, LONDON, Dec 4 – Britain\’s financial support including guarantees for its ailing banks has hit 850 billion pounds since the start of the crisis, a watchdog report said on Friday, amid tensions over bankers\’ bonuses.
The National Audit Office said Prime Minister Gordon Brown\’s government was justified in pledging the "unprecedented" amount on rescuing banks that went into meltdown after the collapse of US investment bank Lehman Brothers in 2007.
"It is difficult to imagine the scale of the consequences for the economy and society if major banks had been allowed to collapse," said NAO head Amyas Morse.
"The Treasury was justified in using taxpayers\’ money to safeguard savings and stabilise and restore confidence in the financial system.
"But the big question is what all of this will eventually cost the taxpayer. This will take time to answer," he added.
Britain was among countries that spent billions of pounds bailing out leading banks including Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG) during the crisis, while Northern Rock was nationalised outright.
LBG is 43-percent owned by the taxpayer while RBS, ravaged by the credit crunch and the takeover of Dutch giant ABN Amro at the top of the market, is set to become 84 percent state-owned after the latest bailout.
The government\’s rescue packages, including purchase of shares, guarantees, loans and insurance schemes made to financial institutions, totalled 850 billion pounds (933 billion Euros, 1.40 trillion US dollars), the NAO report said.
About 117 million pounds has been spent on buying shares in and lending directly to the banks, and the government will have handed over another 107 million pounds by April 2010 to financial advisers about handling the crisis.
Despite the injection of money, banks are unlikely to meet targets set for increased lending to businesses in recession-hit Britain, one of the conditions for receiving the bailouts, the report said.
Both LBG and RBS are however on target for mortgage lending.
Morse said the eventual sale of RBS and LBG will be "crucial" to determining the final cost to taxpayers of rescuing such institutions.
The report comes amid a row over bonuses for bankers, with reports Friday that 200 executives at LBG are set to receive a one-off payment worth up to 80 percent of their annual salaries.
Staff will receive the money for integrating Lloyds with HBOS in a government-brokered deal, which has led to more than 11,000 job losses at the new combined LBG bank since January, according to The Times.
However Royal Bank of Scotland has indicated it will bow to pressure to slash executive bonuses, the Financial Times reported on Friday.
RBS insiders said pay-outs in its investment banking division would be "at the low, low end of the scale."
Reports on Thursday had said the RBS board could resign in protest at the Labour government\’s plans for a crackdown on performance payments.
Some observers blame the bonus culture of the world\’s two pre-eminent financial sectors – the City of London and Wall Street – for encouraging excessive risk-taking, which helped to tip the global economy into chaos.