Lloyds Banking Group revealed yesterday that losses incurred by HBOS, at £10 billion, would exceed expectations by £1.6 billion. Lloyds' share price fell by 40 per cent within minutes of the announcement.
As the Government holds a 43 per cent stake in the company, much of the loss will be borne at taxpayers' expense. The Government invested £17.7 billion in Lloyds and HBOS on behalf of the taxpayer. On yesterday's prices, the loss on that investment to date amounts to £8.3 billion… The responsibility for this perverse and costly outcome rests with the Government.
First of all, fuming about a “loss” to the taxpayer based on the share price on one particular day is meaningless. Back-of-an-envelope calculations of £8.3bn – “or £143 for every person in the country” – tell us nothing, because, funnily enough, the Government didn’t sell its 43% stake yesterday. So this “perverse and costly outcome” isn’t in that way costly, and it isn’t an outcome. To treat it as such is perverse, unless your aim is to scandalise your readers rather than informing them.
(The fact that the overall market valuation of Lloyds dropped by about £10bn yesterday, based on the news that losses had been just £1.6bn worse than expected, suggests that this market response may have been, as these things so often are, a short-term overreaction.)
Second, what would have happened if the Government hadn’t enabled the Lloyds takeover of HBOS back in the autumn? Well, either HBOS would have collapsed, in which case far greater carnage would have ripped through the financial system and we’d now be in a slump that would dwarf the current recession, or we’d have nationalised HBOS to save it, in which case all its losses would now be public liabilities anyway - and the Times would be denouncing the Government for such a “perverse and costly outcome”.