By Al Innes
The tax-payer has now footed a bill of more than £70bn in its efforts to stabilize the UK economy as today Alistair Darling proposed an injection of some £37bn into RBS and Loyds Banking Group.
While the government has commented that it sees a figure closer to £29bn is a more accurate reflection, the overall bail-out of the banks has cost the tax-payer dear with rising discontent over the bonus pot as bankers are set to receive 50% more than in 2008 with a reported £6bn in pay-outs.
With job cuts across the banking sector and current accounts for sale there may be unlikely winners and losers in this the latest incident in the UK’s banking drama.
The BBC chief economic correspondent, Hugh Pym, is optimistic this will be a significant chapter in the banking saga.
“This will be a big day for British Banking, the latest chapter in the bail-out saga.”
The increase in funding for the embattled banks comes attached with restrictions on paying bonuses to employees earning more than £39,000 a year for 2009. There will also be a delay on bonuses for three years.
Rob McGregor of the union Unite believes the banks actions would bring “huge uncertainty” for the 25,000 UK-wide employees. He believes the country itself would “pay the price for banking executives recklessness”.
While The government hope that this new injection will boost the UK economy and allow the banks to begin lending to small and medium businesses again in order to stimulate growth. On Monday RBS unveiled plans to axe another 3,700 jobs. This coupled with 10,000 redundancies in it’s investment banking and 6,000 in overseas operation. With a total of around 900 branches to be sold-off, the 600 Loyd branches accounting for more than 4.6% of the UK current account market.
The sell-off of a number of branches by RBS Loyds could benefit smaller banks such as Tesco and Virgin. Tesco unveiled plans in October to purchase core banking software with the intention of offering current accounts in the next two years. Banking branches would appear in Tesco stores alongside Tesco Home Insurance and Tesco Value Cola.