The budget is less than 48 hours away, yet there may be as much left out of this document as put in.
Certainly the single biggest budget decision made since November’s mini-budget may or may not score in the number crunching: a likely loss of tens of billions from the government insurance scheme for the toxic assets of RBS and Lloyds – the Asset Protection Scheme.
At the Treasury, ministers privately describe that move as the largest contract signed by the UK government since the lend-lease arrangements with the US government in the Second World War. The IMF has estimated the likely cost at 8 per cent of GDP or £130bn. Last month we attempted some estimates, which ranged from £100bn to £250bn.
The Treasury is floating the idea that it will cost £60bn. This is hugely significant: the first official confirmation that we are likely to see a massive loss worth around double the defence budget.
Still, it seems apparent to me that the Treasury views the IMF figure as feasible, though perhaps a tad high.
Of course theoretically, the government could make a profit from the insurance premiums they have been paid (mainly in the form of bank shares). But it’s worth noting that the lend-lease debt to the US was only repaid in full in December 2006.
So will the grandchildren of the credit boom generation still be repaying the great 2009 bank bailout in 2077? Hopefully not.
- UPDATE: IMF has upgraded its estimate to £200bn.
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Where does the government borrow that money from? Who are we indebted to (China, the Saudis)? In the case of WW2 it was the USA and I believe we never paid back all the money we owed for WW1?
If I were a banker with the safety-net of an insurance scheme for toxic assets, the premium for which had cost me a few billion, I wouldn’t worry about pursuing defaulters. I’d just claim against the insurance scheme…
I’ve written about The budget speech I’d like to hear on my blog.
Its radical, but I think it would make the world fairer for everybody, correcting lots of things that are wrong with our current system…
So our loss on this is likely to be double the annual defence budget?
I think I see a way out of this . . .
Think not only the people but the Government has to live within its means. Never has so much debt been created by so few in so little time.
[...] 5:19 pm on 21/04/09 Category: Faisal Islam on Economics | Tags: Budget/ IMF The IMF has hugely upgraded its projection for the likely total costs of the bank [...]
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