Taxpayer bank bailouts must stop, says Lord Myners

Treasury minister Lord Myners today told officials of the G7 countries' finance ministries, the IMF and the World Bank that banks should be made to pay upfront for any future state bailouts.

"If banks are to enjoy even a small hint of implicit underwriting from the state, they should pay for it," he said. "None of us can get insurance for our homes or our businesses for free — we pay a premium for it. And so should banks."

He declared that if a bank was judged "too big too fail", it should "be the banks and their owners, and not the taxpayers, who pay the price for saving it".

Lord Myners asked academics and civil servants in a meeting in 11 Downing Street to outline ways of charging a global levy on banks and how they can use capital instruments to boost their balance sheets.

"It is important that any costs governments incur for interventions in the financial sector are distributed more fairly. There is a strong rationale to charge for the externality caused by the financial sector, and financial institutions should shoulder the responsibilities for losses they may face," he said.

"We need harmonisation of approaches globally and extensive international co-ordination to bring major benefits to the whole system."

Proposals include a mandatory global insurance fund to support the sector, contingent capital instruments and a tax on financial transactions, of the kind suggested by Prime Minister Gordon Brown at the recent G7 summit in St Andrews.

Brendan Barber, general secretary of the Trades Union Congress, urged representatives at today's seminar to back a transaction tax on banks.

"This debate must look further than just the direct costs of bailing out the banks either during the financial crash or any future crisis," he said.

"The costs of the recession go far wider - both to taxpayers and the millions who have lost their jobs or livelihoods as a result of this finance-driven downturn."