Thanks Brillo for pointing me to this story. Was Martin Armstrong right?:
Daily Telegraph link
Every British taxpayer faces a bill of nearly £5,000 for losses associated with the financial crisis and the bailout of the country's high-street banks, the International Monetary Fund warned last night.
By Edmund Conway and Robert Winnett
Last Updated: 9:28AM BST 22 Apr 2009
The Chancellor will admit that the Government is likely to lose about £60 billion from the rescue of British banks including RBS, Lloyds and Northern Rock Photo: PA
The warning was sounded only hours before Alistair Darling is expected to be forced to admit in today's Budget that Britain is experiencing the worst recession since the Second World War.
The Chancellor will admit that the Government is likely to lose about £60 billion from the rescue of British banks including RBS, Lloyds and Northern Rock. The Prime Minister had previously insisted that the Government may actually profit from the deals.
However, the IMF predicts that Mr Darling's admission underestimates the scale of the potential losses. It expects that Britain will eventually face one of the worst losses of any leading industrialised nation in the world from the financial rescue – amounting to about £140 billion. The respected international body also believes that the British Government will have to spend billions more rescuing the banks and may even have to nationalise other financial institutions.
However there was confusion after the IMF revised its figures late last night after the Treasury disputed its calculations.
The IMF had initially said the British Government was likely to lose £200 billion from the bank bailouts. Its revised figures are still more than twice as much as the Treasury is expected to admit today.
The damning verdict comes as Mr Darling prepares to announce the Government will have to borrow more than £150 billion this year to fight the recession. The borrowing is likely to plunge Britain into debt for a decade and will lead to large tax rises after the next election.
Today's budget - described as "Judgement Day" for Alistair Darling and Gordon Brown – will also coincide with the release of official unemployment statistics expected to reveal the jobless total climbing to the highest level since Labour came to government.
There are growing fears that the Government may scrap higher-rate tax relief of pension savings in a bid to reduce the black-hole in the public finances. The move, which could raise £5 billion, would have devastating effects for millions of Britons earning more than £40,000 who will have to save far more for their retirement.
The Daily Telegraph has also learnt that the budget is expected to announce:
*A new higher Isa limit for pensioners. The Daily Telegraph has campaigned for new help for savers who have been hit hard by the impact of falling interest rates. However, Mr Darling will not introduce more radical measures to help savers – such as the Conservative proposal to scrap all tax on the savings of basic-rate taxpayers.
*Drivers of older cars will be offered a new "scrappage" payment if they trade in their vehicles for newer, more environmentally friendly models.
*Mr Darling will claim to have saved 500,000 jobs as a result of measures introduced in the pre-budget report and interest rate cuts. He will pledge to create 250,000 new jobs with a range of new initiatives. Anyone aged under 25 who has been out of work for at least a year will be offered a job or full-time training.
*Grandparents looking after their grandchildren for more than 20 hours a week will be entitled to a higher state pension. The move will benefit an estimated 40,000 people.
However, these measures will be overshadowed by the unprecedented scale of the economic and financial problems looming over the UK. The IMF's verdict last night on the cost of Britain's banking bail-out is likely to cause particular concerns. When the Prime Minister and Chancellor unveiled their original rescue package for the City's stricken banks last autumn, they claimed that the public money injected into the system was likely to yield an eventual profit. At the time, Mr Brown said: "These are investments that we are making in banks... We believe that these shares will grow in value over the next period of time".
In fact, the IMF calculated in its Global Financial Stability Report that the eventual cost to British citizens would amount to some £140 billion - or almost £5,000 for every UK taxpayer. The loss is related to the fact both that the banks are set to lose so much money throughout this crisis, and that the value of the shares bought by the Government are unlikely ever to recover fully.
At 9.1 per cent of gross domestic product, this total cost is among the worst of any major industrialised nation.
Although the Treasury has privately admitted that it will have to make some allowance for losses associated with its rescue package in today's Budget, it is likely only to write off around £60 billion in taxpayer cash.
Shadow Chancellor George Osborne said: "Now we know the potentially massive cost of Gordon Brown's utter failure to regulate the banking system. This couldn't be worse news on the eve of the Budget.
"It blows apart the myth that Britain was better prepared for the recession than other countries."
