STEPHEN Hester, chief executive of 81 per cent government-owned RBS, has sent the most encouraging signal from the stricken company since its taxpayer rescue in 2008.
He said the bank would be in a “condition fit to sell” before the next election in 2015 and wanted to give the government the option to start selling its stake as soon as next year. But he warned the shares may not be worth what the government paid (the closing price yesterday was 323.9p, well down on the acquisition price of around 500p adjusted for the share capitalisation).
Mr Hester’s ambition will be well received. For shareholders it offers the prospect of a return to dividends after five torrid years. For the government it holds out the prospect of a big reduction in its colossal debt pile. For employees it brings the promise of normalisation after a relentless series of redundancies, cutbacks and disposals. And for the taxpayer it would mean a merciful release from the bank’s deeply troubling liabilities.
This declaration of intent by Mr Hester is welcome. Now that there is light at the end of the tunnel it makes sense to swim towards it. And we would applaud early progress in getting a share sale under way, even if the first tranche is modest. A share sale of this magnitude will need to be staggered over years.
But no-one should pretend that it will be plain sailing. While the bank can point to progress in the annual results, with an underlying operating profit of £3.5 billion before special charges, there is also a long and troubling list of exceptional write-downs, write-offs and charges to be considered. These resulted in a pre-tax loss of £5.17bn. There was a £4.6bn accounting charge for changes in the value of its credit. It took a £5bn in write-offs to cover loans unlikely to be repaid. There was a £381 million fine for attempted Libor rate manipulation, a charge of £700m for money it expects to have to pay out to cover mis-selling interest rate swaps and a £450m charge to cover mis-selling of payment protection insurance, taking its total provision to £2.2bn.
Not only would any offer of shares to the public need to be clear of any further charges and penalties of this sort but would also require clear evidence that the culture of the bank has changed, which is the best means of narrowing the gap between today’s share price and the acquisition cost, minimising losses to the taxpayer.
But while culture change is taking place, RBS can send out a positive signal by moving towards the start of the sell-off, even if, ironically, the early transactions take place at such a price that the taxpayer has to take a small hit. Waiting for the share price to go up before a sale takes place could result in an unacceptably lengthy delay. It is necessary that the process is now seen to take its first steps.
Debate needed for Yes and No
WE WILL hear much over the coming months about what an independent Scotland might look like should there be a Yes vote in next year’s referendum. But of at least equal importance is what might happen in the event of a No vote – an outcome that, on current poll readings, looks the more likely.
For that reason there will be keen interest in the speech to be given today by shadow foreign secretary Douglas Alexander. Many will share his critique that the unsparing focus on constitutional arrangements in Scottish politics has crowded out important debate on other vital issues. Mr Alexander will maintain that key issues on the economy and social justice which concern ordinary families have been ignored, or over-shadowed.
He is set to propose a “National Convention” that would set priorities for the countries over the next two decades. Judgment must necessarily await agreement on contents. But it is important for the Better Together campaign that it is able to offer a positive alternative and not rely on a return to ‘status quo ante’.
There is growing cross-party concern over the widening social and economic differences within the UK and the need for an effective rebalancing.
Increasing awareness of the need to give greater support for areas outside London and the south-east could form the basis of a positive campaign that could offer an alternative vision of progress and betterment. But gulfs would have to be bridged. Voters would need more than vague declarations of intent from the Better Together camp. What Mr Alexander proposes provides a good start; next, the debate must be developed.