The banks are being punished – but that’s not the good news it might seem

Bank fines risk becoming part of the government’s revenues – and that could be very dangerous, says Matthew Lynn.

You might think the British government was just about broke. The budget deficit is still among the largest in Europe. Tax revenues are spluttering even as the economy recovers. The pressure on spending grows all the time. Fortunately, however, Chancellor George Osborne managed to find a couple of billion stuffed behind the Treasury sofa just before the Autumn Statement to spend on the NHS.

Where did it come from? It turns out that half of it came from all the money the government has been collecting in fines from the banks. The misdemeanours of the City boys have turned into a lucrative source of extra funds for the state. This month, six banks were fined £2.6bn by American and British regulators for their role in rigging the foreign-exchange markets. That came after fines running into billions for the Libor-fixing scandal. In total, Britain's four main banks set aside £21.5bn during 2013 to cover the costs of penalties, according to research by the London School of Economics. That was on top of £25bn they had set aside since the crash of 2008.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.