More on the question of whether or not Britain is about to go bankrupt.
Some of the figures that have been quoted in the press look frightening. Britain’s banks are huge. For example, RBS, the bank that the taxpayer now pretty much owns, has a balance sheet larger than the UK’s anual GDP. Add in all the other basket-case banks and the taxpayer’s liabilities start to look overwhelming.
But not all the assets of these banks are dodgy. According to the Financial Times, Goldman Sachs economist Ben Broadbent has calculated that the maximum liability for toxic bank assets that might have to be met by the taxpayer is £120 billion.
Bloggers usually provide links to their source material but, unfortunately, proper journalists don’t and I have not been able to find the details of Mr Broadbent’s calculations anywhere on the interweb. However, assuming he is right, £120 billion is not going to break the country’s finances. Sure, it is a hell of a lot of money. According to the Mail’s Simon Watkins it is more than all the banks have paid in tax since 1997, although he doesn’t say where he got his figures from either.
But it is still only around 8% of GDP. As Ben Broadbent told the FT:
[W]ith the best (or rather the worst) will in the world, it is extremely difficult to get some of the numbers . . . to levels that would materially threaten the integrity of UK debt.
£120 billion is bad. We have every right to be extremely angry with the people who got us into this mess, especially if Simon Watkins is right and a decade’s worth of our banking sector’s contribution to tax revenues looks like being wiped out. But it’s not so bad that it is going to bring the country down.
Let’s get some perspective here. The banks have saddled us with a huge debt but it is still at a manageable level. Despite the hysteria from the scaremongers, we are not about to go down the pan yet.