My colleague Beth Rigby reveals tonight that Nick Clegg is pressing the Treasury to give every British voter shares in the state-owned banks when they are privatised – creating a “people’s banking system”.
It’s a move that smacks of populism. Clegg has briefed the press corps following him around Brazil that he has penned a letter to George Osborne asking them to look into a “mass share ownership scheme” as part of the privatisations of RBS and Lloyds.
“Psychologically it is immensely important that the British public feel they have not just been overlooked and ignored,” he said.
We don’t yet know what the Treasury makes of the proposition.
The deputy prime minister injected a note of caution by admitting such a scheme could be “insuperably complex”. The idea was first mooted by Stephen Williams, a Lib Dem backbencher, in a CentreForum pamphlet a few months ago.
Three thoughts spring to mind:
1] If the government gives away even a small stake in these two huge banks it is billions of pounds which could be better spent cutting the deficit or reversing benefits cuts. (RBS alone has a market cap of £23bn).
Alternatively it could be used for tax cuts. But all coalition politicians agree that the right time for a giveaway would be 2014, in the run-up to the general election; not next year.
2] Could they instead concoct some system whereby people can buy the shares at a discount? The problem with this is that most would sell at the first opportunity, reaping a windfall at the expense of the exchequer. And if they hung on to the stock they could make a loss, in which case they might resent the government.
Also, if the public want to buy bank shares quite cheaply they can do it now. (Shares in RBS and LBG are both significantly lower than a point where the Treasury will realistically sell either).
3] If the coalition is just looking for a symbolic hit – by showing their commitment to Thatcher-style share ownership – they could have done it much more cheaply by giving away a small part of Northern Rock, which is a fraction of the size of the two major banks. Instead they are going for an outright sale to a single buyer.
Jim Pickard
Kiran Stacey