Philip Hammond has been forced to defend the government’s decision to sell part of its stake in RBS after an overnight sale of shares left taxpayers nursing a £2bn loss.
The chancellor said the offloading of almost 8% of the company’s shares for £2.5bn was a significant step in returning the high street bank – bailed out by Labour during the depths of the 2008 financial crisis – to the private sector.
But the sale of 925m shares at 271p each was at a price significantly lower than the 502p at which the Treasury bought its stake a decade ago and led to criticism that ministers had sold at the wrong time.
Hammond said: “This sale represents a significant step in returning RBS to full private ownership and putting the financial crisis behind us. The government should not be in the business of owning banks. The proceeds of this sale will go towards reducing our national debt. This is the right thing to do for taxpayers as we build an economy that is fit for the future.”
John McDonnell, the shadow chancellor, said: “There is no economic justification for this sell-off of RBS shares. There should be no sales of RBS shares, full stop. But particularly with such a large loss to the taxpayers who bailed out the bank.
Prem Sikka, emeritus professor of accounting at the University of Essex, said: “Why sell? Taxpayers bailed out the bank and when there is a glimpse of recovery and profits, the government sells it at a loss to ensure that profits are collected by its friends in the City.”
Shares in RBS have not traded above the price the government bought them at since 2010 and never once hit the 625p-a-share break-even price calculated by the National Audit Office (NAO) to take into account the cost of finance.
The overnight sale was the second since RBS was part-nationalised and reduces the government’s stake in the bank to 62.4%. Sales of £3bn worth of shares have been pencilled in for the five years from 2018-19.
Back in 2015, the government sold its first tranche of RBS shares at 330p each at a loss of £1.9bn according to the NAO, which concluded that the 2015 sale achieved value for money.
Ross McEwan, the chief executive of RBS, said: “I am pleased that the government has decided the time is now right to restart the share sale process This is an important moment for RBS and an important step in returning the bank to private ownership. It also reflects the progress we have made in building a much simpler, safer bank that is focused on delivering for its customers and its shareholders.”
John Glen, economic secretary to the Treasury, told BBC Radio 4’s Today programme: “I would love it if we could sell the shares at a much higher price – obviously, that is what everyone would like to do – but we need to be realistic and look at the market conditions.”
Neil Wilson of Markets.com said: “RBS has come a long way in recent years. From racking up c£50bn in losses in 10 years due in large part to mega-restructuring charges and impairment charges, the bank has turned a corner.”
Wilson added that the settling of a case brought by the US Department of Justice over the mis-selling of toxic mortgage-backed securities had removed the last big barrier to the sale.
This article was written by Larry Elliott, for theguardian.com on Tuesday 5th June 2018 11.49 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010
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