Britain’s banks continue to rely on the taxpayer for £512bn of support, according to the public accounts committee as it calls for the industry’s reliance on the state to end.

Margaret Hodge, MP, chairman of the public accounts committee, said: “Contracts entered into when state support was put in place have allowed some of these gains to be used to pay bonuses to certain bank staff and dividends to shareholders, rather than enhancing the financial sustainability of the sector, and this causes us and the wider public much concern.

“This committee feels that it is inappropriate for banks dependent on taxpayer support to be generating excessive incomes, unnecessary bonuses or dividends at the expense of exiting public support.”

The committee’s report said: “The Treasury must explore all avenues to ensure that the remuneration packages for the part-nationalised banks provide value for money for the taxpayer, and properly reflect the burden on the taxpayer for continuing support.”

However, the committee also believes the government should take account of the £5bn of interest it pays on the £124bn of debt it incurred as a result of bailing out the banks when assessing the return to the taxpayer.

It also notes that the sell-off of the stakes will require “extraordinarily careful handling”.

“When developing its strategy for the sale, the Treasury will need to balance the legitimate desire to maximise proceeds against its other objectives of preserving financial stability and enhancing competition,” it said.

Noting the importance of the independent commission on banking, chaired by Sir John Vickers, the committee suggests the government produces options for the shape of the banking sector and quantifies the value it places on its objectives.

“Considerable regulatory and political uncertainty over the government’s intentions of the banking sector will remain until the government has responded to the recommendations from the independent commission of banking, expected to report in September 2011,” the committee said.

Taxpayer support had fallen from £1 trillion to £512bn by December 2010. The committee suggests the fees for the credit guarantee scheme used by some of the banks – which the National Audit Office has said amounts to a subsidy to the banks of at least £1bn – should be increased.

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