“We spent just over £1 trillion bailing out the banks after the financial crisis. So if we did it for the bankers then why wouldn’t we do it what is needed for our fishermen and our farmers now?”
Jeremy Hunt MP, 1 July 2019
This week, the Conservative leadership candidate Jeremy Hunt promised to “develop support funds to provide direct assistance to those most in need” as part of no deal Brexit preparations. He argued that, given £1 trillion was spent on bailing out the banks after the financial crisis, why not do the same for farmers and fishermen now?
But the £1 trillion figure is incorrect: nowhere near that much was actually spent on bank bailouts during the financial crisis.
From 2007 to 2009, the Labour government made a number of interventions to bail out banks that were on the brink of collapse and support the banking sector.
Overall, the government spent £137 billion of public money to provide loans and capital to stabilise the banks, according to the latest figures from the Office for Budget Responsibility (OBR) in March 2019.
However, most of that money has been recouped in the years since—mainly through repayments and other schemes.
As of March 2019, the OBR estimates that the net cost of the bank bailouts—once you factor in money recouped by the government—was £27 billion.
Separate figures from the National Audit Office (NAO) in 2018 estimated the sum spent to stabilise the banks to be £133 billion.
The NAO also provides a second figure, which brings us back to Mr Hunt’s claim. The Treasury also provided a number of financial guarantees during the crisis, which totalled around £1 trillion, according to the NAO. This is money the government promised to pay to investors or compensate them with if they lost their money, and is presumably the sum Mr Hunt is referring to.
But it’s not correct to say that this sum was all spent on bailing out the banks. As the House of Commons Library points out, financial guarantees cost nothing if all goes well. Their main purpose is to restore confidence in banking sector.
Speaking yesterday on BBC Radio 4, Paul Johnson, Director of the Institute for Fiscal Studies said “it’s simply not true that in any real sense we spent a trillion pounds bailing out the banks.”