Warnings that every household in Britain has made a theoretical loss of £1,000 on the bank bail-out sound worrying, but they should not be a cause for panic.
Taxpayers’ cash has been invested in Royal Bank of Scotland and Lloyds shares. But the value of those shares has fallen since the bail-out took place.
Hence, the Treasury, and by extension the public as a whole, has effectively lost money.
In a sense, the figures are actually a reminder that the cost to taxpayers is not as high as it may have appeared when the bail-out happened, as the Government did obtain shares in return, which will one day be disposed of and allow the Treasury to recoup at least some of what it paid.
It could also be argued that the benefit to the economy, and therefore to households, really lies in the effect the bank bail-out had on the wider economy, as it may have prevented the collapse of major high street chains, which would have precipitated a financial crisis much worse than Britain has experienced.
By that reckoning, the paper loss of £1,000 must be offset against the benefit to average household finances resulting from the decision to save the banking system.
In any case, the decision was taken and we have to live with it. It would be a mistake to succumb to any temptation to play politics with this issue.
Gordon Brown has come under pressure to show that the shares will produce a profit for taxpayers when they are sold. He may also come under pressure to dispose of them quickly, particularly if the Government seeks to demonstrate that the economic crisis is drawing to a close and things are getting back to normal. Of course, opposition parties are likely to demand good value for money for the taxpayer, and press for the public to “get their money back” as soon as possible.
But a long-term view is more likely to safeguard taxpayers’ interests. Indeed, what ultimately matters is ensuring that the banking system, once the Government is shot of it, both works effectively and is unlikely to sink into chaos yet again.
This is more important than getting the Treasury’s money back, because if the banking crisis is repeated the cost to the nation will be far more than £1,000 a household.
Patience is the key to dealing with the banks now.
Dramatic figures should not lead to rash decisions.