In the previous two parts of this series we examined the true scale of the National Debt, and it’s associated interest payments. This time we look at another factor which may somewhat mitigate the scale of the debt.
While there’s still a great deal of talk about the Govt’s bailout of the banks, most commentators, and politicians, seem to be largely ignoring the fact that much of the bailout money was lent to the banks; it wasn’t a gift it was an investment and one which has a good chance of producing a decent return for the tax payer, assuming that the UK’s economic growth forecasts turn out to be at all accurate.
Other than the Basel Accord’s new regulations on the ratio of capital held to loans made, and some talk about a windfall tax should the banks continue to pay bonuses which, though perhaps normal within the industry, are likely to offend a public which is being primed for harsh Govt cuts, the banks seem to have gotten through the economic crisis without actually having to change their modus operandi very much.
This means that, barring the possibility of a “double dip” recession materialising, it’s quite likely that the banks will make good on the Govt’s bailout loan, and that the Govt may actually end up making a profit (some recent industry estimates put this figure at about £30bn.)
Of course this lack of regulation also leaves the possibility that we’ll be faced with a similar banking crisis in a couple of decades, which is obviously a concern but, pragmatically speaking, getting out of our current mess has to be a higher priority than preventing a future crisis which may not even materialise.
In any case, although it is the height of foolishness to “count your chickens before they’ve hatched”, and I wouldn’t for one second advocate that the Govt should rely on getting the bailout money back, or discount the possibility that they may be required to provide another bailout if a “double-dip” does materialise, the facts are that, if economic growth continues as predicted, the tax payer should start to see a profit from the bailout by 2015.
In other words, however bad the public finances look right now it is quite likely that they’ll look a good deal better in 5 years time when we’ve started to get our money, and any associated profit, back from the banks; assuming of course that the Govt can manage the economy well enough to keep growth at predicted levels and avoid another recession in the mean time.