Darling needs £50bn to cover rescued banks losses

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The sum, the equivalent of an extra penny on income tax for 14 years, will fuel Tory claims that the Treasury's rescue package will cost the taxpayer dear over the long-term.

Whitehall sources confirmed today that there would be a "prudent provision" inserted into the public sector debt figures as part of the Treasury's cautious assumptions about future finances.

Until now, ministers and officials have sought to play down the likely cost of the banks rescue.
Around £50 billion is equivalent to the size of the NHS budget for seven months or more than a year of the defence budget.

Alistair Darling is also expected to declare that while he needs to set out a worst-case scenario, the state stands to make substantial profits when it sells its shares in RBS, Lloyds, Northern Rock, Dunfermline and Bradford & Bingley.

But Mr Darling has virtually ruled out selling off any of the Government's stakes in RBS and other banks before the general election, due next spring. The Treasury has a duty to get the best possible return for the taxpayer and will hold onto the banks and building society shares it owns until the economy recovers, sources said.

The Government has come under fire from the Conservatives for the "paper" losses it has already incurred in buying bank shares that have since collapsed in value. At yesterday's closing share price, the £20 billion Mr Darling has put into RBS had shrunk to £12.9 billion.

Ministers believe that they can emulate the Swedish government, which made healthy profits after its state rescue of banks in the early Nineties.

A total of £1.2 trillion in loans, capital injections and guarantees has been set out by the Treasury over the past 18 months as it battled to prevent Britain's banks from going into meltdown.