£1.5trn could be added to national debt

Author: By Russell Lynch, Press Association

The surge comes from the huge liabilities of bailed out banks such as Royal
Bank of Scotland and Lloyds Banking Group being taken on to the public
balance sheet.

The Government has also offered a total of £330 billion in guarantees to the
financial sector as of the end of September, the ONS said.

Today’s £1.5 trillion figure represents the economic output of the entire
country for one year.

Added to the latest Treasury figures – which forecast UK debt of £792 billion
for the current financial year, the sum would take the UK’s national debt to
a whopping £2.3 trillion.

It is also at the upper end of the range put forward by the ONS when it made
its initial estimate of the impact of the crisis on the public accounts in
February.

The liabilities of the bail-outs has been added for classification purposes,
but taxpayers are not on the hook for the whole amount.

This would mean every loan held by a bailed-out or fully-nationalised bank
such as Northern Rock had turned sour, while sales back to the private
sector would eventually reduce the public sector’s exposure.

But the measures taken so far added an extra £4.7 billion to net borrowing in
2008 and a further £3.3 billion in the first three quarters of 2009 – mainly
from the extra money the Government needed to finance its intervention.

In April Chancellor Alistair Darling said he expected losses of up to £50
billion to the taxpayer on moves to prop up the banks – although he now
expects to revise this figure lower in the forthcoming Pre-Budget statement.

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