Government set for £30bn boost from bail-out

The Government is set to reap almost £30 billion from its holdings in British banks which it bailed out at the time of the financial crisis, according to an analysis published today.

The sum - enough to fund the UK's primary schools for a year - represents a dramatic turnaround from predictions at the height of the crisis that propping up the banks could cost taxpayers as much as £850 billion.

It will be achieved if equity prices rise in line with predicted economic growth over the next five years, delivering a profit of around £19 billion to the taxpayer by 2015, said The Banker magazine.

At least a further £8 billion will be due from fees for loans, bond guarantees and the asset protection scheme (APS) set up by the Treasury in 2009 to restore confidence in banks which had seemed in danger of failing.

Lloyds paid £2.5 billion in fees to join the APS, but did not ultimately participate, while losses at RBS are unlikely to be large enough for the bank to call upon the guarantee of taxpayer money, for which it has so far paid £1.4 billion.

UK taxpayers are currently breaking even on their 83% shareholding in Royal Bank of Scotland and 41% of Lloyds TSB, when dividends and other earnings are taken into account.

Receiving a profit from the holdings would be a welcome boost for a coalition Government fighting to fill the hole in the national finances left by the banking crisis, but would also be hailed by Labour as a vindication of the strategy adopted by former prime minister Gordon Brown and his chancellor Alistair Darling in dealing with the crisis.

The Banker's editor, Brian Caplen, said: "While the banks remain at fault for decisions that led to some of them needing a rescue package, the UK taxpayer could make a significant profit from bailing out the banks by 2015."