Watchdog criticises Treasury

More than £66 billion of taxpayers' cash invested in RBS and Lloyds may never be recovered, a spending watchdog warned today as it criticised the Treasury for making a series of costly mistakes in its handling of Northern Rock.

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Northern Rock rescue expected to 'cost taxpayer £2 billion'

Margaret Hodge, chair of the public accounts committee, said the sale of the bank was handled well but still led to a loss for taxpayers of nearly half a billion pounds.

Mrs Hodge said:

The rescue of Northern Rock is expected to cost the taxpayer some £2 billion.

The Treasury was unable to respond promptly when the banking crisis hit because it lacked the right skills and understanding.

It was slow to nationalise the bank and that made a loss difficult to avoid.

The Treasury had spent five months trying to find a private sector buyer before giving up.

After nationalisation, it then failed to effectively challenge the optimistic business plan put forward by the bank's management to split the bank.

– Margaret Hodge

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