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Govt bank bail-outs to cost £145bn

The Government’s intervention in the UK financial sector during the credit crunch is set to cost a significant £145bn, or 10 per cent of GDP, according to Fitch Ratings.

Only £80bn has already been incurred but Fitch projects the long-term fiscal cost, net of recoveries on the claims and assets acquired as a result of these interventions, to come in at around £40bn.

Head of sovereign ratings David Riley says: “Stabilising the banking system has been very expensive and contributed to the rapid deterioration in UK public finances.”

He expects the Treasury to recover most of the costs through imposing levies on the financial services sector and selling its shareholdings in Lloyds Bank Group and RBS.

Riley adds that this will be very gradual.

He says: “Although the net fiscal cost of support for the banking sector over the long run is likely to be moderate, the repayment of Government loans and sale of shareholdings in RBS and Lloyds will be spread over several years.

“It is therefore unlikely to make a meaningful contribution to the consolidation of public finances over the term of the current or next Government.”

The Treasury has funded compensation of £28bn to depositors of failed UK banks.

Fitch expects the Government to eventually recoup most of this outlay through recoveries on the assets on banks in administration, such as Bradford & Bingley, and in particular from fees on UK financial institutions levied by the Financial Services Compensation Scheme.


Commission should be a choice

The recent story providing financial journalists with plenty of ammunition against financial advisers is that of £14,000 commission being paid on a £200,000 bond. It must bring revulsion to the many independent financial advisers who work hard for their clients and have modest incomes.


A gap too far?

New figures from Home Buyer Systems revealed today that those who opt for a direct mortgage could be as much as £5000 better off over two years than they would be if their mortgage came through an intermediary.


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