Banks could get £billions more tax payer money

05 January 2009 / by Rachel Mason
The UK's flailing banks could see another massive injection of tax payer cash, despite the fact they have already received a bailout of £37billion.

The Prime Minister and the Chancellor have both said that the banks may need more money to help them through the financial crisis after the Government's first bail-out failed to kick-start the economy.

However, although both Gordon Brown and Alistair Darling said that another direct cash injection could not be ruled out, they said it was not their first option; instead they are thought to be figuring out a multi-billion insurance scheme in which the Treasury would take on some of the risk of debts.

Speaking on the BBC's Andrew Marr Show yesterday, Mr Brown said: "Look, we've had the first financial crisis of the global era. The global banking system virtually collapsed and we had to try to rebuild it."

He said that solving the problem has involved a number of stages, the first being the £37billion cash injection.

"One, we had to give the banks liquidity to keep going," he said, "then we had to give them the capital that was necessary for them to sustain themselves. Now we've got to get them back to doing what banks should do, which they're not yet properly doing, and that is lending."

The Prime Minister continued, "We've got our mortgage protection scheme, which is to help people stay in their homes and we're not going to do what happened in previous recessions and allow people to go under.

"And then the small business issue and the jobs in small businesses and even larger businesses. That is a bank funding problem and we've got to solve that problem over the next few weeks. Now that is what we are urgently talking about with the banks at the moment."

Shadow Chancellor George Osborne said that if the Government does have to revisit recapitalization of UK financial intuitions, then it will be "a stunning admission that their whole approach to the recession isn't working," saying that the Prime Minister's recession policies "are becoming an expensive failure."

Vince Cable, Liberal Democrat Treasury spokesman, said that the Lib Dems would oppose any further bank bail-out, saying that there cannot be a situation where the taxpayer is forced to make "open ended financial commitments to the banking system" while the banks continue to put their own interests ahead of the national economy.

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