Taxpayers were last night sitting on losses of nearly £40billion in Britain’s basket case banks.
It is a bitter blow to Chancellor George Osborne who planned to offload shares in Royal Bank of Scotland and Lloyds Banking Group for a profit before the next general election.
The one-time banking giants were saved from collapse during the financial crisis with £65.8billion of public money.
It was hoped the stakes would be sold for a healthy profit but shares in both banks have been hammered in the stock market turmoil of recent weeks.
They are now worth just £26.6billion – meaning UK taxpayers are nursing a loss of £39.2billion, or £1,500 per household.
That is more than the amount Britain spent on the Army, Navy and RAF last year and is more than half the nation’s entire education budget.
One leading City analyst said it could be ten years before the Government can sell the banks for a profit.
The windfall from an early sale could have been used to pay down the deficit and fund a series of vote-winning tax cuts before polling day in 2015.
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‘It will be a long haul to profitability to enable repayment to the taxpayer,’ said David Buik, a veteran market commentator at BGC Partners. ‘It could be at least ten years.’
The scale of the paper losses held by the taxpayer will cause fresh anger over the role of multi-millionaire bankers in the build up to the crisis.
Sir Fred Goodwin, the disgraced former chief executive of RBS, took the bank to the brink of collapse but still left with a pension worth more than £700,000 a year, which was later reduced.
Eric Daniels, the former boss of Lloyds, is still being paid nearly £100,000 a month by the bank for doing nothing.
With Gordon Brown, the 59-year-old American was one of the key architects of the controversial takeover of HBOS which plunged the bank into crisis.
Losses: Shares in RBS and Lloyds are now worth just £26.6billion
Just a year ago the taxpayer was sitting on small gains in RBS and Lloyds.
However, Britain spurned its chance to pocket a profit – unlike the U.S.
Washington spent hundreds of billions of dollars propping up the American banking system following the collapse of Lehman Brothers in autumn 2008.
But it off-loaded its huge investments at a profit as soon as possible, with officials insisting the state should not own the country’s banks.
Shares in RBS, 81 per cent owned by the taxpayer, fell another 5.4 per cent yesterday to 20.77p. Lloyds, 41 per cent in taxpayer hands, dropped 4.8 per cent to 28.38p.
They have lost more than half their value this year and are now at their lowest levels for two years.
The latest sell-off came as the FTSE 100 index dropped another 1 per cent, or 51.47 points, to 5040.76. It followed a near-240 points sell off the previous day.
The carnage in the financial markets has also cast doubt over the planned sale of Northern Rock, which was fully nationalised after a run on the bank in 2007.
Mr Osborne outlined plans to return the lender to the private sector in his Mansion House speech this year. But it is now feared the banking system and the markets are too brittle.
Treasury sources said it is up to UKFI, the company set up by the Government to manage the taxpayer’s stakes, to advise when to sell shares in RBS and Lloyds.
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