DEPENDING on your point of view, Britain’s taxpayers either made £2 billion or lost £1 billion on August 3rd. The larger figure (equivalent to $3.1 billion) is the amount netted by selling off a 5.4% sliver of the government’s shareholding in Royal Bank of Scotland (RBS), which it bailed out in 2008. The lower figure is the difference between the 502p per share it paid back then and the 330p it received this week.
The Treasury, unsurprisingly, played up the £2 billion cash boost to the public finances. But its desire to avoid headlines like the one above has mistakenly guided its thinking on what to do with RBS. For years it dithered on selling down its 78% stake—now 73%, and set to dwindle in the coming years—in the vain hope that the troubled lender’s shares would resurface above the price it paid for them, so engendering a profit. That hasn’t happened in five years. Worse, the stock has dipped from 400p earlier this year, even as that of other banks soared.
The focus on profit is misguided: RBS was not taken into public ownership, at a cost of over £45 billion, so that the government could make a surplus when it sold its shareholding. Rather, the aim was to fend off an implosion of the financial system and the damage to the economy that would ensue. The costs avoided—soaring unemployment benefits, for instance—could have been much...Continue reading
via Brian Rushton, British taxpayers lose £1 billion
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