Taxpayers may make £27 billion from bailing out banks during the economic downturn

Financial News

The taxpayer is set to make a £27 billion return from bailing out two financially marred banks during the recession, according to The Banker magazine.

The money made from the future sale of the government stakes in Royal Bank of Scotland and Lloyds Banking Group would be enough to fund the UK’s primary schools for a year or could help the state to reduce its debt to 1.1 per cent of GDP.

The investment return figure is expected to include £19 billion of share price gains, £2 billion in fees for guaranteeing bank bonds, £1 billion in loan fees and £5 billion in fees for the Asset Protection Scheme.

Editor of the magazine Brian Caplen said: “While the banks remain at fault for decisions that led to some of them needing a rescue package, the UK taxpayer could make a significant profit from bailing out the banks by 2015.”

He continued: “Even if you take a fairly conservative view of the share prices, the outlook is strong. Every time Lloyds’s share price goes up by 10p, the Government makes £2.76 billion”.

Mr Caplen explained that the government’s assistance strategy was a clever move; charging the banks hefty fees for services and other commitments has generated a handsome return.

However, the predicted figure depends on the scale of economic growth in the coming years as well as when the government decides to sell its shares in the banks.