A hasty RBS and Lloyds share sale – like Gordon Brown selling gold at the market low

Oh how I don’t trust politicians with our money. I don’t care about their political allegiance; rather I worry about their knowledge, experience and intentions. Whilst I don’t believe that our politicians are actually evil, I just don’t think they are the best people to be making financial decisions when they are exceedingly inexperienced, and likely to be influenced at the very least by their political futures and opportunities.

Here then is a worrying background for the return of the government holdings in two of our major banks. Recently we have had a report from a right of centre think tank with some short term privatisation ideas, and then a swift “removal” of Stephen Hester from his key recovery role at RBS. Although we won’t know the truth for some time to come, I suspect this is one area where the conspiracy theorist may well be closer to reality.

It looks as though the Government is keen to get shot of RBS and Lloyds as quickly as possible. This will probably come under the guise of getting politicians out of banking (which is to be lauded) but I suspect the truth would be closer to trying to get some short term money in now for the deficit,  and to then see if you can also win some votes with some discounted share offerings. Not exactly the right way to run the finances in my view. Feels a bit like a Mr. Brown selling our gold at a market low just to get some cash.

Taking a good investment perspective, would it not be better to transfer the bank under the auspices of the Bank of England (as per previous rescues and lifeboat structures) and away from the politicians, carry out the necessary capitalist surgery – painful but practical – and only then seek to return the business over a longer timeframe? Thus we can better ensure that the tax payers get not just their investment back but a healthy profit as well.

So why not use some imagination to think of a better way of doing this? Rather than just having a public share sale of these holdings to try and raise money in the old privatisation manner, or even some rather complicated manner of offering a holding in a single company to nearly all the adult population of the  country, why not take a more enlightened view?

After all, if we were doing the privatisations all over again, it would have been cheaper, easier and far better value for all if we had offered “Sid” a fund made up of all the state assets being sold off – to provide him or Mrs. Sid with a broader base of investments and something to hold for a longer period than just a sale to get the cash.

Now with most of the assets already sold, there is of course less around by way of family silver. However with the banks, the Royal Mail, the Met office, the student loan book and an array of smaller items, there is quite a portfolio of government assets which could easily make up the value of a FTSE 100 company. Effectively an investment fund with a range of assets which, as it grows, could in effect become our own UK sovereign wealth fund?

Better than flogging them off for short term cash to pay off the government’s pay day loan book.


This entry was posted in Banks. Bookmark the permalink.
Subscribe Find an Adviser
  • David Lilley

    Dear Justin,

    I miss your regular appearances on the BBC business news.

    We, as the most indebted country in the world, must sell some assets quickly. Our debt is 75% of GDP, but if we include bank bailouts it is 140% (see Shaun Richards above). If our state borrowing costs increase we have a big problem.

    None mention that our banks are making great underlying profits as they have increased their spread four-fold. When the fines and bad debt are behind them they will be great again.

  • Nancy Crutcher

    Wonderful article!! Thank you so much for this post! Though, I am not so knowledgeable about this matter but, I am glad to have read this. I hope to see you back at BBC, Justin. -http://www.golddiggers-webuygold.com/