Another results season, another bout of chatter over how to return Royal Bank of Scotland to the private sector — and so another chance to air a plan, supported by UK business secretary Vince Cable, to give its shares away to all and sundry.
There are so many things wrong with this gimmick that it’s hard to know where to begin.
Let’s start with the fact that the shares belong to the government — that is, the whole country. If the government gets its money back, that helps everyone in the country. The government can spend the money, or use it to reduce borrowing or give it back to the population through any number of tax or benefit changes.
The government’s responsibility to taxpayers, who paid for the bank's £45bn bailout, is to maximise the price it gets for the shares.
First of all, this means waiting a decent time, in the hope that the shares become worth more than they were bought for. Second, it means using the best skills of the City to sell the stake, probably in stages, in such a way as to maximise value.
Giving the shares away to the public is not maximising value for the public purse — instead, it is subordinating that goal to a craven attempt to curry popularity with voters.
Re-privatising the bank by distributing the shares among the population is a form of wealth redistribution, since presumably non-taxpayers would get the same as large taxpayers. But that does not make it fair or wise.
If the government wants to give the poorest more money, there are umpteen better ways than this. A windfall of shares worth £300 or £400 will not lift anyone out of poverty. Higher benefits on a permanent basis, or lower marginal tax rates, would concentrate the giveaway on the poor and could enable them to receive much more.
Alternatively, there are scores of public services for the most vulnerable members of society that are crying out for investment.
And if the manifest injustice and pointlessness of this scheme were not enough, it is also absurdly clumsy. Administering the slightest change in tax or benefits costs a ludicrous amount. Imagine the cost of a completely new, nationwide voucher privatisation — in the form of share options — which would need to be legally documented!
Then, what does everyone do with their new shares? Do they sell or keep them? Who should advise? No doubt bucket shops would spring up to buy people’s shares and sell them on.
That’s before we have to investigate and prosecute all the frauds that will result. And can’t you just see the headlines in about 2018: “Government to shell out billions on RBS share mis-selling”?
Somebody tell George Osborne to squash this idea before Boris Johnson endorses it and the whole UK press decides it must be genius.
