LONDON The price tag for bailing out UK banks has hit 850 billion pounds but Britain's spending watchdog says the final cost to taxpayers will not be known for years.
The independent National Audit Office (NAO) said Friday the government was justified in asking the public to shore up the shaken sector at the height of last year's financial crisis -- although lending to businesses was likely to miss targets.
"It is difficult to imagine the scale of the consequences for the economy and society if major banks had been allowed to collapse," said the NAO's head Amyas Morse.
"But the big question is what all of this will eventually cost the taxpayer.
"As the crisis begins to subside ... the authorities need to put formal arrangements in place to evaluate the effectiveness of the support provided to banks in order to inform future policy makers."
Britain, along with other countries, partly nationalised some banks and offered guarantees, insurance and loans to the industry after the credit crisis pitched the world into recession in the wake of the collapse of Wall Street giant Lehman Brothers last year.
The government has put the potential loss to the taxpayer at between 20 billion and 50 billion pounds, depending on losses on bad assets held by Royal Bank of Scotland and the price at which the state sells stakes in RBS and Lloyds Banking Group.
And the costs keep mounting. The finance ministry expects to have spent 107 million pounds on advisers alone by next April, with Credit Suisse and Deutsche Bank each appointed on retainers of 200,000 pounds per month for a year, the NAO said. Success fees could reach 5.8 million pounds.
RBS and Lloyds have agreed to lend more to consumers and businesses as part of their bailout. But although both are on target for mortgage lending, lending to businesses is likely to fall short of targets, the NAO said.
RBS agreed to lend an additional 25 billion pounds in 2009-2010, while Lloyds agreed to lend an additional 14 billion to help businesses and consumers weather the credit crisis.
The NAO is an independent body funded by parliament, rather than the government of the day. But it has limited powers and its role is largely to draw attention to cases where it feels public money has been misused.
(Editing by David Cowell)