Darling seeks to justify bank bailout

By Sumeet Desai and Keith Weir

LONDON (Reuters) - Forced to plough another 30 billion pounds into the country's banks on Tuesday, Chancellor Alistair Darling said the latest cash boost would in the end secure a better deal for the taxpayer.

Just over a year after Britain took huge stakes in its major banks to prevent a financial collapse, the Treasury said it would put another 25.5 billion pounds into Royal Bank of Scotland (RBS.L) and 5.7 billion pounds into Lloyds Banking Group (LLOY.L) minus a 2.5 billion pound fee.

The total 28.7 billion pounds is more than five times the cost of annual military operations in Afghanistan and Iraq.

The new money is part of a major restructuring forced by European Union competition rules which will see both banks sell parts of their businesses and let's Lloyds escape the government's Asset Protection Scheme to insure their riskier assets.

But the news comes as Britain suffers its worst recession since World War Two and a record budget deficit that has got politicians on all sides talking about huge spending cuts whoever wins an election expected next May.

Faced with such a hard sell when public anger over bankers, whom many blame for the financial crisis, is running so high, Darling took to the airwaves early on Tuesday to say the deal meant government liabilities had come down significantly and that bankers at RBS would not get huge bonuses.

"One of my priorities is to make sure the taxpayer does get its money back," he told GMTV. "It may take years before we know whether we are going to get our money back but a lot of it will come back. As a result of what I am doing today we have managed to get rid of about 300 billion pounds of liabilities."

In addition, the Treasury said that it had in the budget this year calculated in its public finance projections that the financial sector interventions would cost 50 billion pounds but would now be able to revise this down, other things being equal.