It emerged recently that the Chancellor has ordered officials to draw up plans for privatisation of the publicly-owned 83% share of the Royal Bank of Scotland by 2015, despite the fact that this will probably mean a multi-billion loss on the bank’s bailout in 2008. George Osborne hopes to sweeten the £14 billion loss that will result by issuing “parcels” of shares to every taxpayer or voter in the country, hopefully in the few months immediately before the General Election.
It is clear that, if the Conservatives are unhappy with having the National Health Service under public ownership, they are even less happy with having a bank under our control. Aware of the political toxicity of being seen to “deliver poor value to the taxpayer” by selling RBS and Lloyd’s shares prematurely, both the Brown and Cameron governments have attempted to run the banks at arms length from the state, rightly causing outrage when ministers failed to tackle excessive executive pay at the business. Osborne has reached the conclusion that the only way to stem the political damage is to privatise the bank as soon as possible- a conclusion which seems based less on facts and more on ideology.
If the proposals went ahead, every voter or taxpayer in the country would in 2015 be given 100-or-so RBS shares to do with as they please. There are important questions to be asked about the definition of “taxpayers”- would disabled benefit claimants, for example, be granted their share? What about workers on the Minimum Wage whose wages fall below the tax threshold? Knowing the Coalition’s record in neglecting these groups, I suspect that we already know the answer. Even if they make the “fairer” choice, and distribute shares to all voters, then are Scottish 16-17 and a 1/2 year olds who voted in the 2014 referendum but are ineligible to vote in the general election entitled?
The move is highly regressive in nature, for the simple reason that the poor will have little option but to sell the shares immediately. If a household is struggling financially, the logic of “a bird in the hand is worth two in the bush” will apply. The exploitative industry which markets payday loans to such groups will no doubt offer “instant ca$h” purchasing of the shares from them, taking inflated commissions in the process. In short, the massive government loss will be individualised instead, but with the burden once more being felt by the disadvantaged- those who have lost the most from the banking crisis and its effects in the first place.
The government hopes that it can rid itself of the controversy of allowing state-controlled bank to act unfairly, and provide a politically valuable bribe- and yes, this amounts to shameless bribery, especially when timetabled so close to an election- to the electorate at the same time. It is notable that Osborne and Co adopt a rhetoric of fiscal discipline and “prudence”, and yet feel able to square this with giving away a £30 billion+ payout while simultaneously slashing public spending in a failing attempt to shrink the budget deficit. Surely it would be more in keeping with the fiscal plan to pay down the National Debt with the proceeds after allowing RBS shares to reach pre-bailout levels?
Of course, at a time in which business and mortgage lending is limited, competition in the banking sector is virtually non-existent, and the ethical conduct of banks is widely regarded as unacceptable, a much fairer alternative presents itself. RBS could be taken into full public ownership, and then run as a “People’s Bank”, on a not-for-profit basis (as long as the People’s Bank is not run at a loss, competition law can easily be met).The surplus liquidity controlled by RBS would be utilised to free up credit for people, business, and infrastructure projects. Though one bank can only have so much of an effect on its own, it would also force competitors to raise their game. Would the economic value of creating a real standard-setter for the banking industry, one dedicated to working in the public interest, not be worth more to us all than a botched £300 bribe?
