5 Aug 2015

RBS share sale good for Osborne – but don’t the public get a say?

You could argue that it’s us the taxpayer – the people who bailed out RBS in the first place – that should have been given first dibs to buy the shares today. But the fact the shares were sold at all was – on balance – the right move.


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If you look at a graph of the share price of RBS over the last 8 years – it’s basically a flat line oscillating occasionally up and down, but never wildly.

The reality is that over time the presence of the government hovering over the bank’s shoulder like the grim reaper has become one of the things holding the shares back. And yes, crystallising a loss today doesn’t look good on paper, but when would have been a good time to start offloading?

Can anyone point to the specific day that RBS shares were going to hit that magical £5 point at which we bought the shares back in 2008? The mistake was to pay too much for them back then – but you can’t blame George Osborne for that.

He can only look at the same graph I did today and conclude that he’s better off selling the shares – and making some money – than holding onto them and making nothing at all. And – at the same time – taking all the flack every time the “state-owned bank” does something wrong. The government sold a total of £2.1 billion worth of  shares in RBS at a loss – cutting the government’s stake in the bank to 73%.

But there is surely an argument to say that it’s us, the taxpayer, who paid the £45 billion and even bigger social price since then – who should have been given the chance to buy the shares at a discount.

Why was that privilege only given to so-called sophisticated investors? To hedge funds, who according to the Financial Times, have already profited from the share sale by shorting the stock ahead of the announcement last night.

At one point, there was even a plan floated to give the shares away to the public. A pay back for the public pain suffered by years of austerity. OK, so many people wouldn’t go near RBS shares if their life depended on it. But would there have been some ordinary “unsophisticated” investors like you and me who might have done? Maybe, yes.

The point is the chance would have been nice. Now we’ll never know. If George Osborne’s plan works, and the shares gradually start to rise, this will have been a one off opportunity. One reserved for the financial elite, rather than the ordinary man on the street.

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One reader comment

  1. Andrew Dundas says:

    Because the shares were bought with government ‘QE money’ those shares didn’t cost “the taxpayer” anything.
    Just like the Government Bonds bought by the Bank of England haven’t cost ‘the taxpayer” anything either.
    It would have been nice to have sold a bundle of RBS shares for an higher price. But all of the proceeds are moneys-worth and could be spent by Government, or used to finance the real value of the cut in Corporation Tax. As it is, the fact of the sale signals that RBS is actually returning to something like a normal bank.
    What is also important is that RBS is no longer directed by a reckless Edinburgh board. Moreover, the sale of the remaining 71% of its main US subsidiary – Citizens Bank – will proceed over the next couple of years and will yield much of the additional capital that RBS needs to be an effective UK bank.
    Altogether, buying RBS with QE money was a massive bargain.

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