£25bn for RBS as 20,000 jobs to go

Feb 27 2009 by Chris Knox, The Journal

AILING Royal Bank of Scotland will be propped up with another huge taxpayer handout – up to £25.5bn – after posting the biggest loss in UK history.

The bank, already 70% State-owned, took a step closer to full nationalisation as it announced plans to dump £325bn in toxic debts into a Treasury-backed protection scheme.

The bank said its losses for 2008 totalled £24.1bn, sparking fears it could be planning to axe up to 20,000 UK workers as part of its aim to cut costs by £2.5bn a year.

Chief executive Stephen Hester said he “would not dissent” from speculation over the size of the cuts.

Its workers at branches and offices in the North East were concerned, but yesterday there was little information about where the cuts would be made. Although RBS said job losses would be substantial, union representatives said they were “extremely frustrated” by its failure to give any numbers or details.

The bank has also been criticised heavily after reports that Sir Fred Goodwin, the bank’s 50-year-old former chief executive, is already drawing a pension of £650,000 a year, despite being blamed for much of the damage.

Unions are concerned at further job losses in the North East’s financial sector with 150 jobs having been axed at the Newcastle Building Society and more than 1,500 at Northern Rock.

North East officer at the Unite union Brian Coll said: “It has been a very busy few months, with some very bad news for the North East’s financial services industry. Although we know little about what RBS has planned for the region, it’s just more bad news that we didn’t need.

“It’s of particular concern when you consider the £650,000-a-year pension Mr Goodwin is being allowed to draw upon.

“I will be in talks with our members over the coming days to ensure that we are able to get more information.”

Prime Minister Gordon Brown said he was “determined” to act over the £693,000 retirement package, threatening legal action if necessary.

RBS will issue £13bn in special B shares to the Government, as well as a further £6.5bn to take part in the Asset Protection Scheme (APS).

The bank, which has already taken £20bn in public funds under the first banking bail-out last October, can call on a further £6bn if needed.

The Government’s voting shares will be capped at 75%, but its economic interest in RBS – its claim on RBS’s assets – could rise to 95% depending on its future performance, said Mr Hester. “The economic stake could be anywhere from 75% frankly all the way up to 95%,” he added.

Chancellor Alistair Darling defended the APS amid fierce criticism. “While the taxpayer does face risks as a result, the cost of doing nothing is far greater,” he said.