Did the official Treasury document about the first Osborne Budget contain a misprint? On page 74, it carried the statement: "Using the latest market prices, the cost of the financial sector interventions, net of fees and other income, is estimated at £2 billion." In other words, the Treasury believed on Budget day — June 22 — that the cost to the taxpayer of the banking crisis was £2 billion.
Only £2 billion? Surely the figure is £20 billion or £200 billion or even, given the supposedly galactic folly and iniquity of Britain's bankers, £2,000 billion. Isn't there a nought or three missing?
The recent report from the Future of Banking Commission, masterminded (if that is the right word) by the MPs David Davis and John McFall, asserted: "The immediate and direct public costs of bailing out the UK's banks is estimated at £131 billion in cash injections, along with additional state guarantees amounting to £850 billion." Alternatively, recall John Kay's well-regarded column in the Financial Times on May 11: "The party ended with the bankers begging at the back door...We are likely to have borrowed at least £500 billion extra on their account."
So what is the right answer? Has the banking crisis lost the taxpayer £2 billion, £131 billion or £500 billion?
All these numbers are wrong. The truth is that the taxpayer will make an immense profit from the state's financial sector interventions, not a loss. At the simplest level, banks fully or partly owned by the government have, since the Budget, announced profits and the share prices of the two publicly-quoted banks, RBS and Lloyds, have risen. If the government's stakes were sold now, a profit of more than £5 billion would have been earned.
More fundamentally, the government has been engaged in large-scale racketeering that will result in a substantial wealth transfer from banks' shareholders to taxpayers in general. Its behaviour towards the financial sector in the two years to spring 2009 breached a long-standing implicit contract: a solvent UK bank that had complied with regulations should be able to borrow from the Bank of England if it had a cash problem. The breaching of this contract enabled the government to stigmatise and vilify the banks.