By Bob Duncan
Anti-independence campaign leader Alistair Darling’s credibility has sunk to a new low according to the SNP as a new report warns that UK taxpayers may never get back the £68 billion he used when Chancellor to bail out the banks.
A “devastating” report spells out the risk of a £2billion loss on Northern Rock plus a potential danger of never getting back the £66 billion put into Lloyds and RBS.
The MPs single out the Treasury and its then political bosses Labour Chancellor Alistair Darling and Prime Minister Gordon Brown for damning criticism as part of “a monumental collective failure” to understand either how the pre-crunch boom could spark a banking crisis or what to do when it did.
A run on deposits at North of England based Northern Rock in September 2007 was a key moment in the financial crash. The Treasury spent five months vainly seeking a private buyer for it – a period of “drift”, its top civil servant admitted earlier this year.
With only two bidders for Northern Rock and only one that was really keen to buy – Virgin Money – the committee said this did not bode well for any attempts to sell off RBS, of which taxpayers own just over 80%, and Lloyds, in which taxpayers own just under 40%. At current share prices taxpayers are losing around half of the £66bn investment.
“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 £66bn invested in RBS and Lloyds may never be recovered.
“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,” said Margaret Hodge, the MP who chairs the committee.
Hodge noted that when Northern Rock was split in 2009 and the “good bank” given a mandate to start lending, it failed to achieve its goal. “Splitting the bank was supposed to generate lending, but the new bank lent only £9.1 bn against a target of £15 bn,” she said.
The committee concluded the Treasury was “part of a monumental collective failure to understand that the pre-crisis boom could lead to a banking crisis”.
SNP Treasury spokesman Stewart Hosie said:
“This is a damning report for the leader of the anti-independence campaign.
“It was Mr Darling’s monumental failure to act that brought on the banking crisis but his credibility has now sunk to a new low.
“Taxpayers across the country will be rightly outraged at the idea they will be left #68billion out of pocket as a result of bailing out the banks.
“That is public money and they deserve a full explanation from Mr Darling and Mr Brown.
“Labour tried to deny any involvement in the economic crisis but we know, thanks to this report and to comments from FSA chief executive Hector Sants, it was entirely the fault of the party’s economic mismanagement.
“Mr Darling, who has absolutely no financial credibility left, is leading a campaign asking the people of Scotland to trust him that they are better together with a Tory UK government.
“But for the people of Scotland the question is how much they can trust a word Mr Darling says after trying to hide his responsibility for making a mess of the economy.”