UK's state-owned finance sprawl needs better management: watchdog

[LONDON] Britain should overhaul the way it runs a growing sprawl of state-owned financial bodies ranging from nationalised banks to institutions that manage student loans and business lending, the country's spending watchdog said on Thursday.

Britain now has 54 state-controlled financial institutions, double the number in 2007, many of which were created as the government battled to keep the economy afloat during the financial crisis.

They now make up a sizeable chunk of the government's balance sheet - wholly-owned government institutions represent a total asset value of 222 billion pounds (S$483 billion) - but no single government agency commands an overview of them, the National Audit Office (NAO) warned.

The NAO also said it was hard to distinguish whether some of these bodies were supposed to be temporary.

"Most of these institutions are unregulated which makes it difficult to see how the government can fully understand what is going on across these bodies or ensure taxpayers' money is being properly protected," said Meg Hillier, an opposition Labour MP who chairs parliament's committee of public accounts.

The NAO concluded the government should take a portfolio approach to managing its financial institutions.

The government is reducing its exposure to the financial sector by selling shares in Lloyds Banking Group and RBS, two major banks which were bailed out with taxpayer funds during the crisis.

But at the same time it will expose itself to more debt through a further expansion of student loans, as well as programmes like the Help to Buy mortgage subsidy scheme.

Overall, the government risks losing more than the 200 million pounds it expects to see over the next five years.

"The government's poor track record in achieving value for money from selling shares and getting back the money will give the public little confidence that the debt increase will be limited to 200 million pounds," said Ms Hillier.

Last year Ms Hillier's committee was critical of the government's sale of Royal Mail, which it said was blighted by a fear of failure and poor advice from state-appointed banks.

REUTERS