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Sri Lanka: One Island Two Nations
A Brief Colonial History Of Ceylon(SriLanka)
Sri Lanka: One Island Two Nations
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Thiranjala Weerasinghe sj.- One Island Two Nations
?????????????????????????????????????????????????Thursday, May 18, 2017
Has the taxpayer really made a profit from selling Lloyds?
- By Georgina Lee-17 MAY 2017
The government sold its remaining shares in Lloyds today, with the bank
declaring that the sale returned “more than £21.2 billion to the British
taxpayer, repaying £894 million more than the original investment”.
You’d be forgiven for thinking that this means we’ve profited to the
tune of nearly £900 million. A win for the UK taxpayer, surely? And at a
time when any additional cash into the public coffers is extremely
welcome.
But on closer inspection, things are not quite so simple.
The bank, which was bailed out eight years ago by Gordon Brown’s
government, received £20.5bn of public money during the financial crisis
in return for a 43.4% share in the group.
Today’s sale marks the end of a messy breakup.
Philip Hammond was forced to push back plans to sell the government’s
stake in Lloyds last autumn, citing “ongoing market volatility” and the
need to “secure value for money for the taxpayer” as reasons for the
delay.
Back in 2013, George Osborne made the first sale of government shares in
the bank, which he claimed yielded a “profit for taxpayers” in the
region of £450 million.
FactCheck called him out on
this at the time, noting that the headline “profit” figure didn’t take
account of the cost to government of borrowing the money to bail out the
banks in the first place. The National Audit Office backed us up, later
concluding that “there was a shortfall for the taxpayer of at least £230m” after the 2013 sale.
So naturally, our ears pricked up this morning when Lloyds declared that
today’s conscious uncoupling has recouped nearly £900 million of public
money. Surely this time, they’ll have got it right, and their
calculations will take full account of the costs to government?
Well, almost.
We contacted Lloyds to ask them to show their working. They said that
the £900 million figure came from comparing the “absolute figure
(£20.3bn) originally injected into the Group and (£21.2bn) that has been
generated through the selldown and returned to the taxpayer, including
dividends”. They pointed out that their press release does not talk
about profit. And they’re right.
But we didn’t get any detail from them on whether the cost of government
borrowing was part of their calculations. And the very fact that they
avoided using the word “profit” suggests that it might not have been.
So in the absence of any further detail from them, we’ve done our best to fill in the blanks.
The government bought its stake in Lloyds in several transactions through 2009 at a gross cost of £20.3 billion.
But that wasn’t cash that the government just had sloshing around – they
had to borrow £3.2 billion over four years and a half years to finance
the purchase.
At the time, the government had to pay 3 per cent interest a year on its
borrowing, which means it cost them £96 million for every year of the
loan. By our estimates, that puts total interest repayments at over £400
million, and that’s not even adjusted for inflation. Add to that the
£2.5 billion fee that Lloyds paid when it left the Treasury’s asset
protection scheme, and today’s £900 million “return” looks rather less
impressive.
So have Lloyds learned their lesson? Yes and no. They’ve not actually
used the word “profit”, and they’re not making any explicit claims about
the taxpayer benefiting from the bailout. But if someone issues a press
release saying they’ve given you more money than you gave them, you’d
be within your rights to think you were up on the deal. And as we’ve
shown (twice) that’s not the case.
What does the Treasury say?
The Treasury have been quiet on this, in contrast to their triumphant tone back in 2013. They have issued a purely factual statement confirming the sale on their website.
We’d like to think it’s the threat of the FactCheck treatment keeping
them honest, but so-called purdah rules prevent government departments
from major policy or political announcements this close to an election.
Perhaps that strict requirement to stick only to the facts explains why the Treasury hasn’t – or can’t – use the word “profit”.
But before the purdah period began, Chancellor Philip Hammond gave a
speech in the margins of the IMF conference last month, saying that the
government had “recovered every penny of its investment in Lloyds” and
it “marks a significant milestone” for the economy.
A milestone, certainly. A victory, not so much.