OPPOSITION to the sale of the first tranche of government-owned RBS shares reached a clamour yesterday when it emerged that the taxpayer had lost £1.4 billion on the deal approved by Chancellor George Osborne on Monday afternoon.
Financial institutions snapped up all 630 million available RBS shares at a discounted price of 330p each almost as soon as they were put up for sale by UK Financial Investments (UKFI) which holds the stakes in the banks that the government acquired.
The sale gained over £2 billion for the Treasury but the sale price compared to the average purchase price of 502p some seven years ago meant the government accepted a £1 billion-plus loss.
The Edinburgh-based bank’s share price fell by more than two per cent and reached the offer price of 330p but later recovered to finish up 1.44p at 339p, netting an immediate paper profit of millions for those who had invested.
The sale was of just 5.4 per cent of the bank’s stock, and the government still owns 72.9 per cent of RBS. Chancellor Osborne has decreed that almost all of these shares will be sold in the lifetime of the current government, meaning that a total loss to the taxpayer of nearly £16 billion could occur – much more than the £12 billion in welfare cuts he is planning.
Osborne’s opponents reacted with fury. Stewart Hosie, the SNP’s depute leader and economy spokesman said: “The taxpayer should not and cannot be short-changed by the Chancellor.
“It is to be welcomed that RBS is moving from government ownership back into the private sector, however it should not be on the cheap.
“George Osborne needs to be open and honest about his plans for the rest of the stock in RBS as we look forward. We need to see the small print of the government’s plans to ensure a fair deal; right now there is some very real concern that the Chancellor is trying to cut and run. Once the full sale of the stock is complete, the taxpayer must receive the full £45.8 billion paid by the previous government in 2008. The public must get every single penny back.”
Shadow Treasury minister Barbara Keeley said: “There could be a loss of £1bn on this part of the sale and you have to ask: where are the priorities of a government which has just given up on its cap on care costs leaving thousands paying down their own social care and is losing a billion pounds overnight?
“That would have gone a long way towards helping people pay for social care.
“The most important question for the taxpayer is: are we getting good value for our money?
“This used to be something the Chancellor used to care about. He said he’d only sell these RBS shares when we get good value. Clearly that’s not now.”
Green party leader Natalie Bennett said: “The £1bn loss we are likely to see on this sale allows Osborne to continue to plead poverty and inflict more spending cuts on those least able to afford them, while the bankers walk away with a profit. It is high time the ties between government and the banking lobby were severed.”
Osborne was sticking to his guns, however.
He said: “It’s the right thing to do for British businesses and British taxpayers.
“Yes, we may get a lower price than was paid for it – but we will get the best price possible. The longer we wait, the higher the price the economy will pay.
“This is an important first step in returning the bank to private ownership, which is the right thing to do for the taxpayer and for British businesses: it will promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy.
“Now is the time for RBS to rebuild itself as a commercial bank, no longer reliant on the state, but serving the working people.”
The sudden share sale came after RBS reported better than expected figures for the first half of 2015. Though it lost £153m after setting aside £1.3bn for settling regulator fines, second quarter figures showed profits up 27 per cent year-on-year at £293m.
Ross McEwan, chief executive of RBS, said: “I’m pleased the government has started to sell down its stake.
“It’s an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank.”
The National view: The sell-off of RBS was not designed to help the taxpayers ... just the bankers
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here