Moreover, the IMF added that although the Government has already poured some £75 billion of cash into the banking system, in the process nationalising Northern Rock, Bradford & Bingley and taking controlling stakes in Royal Bank of Scotland and Lloyds Banking Group, it would have to spend more on rescuing banks in the coming months. It calculated that the Government may have to spend as much as £170 more buying up banks' shares if it wants them to get back to the financial health they were in in the 1990s.
The Fund's report, which warned that the total cost of the crisis would reach $4.1 trillion - more than $630 for every man, woman and child on the planet - is a reminder that the financial crisis is far from over. Indeed, it said only a third of this total had been recognised by banks.
The extra costs associated with the crisis are set to push up the total size of the national debt at the fastest rate in 60 years. Britain's total net debt, which sat comfortably below 40 per cent of gross domestic product last year, will be catapulted towards 100 per cent in the coming years, according to Capital Economics, leaving future taxpayers with a near-World War-sized bill to pay off in the coming decades.
As a result fears have been raised that in today's Budget the Chancellor will be forced either to raise taxes or slash spending dramatically in the coming years. If not, he faces the prospect of a possible revolt in the capital markets as private investors from around the world grow wary of Britain's economic credibility and abandon UK government debt. The result could be not merely political humiliation but the prospect of possibly having to call for extra help from the IMF or other countries.
In an effort to reassure markets, Mr Darling is expected to set out a "direction of travel" for the repayments of his debts, although he will be forced to push back the date at which the public finances will be balanced from 2015/16 to 2018/19.
The gloomy outlook will be compounded by the relative frugality of the Budget, which is unlikely to endorse as big a giveaway as did Barack Obama recently in the US. Instead, Mr Darling will pledge to cut public spending by £15 billion through "efficiency savings" and by selling off a number of public sector institutions, including British Waterways, the Dartford Crossing, the Land Registry and the QEII conference centre in London.
The Treasury is also likely to balance out any giveaways with small tax rises elsewhere, with the Budget as a whole only slightly fiscally negative.
A Treasury spokesman said their view was the IMF forecast was very high and did not seem to attempt to take into account the consequences of the UK Government's action.
He confirmed that the "Budget will make a prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting the public finances", and said the figure would be "based on a detailed understanding of the schemes, stress testing and takes account of the fees".
Daily Telegraph link
Every British taxpayer faces a bill of nearly £5,000 for losses associated with the financial crisis and the bailout of the country's high-street banks, the International Monetary Fund warned last night.
By Edmund Conway and Robert Winnett
Last Updated: 9:28AM BST 22 Apr 2009
The Chancellor will admit that the Government is likely to lose about £60 billion from the rescue of British banks including RBS, Lloyds and Northern Rock Photo: PA
The warning was sounded only hours before Alistair Darling is expected to be forced to admit in today's Budget that Britain is experiencing the worst recession since the Second World War.
The Chancellor will admit that the Government is likely to lose about £60 billion from the rescue of British banks including RBS, Lloyds and Northern Rock. The Prime Minister had previously insisted that the Government may actually profit from the deals.
However, the IMF predicts that Mr Darling's admission underestimates the scale of the potential losses. It expects that Britain will eventually face one of the worst losses of any leading industrialised nation in the world from the financial rescue – amounting to about £140 billion. The respected international body also believes that the British Government will have to spend billions more rescuing the banks and may even have to nationalise other financial institutions.
However there was confusion after the IMF revised its figures late last night after the Treasury disputed its calculations.
The IMF had initially said the British Government was likely to lose £200 billion from the bank bailouts. Its revised figures are still more than twice as much as the Treasury is expected to admit today.
The damning verdict comes as Mr Darling prepares to announce the Government will have to borrow more than £150 billion this year to fight the recession. The borrowing is likely to plunge Britain into debt for a decade and will lead to large tax rises after the next election.
Today's budget - described as "Judgement Day" for Alistair Darling and Gordon Brown – will also coincide with the release of official unemployment statistics expected to reveal the jobless total climbing to the highest level since Labour came to government.
There are growing fears that the Government may scrap higher-rate tax relief of pension savings in a bid to reduce the black-hole in the public finances. The move, which could raise £5 billion, would have devastating effects for millions of Britons earning more than £40,000 who will have to save far more for their retirement.
