Lloyds and RBS are about to receive up to an additional £40 billion or so of our money in the form of additional capital. Strangely, the RBS deal has been structured so that, while our share of the business increases to 84%, we are only entitled 70% of the voting rights. In the case of Lloyds, putting in some £5.7 billion will not give us an increased proporiton of the business, because other investors are also putting in money, through a rights issue.

I will not go into the details of the deals, because this has already admirably been done by Tony Bonsignore on the Citywire website. What I would like to look at is the underlying philosophy of taxpayer support for the banks.

Why are we supporting them?
We are told that we rescued the banks because they are vital to our economic survival. I suspect that this is true, but only because they have been allowed to become so large that there are insufficient competitors who could take up the slack, should one crash.

The fact is that the entire credit crunch was down to a combination of influences, including irrational and excessive lending and logic-defying investment programmes that were beyond the capacity of regulators to understand or monitor. In other words, the banks were the cause of their own downfall.

Who benefits?
Yet it seems to me that the ‘solutions’ currently on offer – effectively pumping even more money into the system – are there for the benefit of the banks (well actually, the management of the banks), not the economy as a whole.

After all, nothing in the new set-up appears to prevent the payment of massive bonuses (although some will be deferred for a couple of years), there appears to be nothing that forces the banks to increase lending to businesses and individuals (despite what politicians claim) and they will be selling off some of their branches (and in the case of RBS, several insurance companies) without any of the money going to the taxpayer.

When you really get down to it, we are being asked – well actually given no choice – to pour more money into the banks for no return; at least not for many years in all likelihood. Yet at the same time, taxpayers will be facing fiscal tightening in the form of higher VAT, increased National Insurance contributions and (as yet unknown) other tax increases.

Is this fair?
It is all too easy to blame the bankers; in fact there are other guilty parties including governments for favouring the city over manufacturing industry, regulators for failing to understand what the investment whiz kids and the lending managers were up to and, let it be said, ourselves for borrowing more than we could reasonably expect to repay other than with benefit of inflation to reduce the value of our debts. The government is the worst offender in this context, but according to Credit Action, as individuals we still owed some £1,459 billion in September, which is slightly up on a year ago and more than twice as much as at the start of the decade. In fact the only good news is that the rate of increase has slowed dramatically over the past two years.

But on balance it seems to me that the bank rescue and its aftermath has been structured to help bankers, rather than consumers, businesses and taxpayers. A case of the tail wagging the dog – at least it would be were the tail not so massive that the comparison is inadequate.

As ever, when it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do contact Robert Bruce Associates for individual assistance.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.