Taxpayers in England Get Lambasted for 600 b Sterling to Support Reckless Banks

600b Sterling

Alistair Darling is to offer guarantees worth £600 billion against toxic assets to give two of Britain’s biggest but ailing banks a final chance to survive the credit crunch.

The colossal figure is even bigger than expected and exposes taxpayers to unprecedented liabilities from bad debts that are unlikely ever to be repaid.

Treasury ministers were locked in frantic negotiations with Royal Bank of Scotland and Lloyds late last night to enable the Chancellor to announce this morning that he is insuring more than £300 billion of RBS’s toxic assets.Tomorrow he will say that the Government is insuring between £250 billion and £300 billion of toxic investments held by Lloyds Banking Group.

In return the two banks — in which the taxpayer has already taken a £37 billion stake — will provide extra loans to homebuyers and business worth a combined £40 billion.

The two announcements are timed to coincide with RBS’s confirmation today that it lost £8 billion last year, and Lloyds’s tomorrow that its new HBOS subsidiary lost £10 billion.

In the latest sign of its deep financial woes, RBS announced yesterday that it was ending its sponsorship of the Williams Formula One team as part of a move to cut funding of British sport by 50 per cent by 2010.

The overall figure to be insured is even bigger than expected after the Government insisted that the pool of toxic assets to be isolated should be large enough to give the banks the confidence and stability to restructure and become better organisations.

“We told them it would be erring on the side of caution to go for a higher figure. We do not want them coming back for more,” a source close to the negotiations told The Times last night.

Mr Darling is gambling that the figures eventually agreed will be enough to set the banks on the road to recovery, and ultimately to the private sector, and end talk of them being fully nationalised.