George Osborne to sell off taxpayers’ stake in RBS
GEORGE Osborne has announced he will begin to sell off British taxpayers’ stake in the Royal Bank of Scotland over the next few months.
In his Mansion House speech last night, the Chancellor said that it would cost the government more to hold on to the shares than the loss that would be made by selling them quickly at less than the amount Labour paid for them during the banking crisis of 2008.
Mr Osborne said he was acting on independent advice from Bank of England Governor Mark Carney and a review by Rothschild, stating that it is now in the interest of taxpayers to begin the sell-off of the government’s 80 per cent stake.
He said: “Do we begin the process of selling down the government’s huge majority stake, even though the share price is still below what the last chancellor paid out seven years ago? Or do we hope against hope that something will turn up?
“Frankly, in the short term the easiest path for the politician is to put off the decision and leave it to someone else at some future time to pick up the pieces. I’m not interested in what’s easy – I’m interested in what’s right.
“I was not responsible for the bailout of RBS or the price paid then for shares bought by the taxpayer: but I am responsible for getting the best deal now for the taxpayer and doing whatever I can to support the British economy.
“There is no doubt that starting to sell the government’s stake in RBS is the right thing to do on both counts.
“That is not just my judgment – it is the judgment of the Governor of the Bank of England, whose views I sought and whose letter to me on the issue we publish today.”
Although the first sale will be to large corporations, the Chancellor has also committed to selling thousands of shares to the public.
Mr Osborne said that at current valuations – and taking into account fees and other proceeds received from the banks as a result of government support during the financial crisis – taxpayers can expect to make £14 billion more.
He said: “In the coming months we will begin to sell our stake in RBS. It’s the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than Labour paid for it.
“But the longer we wait, the higher the price the whole economy will pay.
“And when you take the banks in total, we’re making sure taxpayers get back billions more than they were forced to put in.”
He added: “Given the size of our stake in RBS, the sales will take some years and will likely involve all types of investors.
“With such a complex investment case, we have to start with institutions, but I see no reason why ordinary investors – in other words members of the public – should not take part in due course.”
Meanwhile, Mr Carney said the “age of irresponsibility” was over as he set out new plans for rogue bankers and traders who break the rules to be jailed for up to ten years.
He made the remarks as the Bank published the final report of the Fair and Effective Markets Review (FEMR), which the governor and Mr Osborne launched a year ago in the wake of a series of City scandals.
The review calls for UK criminal sanctions for market abuse to be extended to a wider range of areas and the lengthening of the maximum sentence available from seven to ten years.
Mr Carney said if unchecked, markets were “prone to instability, excess and abuse”.
He blamed poor infrastructure for allowing the US subprime mortgage crisis to “light a powder keg under UK markets, triggering the worst recession in our lifetimes”.
The review sets out 21 recommendations to try to restore trust in the Fixed Income, Currency and Commodity (FICC) markets.
These markets are key to the operation of the global economy, underpinning prices for anything from basic household goods to the rate at which firms can borrow.
The FEMR calls for individuals to be held to account for their conduct, with firms taking greater responsibility for market practices.
It also demands tighter regulation, for a regime holding senior management to account to be broadened, and for coordinated international action to be taken where possible “to improve fairness and effectiveness”.
In addition, it recommends that UK authorities create new civil and criminal market abuse rules for foreign exchange dealing.