UK taxpayers may be shocked to know that they might have to forego the cumulative amount of £66 billion ($107 billion), comprising of their hard earned money! The amount was collected for a bailout package for Lloyds and RBS, which was deep in credit crisis and needed sufficient stimulus for a revival. This was declared by a committee formed consisting of trustworthy members of Parliament. Margaret Hodge, the Chairperson of the Public Accounts Committee, stated in the report concerning the sale of Northern Rock that it could be impossible to recover the complete amount invested in the Royal Bank of Scotland and Lloyds.

Northern Rock, involved in mortgage lending, was sold off to Virgin Money, in the last year and the losses that amounted to investment of UK taxpayers worth close to £469 million. This occurred due to a spinoff of the company’s bad debt. According to the estimate put forth by the MP committee, the loss associated with the sale of Northern Rock would amount to approximately £2 billion. This was due to the gross mismanagement concerning the banking operations when it was nationalized for the first time and then brought under the then Chancellor of the Exchequer, Alistair Darling.

Hodge analyzed that the treasury was incapable of prompt crisis management, because of lack of understanding and skill. Nationalization slowed and made loss unavoidable. Even once nationalization was completed; it subsequently failed in challenging the futuristic plan of splitting the bank into two. From Virgin Money’s point of view, the sale of Northern Rock surfaced as the best option since it promised handsome returns for the taxpayers on account of a fair bidding proceeding that was open too.

According to the plan of the government, it was all set to return to markets for selling shares of RBS and Lloyds. However, the share prices were heavily discounted at the time when the government chose to purchase the stakes. According to the predictions of Philip Hampton from RBS, the government could exit the investment by 2015. The chief executive of RBS has also suggested that the government should sell off its stake to recover funds, with prices rises over time.

Hodge states that owing to Northern Rock’s lack of competition, it may be difficult for taxpayers for registering profit on the sale of shares for Lloyds and RBS. In order to recover their investments, the government would have to sell the remaining 82% stakes in RBS at 500p. At the moment, RBS shares at 283p. The British taxpayer owns 40% shares of Lloyds which was in immense pressure owing to the taking over of HBOS. The shares would have to be sold at a minimum of 63p for a break even on investments. However, they continue to trade at 46p.