UK Bank Bail Out = 93.5% of UK National Debt


Confused and frustrated by much of the public discourse around debts, deficits and cuts I decided to do a bit of research of my own. This is where I got to:

Most financial commentators have come to the consensus that the bank bailout cost UK tax payers approximately £850 billion.

The UK total government debt for the end of Financial Year 2011 was £909 Billion.

So on those figures 93.5% of the UK’s National Debt is a direct result of the bank bailout.

The UK government currently runs an on-going deficit (the difference between income & expenditure) forecast to be £163 billion (11.1% of GDP) this year.

Historically, since the mid ‘70’s the UK government has run a deficit every year apart from a brief period under Margaret Thatcher in the late ‘80’s and under Gordon Browne in 2000-2001.

In 2007/8 just before the banking crisis the deficit was £7.6 billion, which was 40% less than the figure inherited by New Labour from the Conservatives in 1997.

The idea that 13 years of New Labour profligacy has got us into this mess is simply nonsense.

The jump from an annual deficit from £7.6 billion to £163 billion is a result of the collapse of tax revenues caused by the recession and the interest payments due on the £850 billion borrowed by UK tax payers that was given to private financial institutions to ensure their survival.

Clearly the UK debt & deficit crisis is almost entirely a direct result of the bank bailout.

A bail out that allowed the survival of a system in which obscenely rich people got even richer by a form of state sanctioned gambling – just like the Lottery – except that their losses were guaranteed by working tax payers on average and low pay.

This same banking system then looks at the £850 billion in UK debt, taken out to ensure it’s own survival, and says, we don’t think this level of debt is sustainable – using the same procedures, systems and values that got us into the mess in the first place – and you have to cut public spending to reduce the debt.

The ConDem government then expect the rest of us to say, “OK, fair enough, we’ll suffer a decade of unemployment and diminished public services in order to pay back that £850 billion – just so long as those poor bankers can keep their bonuses, otherwise they might all emigrate.”

It beggars belief! The UK taxpayer is not responsible for this debt; the banking system is and it is through a tax on their profits that the debt must be repaid.

There are no moral or financial justifications for these cuts and they must be resisted as the ideological opportunism that they are.

For clarity:

1 Billion = 1,000 x 1 million

1 Trillion = 1 million x 1 million i.e. 1000 Billion

http://oxforddictionaries.com/page/howmanybillion

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4 responses to “UK Bank Bail Out = 93.5% of UK National Debt

  1. I can’t claim that I have a sound understanding of the financial mess, but I smell a rat. The bankers are asking for it. For starters I wish all their toilets would back-up at the same time that their air-conditioning, computers, and elevators shut down. If you would like a good visual explanation of the magnitude of a trillion dollars then link to http://usdebt.kleptocracy.us/

  2. Sorry to be “that guy”, but to say that we have given £850bn to the banks is very misleading.

    We lent about £130bn to the banks, with the remainder of the £850bn figure being in the form of guarantees (which are unlikely to ever be drawn against). Whist we are currently in the red on our £130bn investment (book loss of about £40bn at the moment), we can hold this for the long term and shoud see a profit.

    That said, doesn’t change the fact that the banks should have been allowed to fail… the forest needs a fire every now and again.

    Source: http://www.guardian.co.uk/news/datablog/2011/nov/12/bank-bailouts-uk-credit-crunch

    • Update: 7th April 2012.
      These figures are all contested.
      The Independet in February 2009 claimed the bail out would cost UK tax payers 1.5 Trillion

      Andrew Haldane, the Executive Director for financial stability at the Bank Of England, estimated that the public subsidy to just the big 4 UK banks between 2007 and 2010 was £215 billion. This from a senior banker and not including the last 2 years and the rest of the sector.

      Indeed, in October last year the FT suggested RBS might need another bail out of billions

      The truth is it is too early to say how much it will cost. If the Euro crisis continues and deepens, the banks might to need to call in the government guarantees and then we really will be in the shit.

  3. Also, the bail out does not form a part of the national debt. You need to add that on top…..

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