The Quickie

A bite-sized look at this week's news…

Taxpayers liable for £19,000 each after bank bailout

Posted by therealquickie on October 14, 2008

This week’s £500 billion rescue package for high street banks, designed to bring confidence back to the credit market, could cost every taxpayer up to £19,000.

On Wednesday, Gordon Brown and the Chancellor of the Exchequer, Alistair Darling, oversaw the largest rescue of the British banking system ever seen.

Banks including Abbey, Barclays, HSBC, Nationwide Building Society, Lloyds TSB, the Royal Bank of Scotland and HBOS could all be part-nationalised as a result of this unprecedented action.

Brown explained the reasons behind the move in a televised press conference, ‘Good, strong banks are essential for every family and for every business in the country.’

As the scale of this bailout began to sink in, Brown explained that, ‘extraordinary times call for the bold and far-reaching solutions that the treasury has announced today.’

£500 billion may not be enough 

Even combined with interest rate cuts, from 5% to 4.5%, the Evening Standard reported that the Chancellor was prepared to do more.

‘I believe it will go a long way, but as I have said on many, many occasions, I’m not ruling anything out.’

The opposition parties promised constructive support and welcomed the actions taken.

Leader of the Liberal Democrats, Nick Clegg said: ‘When a ship is sinking you send out the lifeboats. You don’t argue about who steered it into an iceberg.’

Taxpayers picking up the bill

This money has to come from somewhere and the bill will inevitably fall to taxpayers.

The knock-on effect of this bailout could lead to an increase in taxes and cuts in public spending, although we would not feel the full effect of this until the next budget report.

Many argue that it is not right for taxpayers to bear the financial burden as a result of the risks taken by bankers during the times of a de-regulated banking system.

Two things are certain.  Firstly, how history remembers the Brown-Darling legacy will be depend on the success or failure of this drastic, but necessary action.  Secondly, we will all be feeling the effect of this financial crisis and radical bailout for some time to come.

What else could you get for £19,000?

 

Will Drysdale (willdrysdale@hotmail.co.uk)

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