The Daily Telegraph has also learnt that the budget is expected to announce:
*A new higher Isa limit for pensioners. The Daily Telegraph has campaigned for new help for savers who have been hit hard by the impact of falling interest rates. However, Mr Darling will not introduce more radical measures to help savers – such as the Conservative proposal to scrap all tax on the savings of basic-rate taxpayers.
*Drivers of older cars will be offered a new "scrappage" payment if they trade in their vehicles for newer, more environmentally friendly models.
*Mr Darling will claim to have saved 500,000 jobs as a result of measures introduced in the pre-budget report and interest rate cuts. He will pledge to create 250,000 new jobs with a range of new initiatives. Anyone aged under 25 who has been out of work for at least a year will be offered a job or full-time training.
*Grandparents looking after their grandchildren for more than 20 hours a week will be entitled to a higher state pension. The move will benefit an estimated 40,000 people.
However, these measures will be overshadowed by the unprecedented scale of the economic and financial problems looming over the UK. The IMF's verdict last night on the cost of Britain's banking bail-out is likely to cause particular concerns. When the Prime Minister and Chancellor unveiled their original rescue package for the City's stricken banks last autumn, they claimed that the public money injected into the system was likely to yield an eventual profit. At the time, Mr Brown said: "These are investments that we are making in banks... We believe that these shares will grow in value over the next period of time".
In fact, the IMF calculated in its Global Financial Stability Report that the eventual cost to British citizens would amount to some £140 billion - or almost £5,000 for every UK taxpayer. The loss is related to the fact both that the banks are set to lose so much money throughout this crisis, and that the value of the shares bought by the Government are unlikely ever to recover fully.
At 9.1 per cent of gross domestic product, this total cost is among the worst of any major industrialised nation.
Although the Treasury has privately admitted that it will have to make some allowance for losses associated with its rescue package in today's Budget, it is likely only to write off around £60 billion in taxpayer cash.
Shadow Chancellor George Osborne said: "Now we know the potentially massive cost of Gordon Brown's utter failure to regulate the banking system. This couldn't be worse news on the eve of the Budget.
"It blows apart the myth that Britain was better prepared for the recession than other countries."
Moreover, the IMF added that although the Government has already poured some £75 billion of cash into the banking system, in the process nationalising Northern Rock, Bradford & Bingley and taking controlling stakes in Royal Bank of Scotland and Lloyds Banking Group, it would have to spend more on rescuing banks in the coming months. It calculated that the Government may have to spend as much as £170 more buying up banks' shares if it wants them to get back to the financial health they were in in the 1990s.
The Fund's report, which warned that the total cost of the crisis would reach $4.1 trillion - more than $630 for every man, woman and child on the planet - is a reminder that the financial crisis is far from over. Indeed, it said only a third of this total had been recognised by banks.
The extra costs associated with the crisis are set to push up the total size of the national debt at the fastest rate in 60 years. Britain's total net debt, which sat comfortably below 40 per cent of gross domestic product last year, will be catapulted towards 100 per cent in the coming years, according to Capital Economics, leaving future taxpayers with a near-World War-sized bill to pay off in the coming decades.
As a result fears have been raised that in today's Budget the Chancellor will be forced either to raise taxes or slash spending dramatically in the coming years. If not, he faces the prospect of a possible revolt in the capital markets as private investors from around the world grow wary of Britain's economic credibility and abandon UK government debt. The result could be not merely political humiliation but the prospect of possibly having to call for extra help from the IMF or other countries.
In an effort to reassure markets, Mr Darling is expected to set out a "direction of travel" for the repayments of his debts, although he will be forced to push back the date at which the public finances will be balanced from 2015/16 to 2018/19.
The gloomy outlook will be compounded by the relative frugality of the Budget, which is unlikely to endorse as big a giveaway as did Barack Obama recently in the US. Instead, Mr Darling will pledge to cut public spending by £15 billion through "efficiency savings" and by selling off a number of public sector institutions, including British Waterways, the Dartford Crossing, the Land Registry and the QEII conference centre in London.
The Treasury is also likely to balance out any giveaways with small tax rises elsewhere, with the Budget as a whole only slightly fiscally negative.
A Treasury spokesman said their view was the IMF forecast was very high and did not seem to attempt to take into account the consequences of the UK Government's action.
He confirmed that the "Budget will make a prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting the public finances", and said the figure would be "based on a detailed understanding of the schemes, stress testing and takes account of the fees".
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