Government may never recover £66bn bailout
The concerns were voiced by Public Accounts Committee chair Margaret Hodge following the publication of the committee’s findings on the creation and sale of Northern Rock.
She said: “The lack of competition does not fill us with confidence that the taxpayer will make a profit on the sale of the two banks which remain in public ownership – RBS and Lloyds. There is a risk that the £66 billion invested in RBS and Lloyds may never be recovered.”
The warning came after the committee had published its report based on evidence from the Treasury and UK Financial Investments.
Hodge said the committee’s opinion had been formed after reflection on the handling of the sale of Northern Rock.
She said: “The rescue of Northern Rock is expected to cost the taxpayer some £2 billion.
“The treasury was unable to respond promptly when the banking crisis hit because it lacked the right skills and understanding.
“It was slow to nationalise the bank and that made a loss difficult to avoid.”
Hodge added the treasury had spent five months trying to find a private sector buyer before giving up and after nationalisation it failed to effectively challenge the optimistic business plan put forward by the bank’s management to split the bank.
She said: “There were only two bidders and it was fortunate that Virgin Money was particularly keen to buy.”
And she added: “It is vital that the final decisions on the wholly owned banks are made with value to the taxpayer taking precedence over speed of exit.
“This will not be the last banking crisis and the next one is likely to be different. The treasury must ensure it retains the right staff with the right skills to understand the risks and respond effectively.
“It needs to learn the lessons from the creation and sale of Northern Rock and make sure that these are applied in future, including to any sale of RBS and Lloyds.”