Britain could lose the £66 billion ($105 billion, 82 billion euros) it spent on rescuing Royal Bank of Scotland and Lloyds Banking Group and made key errors over failed lender Northern Rock, lawmakers said on Friday.
The Public Accounts Committee -- a panel of British lawmakers -- issued the gloomy verdict in a eagerly-awaited report into the government's handling of Northern Rock, which has since been taken over by Richard Branson's Virgin Group.
At the height of the credit crunch in 2008, Britain's then-Labour government was forced to nationalise Northern Rock and pump billions of taxpayers' cash into Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG).
"The £66 billion cash spent purchasing shares in RBS and Lloyds may never be recovered, and the Treasury must also ensure it is prepared to deal with any future crisis, whatever form it may take, when it emerges," the committee warned on Friday.
Taxpayers still own 81 percent of RBS and 39.6 percent of LBG following the enormously expensive bailouts.
The committee meanwhile slammed the Treasury over its slow reaction to the banking crisis and its lack of adequate skills and knowledge.
"The Treasury was part of a monumental collective failure to understand how the pre-crisis boom could lead to a banking crisis," it said in the report.
Back in September 2007, Northern Rock was plunged into turmoil when its exposure to the global credit crunch forced it to seek emergency assistance from the Bank of England, sparking the first run on a British bank in recent history.
The lender, based in the northeastern city of Newcastle, was subsequently nationalised in February 2008.
After a long period of uncertainty, the current Conservative-Liberal Democrat government last year decided to split Northern Rock in two, forming a "good bank" for its healthy businesses and a "bad bank" management firm to wind down toxic assets.
Earlier this year, the Treasury sold the "good" bank -- Northern Rock plc -- to Branson's Virgin Money for £747 million.
Lawmakers added on Friday that authorities had failed to nationalise Northern Rock quickly enough, and had failed to challenge its business plan.
"The Treasury lacked the skills to understand Northern Rock. It took too long to nationalise the bank and failed to make an effective challenge to the bank's business plan, first after nationalisation in 2008 and again in 2009 when deciding what to do with the bank," the committee said.
"The Treasury has started to address this lack of capacity: it has established UK Financial Investments (UKFI) with a small team of 12 people to manage the taxpayer shares in banks, and has conducted a review of its own skills and capacity. But huge challenges remain."
Labour deputy Margaret Hodge, who chairs the Public Accounts Committee, added that the Northern Rock rescue would leave taxpayers with an overall loss of half a billion pounds.