Gary Duncan, Economics Editor
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Where will Alistair Darling find £50 billion in a hurry?
The answer, inevitably, is from taxpayers. Tax bills are likely to rise to help to meet the cost of a bank bailout.
The proposed £50 billion bailout is already equivalent to about a third of total annual income tax bills, and enough to cover more than half the yearly cost of the NHS.
Yet the final cost could be much higher. As well as injecting extra capital into the vulnerable banks, the Treasury might find that to stop the rot it also has to follow America’s lead to buy up many banks’ “toxic” debts.
Initially, Mr Darling will have to borrow the billions for any rescue plan. With the Treasury’s books already awash with red ink, that would plunge the nation’s finances into a dire state.It is likely that if a £50 billion bailout goes ahead, Mr Darling will have to raise all, or most, of the money by issuing government bonds, or “gilts”, promising to repay the billions over periods of ten or more years.
While £100 billion in annual borrowing, or 7 per cent of GDP is huge, it is not unprecedented. Government borrowing reached 7.8 per cent of GDP in 1994 after the last recession.
Eventually, though, all borrowing has to be paid for, and the money must come from taxes.
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Alan Davidson - The Economy has been steered into absolute collapse vrequiring a solution which even our grandchildren will be paying for, and you think Brown is the right option? Quite Remarkable.....oh look, a flying pig!!!!
Andy Iddon, London, UK
Well done, Brown. The alternative was unthinkable, and this package gives us a stake in the recovery.
All Cameron could do was abuse the position he was in - and put our financial system at greater risk. Cameron is unfit for the job.
Alan Davidson, Bournemouth,
when money gets thrown around like confetti does it not become worthless?
peter c, Devizes, Wessex
don't ask me to lend you any money I'm a bit skint after I lent my last £50billion to the banks
peter c, Devizes, Wessex
Inevitably, but I earn above the average and make none of it in the financial sector. Why should I pay more than anyone else?
NEVER AGAIN must this happen.
Sack the government and senior bankers
Vote in anyone who can offer fiscal prudence
Claw back money paid in bonusses to the city
stuart, Middlesbrough,
What is there to say ? I'm no NuLab, but the mess made by banks has to be sorted fast.
I got caught badly in the 1990-92 lot - interest rates went up into double figures,
This time The banks people had better be 'sorted' and sorted properly this time....we don't need this
Ron Allen, Sacy, France
I'm amazed at Labour, l had written them off....but they have
come up with a plan which will right the economy and not
giving money away but buying assets that over time will
probably make a profit. Mandy in the cabinet, Labour is coming back from the dead. Tories we need Ken Clarke
back.
Roger, Weymouth, UK
I hope the Government has the sense to raise taxes disproportionately on the highest earners. If this bail-out is to be politically acceptable the average taxpayer must feel that the wealthiest are bearing more than their fair share of the burden.
sheila, LEICESTER,
The banks' trade is to borrow low and lend high. In the process, they took deposits from all of us; we thought our money was perfectly safe. Then the banks got things wrong, and incurred a global run. So now we, the taxpayers, have to pay extra just to have a better chance of keeping what is ours.
Tom Welsh, Basingstoke,
The Nationalisation of the Banks will be at the expense of pension funds and those who are saving for their retirement. If the Government wishes to takeover the banks for policy reasons, then they should be prepared to pay a fair price to the longterm shareholders or start their own state banks
S Yogarajah, Harrow, England