I'm sick of propping up the banks
Harvey Jones is sick and tired of propping up the banks. Here, he looks at what the Government's latest move means for you.
If you had £39bn to spend, I bet you wouldn't lavish it on Royal Bank of Scotland and Lloyds Banking Group.
Especially if you had already spent £37bn to prop up the banks this time last year, and were also underpinning RBS's toxic assets to the tune of £282bn.
But that's exactly what your taxes have been spent on. Congratulations! Your family has now spent £4,350 and all it got was these two lousy banks. And for all we know, there may be further bills down the line.
Or you could have had this...
For that money you could have bought two or three foreign holidays, the front end of a new family car, or 87 curries at £50 a pop, but no, you ended up with RBS and Lloyds instead. That's what happens when Chancellor Alistair Darling spends money on your behalf.
And since most of this spending will be financed by state borrowing, our reward for the biggest banking bailout in history will be vicious public spending cuts and tax increases.
Yup, it's a rotten deal.
So what else are we getting for our money? First, we get an 84% stake in RBS and 43% in Lloyds. If stock markets continue to recover, we might eventually get some of our money back (providing politicians don't botch the sell-off).
Total taxpayer exposure to toxic banking debts has been cut by a theoretical £300bn, now that Lloyds has pulled out of the Asset Protection Scheme, and RBS has reduced its reliance. So that's something.
It took a European to do it
We have also got a hotchpotch of measures design to break up the big banks and drive competition in the sector.
We certainly need it, because in recent months the traffic has all been in the other direction. Last autumn's shotgun wedding between Lloyds TSB and HBOS, Santander's forced marriage of Abbey, Alliance & Leicester and Bradford & Bingley, and Barclays' casual pick up of Standard Life Bank has made the banks even less competitive than before.
Lloyds and RBS will also have to sell off chunks of their businesses and branch networks, equivalent to around 10% of the UK retail banking market. Big boys such as Barclays and HSBC are banned from buying, in the hope that hungry new competitors will snap them up.
But with the government backing the toxic two with endless piles of taxpayer cash, new entrants will find themselves at a serious competitive disadvantage.
And even this mild attempt to boost competition wasn't the work of Alistair Darling, but an EU competition ruling.
Plus there is no guarantee that the shake-up will get affordable credit flowing to businesses and individuals again, or reverse the trend towards higher charges, cautious lending and the death of free current account banking.
Supermarkets, but super banks?
More competition should herald a better deal for the consumer, but I wish I could be more welcoming towards mooted new banking players such as the supermarkets and Virgin Money.
It would be great if they could fight back against sneaky banking complexity by launching simple, well-priced products, but will they treat their customers any more fairly in the longer run?
There is something about banking that encourages businesses to cream their customers. It doesn't happen in, say, retail. Tesco doesn't slap on a hidden 2% charge on milk chocolate HobNobs when you reach the till, or restrict buy-one-get-one-free discounts to people with squeaky clean credit records. But once retailers behave more like banks, they might struggle to resist temptation.
And do we really want the big supermarkets to control the even more of our lives than they already do?
A banker's life for me
The surprise announcement was that RBS and Lloyds will be banned from paying cash bonuses to employees earning more than £39,000 in 2009, and directors until 2012. But they can receive shares instead.
Sadly, it is a mere political gesture, a bit of blood for the crowds, and bankers have no doubt already figured clever schemes to get around it, probably by ramping up basic salaries instead.
And it will do nothing to curb the bonus frenzy at their banking rivals. Banking is an international business, and if bonuses are squeezed in one country, they will only bubble up in another, or offshore. Only sustained international cooperation will solve that problem. Like world peace, I'm all for it, but it don't expect it to happen.
At the very least we should have a windfall tax on banking bonuses. It won't plug the gaping hole they have blown in our nation's finances, but the howls of pain might make us feel a little bit better.
But I don't think Gordon Brown or Alistair Darling are brave enough to stand up to the banks. This is hardly surprising, bankers are bigger and brighter than any politician, and only marginally less popular.
So now it's up to you
The first (and most expensive) lesson of the credit crunch was that the banks are too big to fail. Now it seems they are too big to tax or regulate in any meaningful way.
It has been shocking to see banks scurry for taxpayer protection during the crunch, then continue banking fat profits, pocketing obscene bonuses and ripping off their customers as if nothing had happened.
But there is one thing you can do. If fresh blood does enter the banking sector, you should do your best to support it, rather than sticking with your tried and untrustworthy bank.
The Government has let bankers off the hook. Don't let your apathy allow them to make a completely clean getaway.
Have your say!
Got a question about the sell-off? Why not have ask your fellow lovemoney.com readers for help using our Q&A community tool? Or add your comments to the bottom of this article!
> Check out Ed Bowsher's blog post - EU should have gone for bigger break-up