The Treasury will net £25bn by selling off mortgages from the nationalised Northern Rock and Bradford & Bingley businesses, along with the student loan book.
Today’s Budget reveals that £13bn of mortgage assets from Northern Rock Asset Management (NRAM) and Bradford & Bingley will be sold.
UK Asset Resolution (UKAR), which manages the government’s ownership of NRAM and Bradford & Bingley, will lead the sale of assets held from the nationalisation of both lenders.
UKAR will also explore options to outsource the collection of these mortgages.
Chancellor George Osborne said: “The bank asset sales, lower debt interest and lower welfare bills present us with a choice.
“We could treat it as a windfall, even though we know the public finances need further repair.
“But today, the central judgement of this Budget is this: we will use the resources from the bank sales and the lower interest payments and the lower welfare bills to pay down the national debt.”
Under these plans Treasury officials will also look at the sale of Granite, the securitisation vehicle that Northern Rock previously used to sell on its mortgage assets to investment banks.
However, the buyer will have to take on £6.7bn of funding costs required to operate Granite.
Aside from UKAR’s assets, the Treasury estimates to make £12bn from the sale of the Income Contingency Repayment student loan book, following a u-turn in government policy. But this is just one of many major sell-offs; The Budget reveals the full range of asset sales to the private sector, to recover taxpayers’ money from the bank bailouts.
For a start, it will sell £9bn of Lloyds Banking Group shares over the next year, continuing the progress of the past year.
This will be on top of cash already made from shrinking its bailouts. After various interventions, the government has now recovered:
• More than £21bn in repayments from the sale of Northern Rock plc and the wind-down of NRAM and Bradford & Bingley
• More than £9.5bn in fees from Lloyds and Royal Bank of Scotland (RBS), relating to intervention and guarantee schemes
• More than £1bn from the Dunfermline Building Society administration.
The list goes on. The chancellor revealed that the public coffers will get an £11bn boost from the Financial Services Compensation Scheme.
The £11bn has come from the estates of failed banks and fees from the wider banking sector, which have paid the Treasury for effectively providing insurance through the Credit Guarantee Scheme and Special Liquidity Scheme. This £11bn excludes payments from RBS and Lloyds.
This year, as a shareholder in Lloyds, the exchequer will secure another £100m via a dividend payment from the bank.
Separately, the Treasury has also received more than £2.6bn in repayments from the failed Icelandic bank Landsbanki.
By Marcel LeGouais