The £850 billion bailout of the UK's banks has been deemed justified, although the final cost to the tax payer will not be known for years, the National Audit Office (NAO) has said.
The scale of the economic and social costs if one or more of the banks had collapsed meant that public support was necessary, the NAO found.
Furthermore, the support given by the Treasury ensured the Government succeeded in fulfilling two of its principal objectives – protecting depositors' money in banks and maintaining the stability of the financial system.
The support – measured at some £850 billion so far – represent 'an unprecedented level of support' said the report, although the final cost and loss suffered by tax payers will not be known for a number of years to come.
During the crisis, Northern Rock was nationalised to save the bank from going under, while public stakes were taken in the Royal Bank of Scotland (RBS) and Lloyds Banking Group in return for propping up their operations.
"Total losses will depend on losses from the Asset Protection Scheme and the price at which the Government sells its holding in RBS and Lloyds," said the NAO.
Public finds were also given to the Bank of England in an attempt to ease the pressure on the country's entire banking framework. A further £107 million will have been spent on advisers by April 2010, the Treasury expects.
"It is difficult to imagine the scale of the consequences for the economy and society if major banks had been allowed to collapse. The Treasury was justified in using taxpayers' money to safeguard savings and stabilise and restore confidence in the financial system," said Amyas Morse, head of the NAO.
"But the big question is what all of this will eventually cost the taxpayer. This will take time to answer. What we do know is that how the eventual sale of RBS and Lloyds is managed will be crucial to protecting the public interest.
"The structure of the UK banking system has changed beyond recognition. When it comes to selling its stakes in the banks, the Government has to be mindful of the proceeds for the taxpayer but also of the implications for competition in the UK market, so that customers get a fair deal."
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