Taxpayers in profit on RBS and Lloyds bank bailouts

Could the British banking crisis be over? A recent surge in the share prices of the bailed-out banks RBS and Lloyds means British taxpayers who came to their rescue are, on paper at least, sitting on a healthy profit. At the end of last year, the taxpayer was down £26bn on the combined stake in the two banks. Today, that loss has been turned into an estimated profit of £9.4bn.

A report by the Guardian claims that after government fees are taken into account, the profit on the taxpayers' 84 per cent stake in RBS stands at £7.4bn while the 41 per cent share in Lloyds is up by almost £2bn.

The reversal in fortune is good news for Labour, appearing to justify Chancellor Alistair Darling's bailout decision. "My judgment was right," Darling said yesterday, "I've always said we would get our money back and more".

The timing is also nice for Gordon Brown as he prepares for the third and final televised leaders' debate this Thursday, when the key subject is the economy. Brown will have more ammunition to support his claim that he and Darling steadied the ship through the economic crisis.

The question now is when will the Chancellor - whoever that may be after the May 6 general election - be tempted to claw back some much-needed cash by selling a chunk of the government's stake?

Alistair Darling said: "The shares have moved into the black rather earlier than people thought. But our policy remains to sell when the time is right."

Vince Cable, the Lib Dems' Treasury spokesman, also takes a long view. "On previous occasions it has taken a decade to turn the banks properly around," he said. He advocates holding on to the stake for some time and believes the priority should be to force the banks to lend more to small businesses.

Tory shadow chancellor George Osborne has not commented. ·