politicians who have never run anything of substance in their lives. When this lot are not feeding at the trough they get hoodwinked by people far brighter than them – and to make it worse they now realise they will be kicked out of office next year so will be even more intent on feathering their nests, lining up places in the House of Lords and currying favour with firms they know through their spheres of influence.
    Being adept in garnering votes is just no training for high political office and we just can’t go on this way.

    All 4 of us really felt very despondent at the way our money is being stolen and wasted when we met this evening for our Friday evening drink…so we’re looking to our fellow blogsters to give us some good news and rays of hope!

    • mike stallard
      Posted February 14, 2009 at 9:51 pm | Permalink

      Here’s just one:
      Australia (NSW) where I am at the moment seems unaffected by the crisis. House prices seem stable, Estate Agents are still in business. The Australian economy balances.
      On the other hand, it is pouring with cold, wet rain!

  7. John Moss
    Posted February 13, 2009 at 9:54 pm | Permalink

    Because nobody in Government or the civil service has ever seen anything like this before. Because of that, once they “announce” something, it has to be done. they are PR politicians, they work by announcement and spin.

    Real solutions involve much more knowledge and understanding and I cannot help feel, everytime I see Darling on the TV, that he looks like somebody who simply does not understand the enormity of the problem he is facing and has adopted a fingers-in-the-ears, la-la-la-la-la, I can’t hear you, approach to policy making.

  8. G. McCullough
    Posted February 13, 2009 at 10:08 pm | Permalink

    You see, not only was bailing the banks out bad morals and bad economics, it is impossible. The prudent banks that would have taken over their assets would have inspired confidence, but zombie ones won’t and can’t. Lack of regulation was never the problem – too much easy money and safety nets were. Will they be any more careful now that they know they will be bailed out if they take excessive risks? And as I said, wasn’t that why they took such risks (encouraged by Brown, as well)?

    Who will bail the government out?

  9. Michael Taylor
    Posted February 14, 2009 at 1:31 am | Permalink

    All the disastrous economic consequences of bankruptcy. None of the benefits.

    You, John, must be burning with the frustration of it.

  10. Ian Jones
    Posted February 14, 2009 at 2:16 am | Permalink

    Lets hope they dont try shoving more money in, just nationalise Lloyds and RBS then break them up. Put the deposit side and usual banking into a new bank and leave the rest to die.

    Remember this has not just cost the taxpayer but also the millions of private pension savers whose schemes owned these banks. Gordon through his 5bn raid and his terrible financial regulation has destroyed a generations pension. Good to see the public sector still think there will be money to stuff their faces with!

  11. mike stallard
    Posted February 14, 2009 at 2:29 am | Permalink

    Interestingly, Labour list gives two newspaper articles, one from the Independent and the other from the FT which criticise Gordon Brown quite heavily today.
    You are quite right: the sheer incompetence of this government is staggering. So much for the “Iron Chancellor”.

    • THE ESSEX BOYS
      Posted February 14, 2009 at 12:11 pm | Permalink

      …onto our couch!

      (Sorry – we cut off their best line!)

  12. jim
    Posted February 14, 2009 at 5:33 am | Permalink

    From the way that income tax receipts are collapsing it should be clear to people that there is no way the banks losses can be paid by the taxpayer, nor should they be. You can’t have a system where profits are privatised and losses are socialised, it is simply not fair. It also rewards failure, which destroys the basis of capitalism.
    As you point out these banks are too big. They should simply be liquidated, the bondholders who leant them money should take a bath, they didn’t do their due diligence, so they should be punished.

  13. Bazman
    Posted February 14, 2009 at 6:07 am | Permalink

    I bet that cheque didn’t take five working days to clear.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page