Could banks become national champions? – 8695

22nd November 2011

However, perhaps there is one method of moving the system towards a brighter future: give everybody a share.

This is one of the solutions proposed as Chancellor George Osborne fights for ways to reinvigorate the economy – hand us some of the state's shares in RBS and Lloyds.  

 

Conflict and resolution

Bank bail-outs angered taxpayers, who wondered why they should put their hands in their pockets when it wasn't them who created the mess. This has created an ongoing conflict when what is required is a clear resolution to avoid sinking further into the mire. The situation demands some kind of rescue plan, and perhaps this one would at least be politically popular.

According to this report, the 87% of RBS controlled by the taxpayer is currently worth around £10 billion, even after a 50% slide in the share price this year. Split between Britain's 46 million adults, that is £220 each which would surely be welcome during a time of cut backs and austerity.

Given that figures from the Office for National Statistics show that just 62% of UK households have a savings account, with 50% of these holding £3,500 or less, any boost to the sum with potential for growth would surely help? After all, with interest rates far below inflation, holding cash is a fool's game at present. If handed an investment, perhaps this would promulgate an interest among Britons in the stock market.

 

Not a new idea

The Centre for Policy Studies, a think-tank, came up with the plan earlier this year that would see taxpayers receiving more than £1,000 worth of shares in both Lloyds and RBS. Despite the idea being rapidly dismissed, others proceeded to latch onto it, including Nick Clegg.

However, while the Treasury said all options would be considered, Labour dismissed this one as a headline-grabbing exercise, reported the BBC.

 

But should it be reconsidered?

Confidence in the system is being hit hard as the financial crisis lurches on with little proposals for resolutions that appear promising. So what might help? Waiting to sell state-owned banks isn't appealing to politicians now that they are unlikely to be in a pretty state for several years to come – so why not give them away?

By giving every taxpayer a slice in the banks there would be a more staggered ebb and flow of the shares onto the market, points out this report on This is Money; some people would hold onto them, hoping for their value to grow, some may just sell their stake straight away.

Of course, this proposal would prompt people to gain a basic understanding of the financial system and encourage further investing. By creating universal share ownership in the UK, people without any experience of share ownership would be able to participate in the investment world that dominates the age we find ourselves in – the age of financialism.

As shareholders, individuals will also be eligible for dividends, and have full AGM voting rights.

 

What about the critics?

This month George Osborne sold off the healthy parts of Northern Rock in the first privatisation of taxpayer-owned financial assets since the crash.

However, the deal with Virgin Money leaves taxpayers facing a loss of at least £400million, demonstrating the disaster that can await those who own bank shares.

Critics argue that the cost of administering the shares scheme will run into millions of pounds at a time when public services are being slashed. Meanwhile, educating the public in how the shares work would also be expensive.  

Commenter Andy says on a BBC report: "Why not just give every PAYE and other genuine registered tax payer a one-off rebate to the value of the windfall, once any profit has been made from the sale of the banks. This way only those who have contributed into the bail-out will benefit. The proposed share nonsense by the liberals will also benefit those who have not contributed in any way. Just call it the taxpayers generosity rebate."

 

But still, could it mean banks become the national champion of big society?

Could the move create a national champion owned by its account holders, thereby encouraging a new era for the industry with the rebuilding of trust on the agenda?

The world we find ourselves in lends itself to a fresh philosophy, after all. There is a wisdom in crowd-sourcing for problem solving – and distributing bank shares is one method of using big society for some kind of possible resolution.

What do you think? 

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