Nick Macpherson, who helped bail out RBS as Gordon Brown’s top Treasury official during the financial crisis a decade ago, said current Labour party plans for the bank made him worried, while warning nationalisation was “corrosive” for banks and taxpayers.
“It won’t end well,” he said of a Labour policy suggestion that would mandate RBS to lend to small businesses using government funds. “If you want to implement socialism, I don’t think nationalisation is necessarily the best way to do it.
“There may well be a case in things like the railways, but steer clear of the banks.”
The warning from one of the most senior Whitehall officials under three successive prime ministers comes a decade after the collapse of Lehman Brothers, which triggered the global financial crisis and the use of billions of pounds of taxpayer money to prevent British banks following their Wall Street counterpart into oblivion.
The Labour government of the day stepped in to prevent bank failures in Britain, bailing out RBS, Lloyds and other financial institutions to prevent the last recession turning into another great depression akin to the one that followed the Wall Street crash of 1929.
At the height of the crash about £955bn of state support and guarantees were needed to keep the UK banking industry afloat, according to the National Audit Office. About £45.5bn of RBS shares were bought. But while share sales have begun, the bank remains majority owned by the state.
Howard Davies, the RBS chairman, spoke alongside Macpherson at the event in London to mark the 10th anniversary of Lehman’s collapse, using his lecture to warn taxpayers they were “very unlikely” to see all of their money recovered from the bailout.
“The bank was rescued to save the UK financial system from collapse, not as a financial investment,” he said.
He called Labour’s manifesto pledge to break up RBS into regional units a “genuinely alarming idea” that would be both expensive and difficult to achieve, while suggesting it may never happen because the current Conservative government has plans to keep selling the taxpayers’ stake.
Philip Hammond, the chancellor, has earmarked the sale of £3bn of RBS shares in each financial year until 2023 as part of Tory spending plans, though he faces sharp criticism for losses on the bailout incurred by taxpayers, including from John McDonnell, the shadow chancellor.
The idea of using RBS to direct investment in the UK economy was made in a report by the economist Graham Turner earlier this year that had been commissioned by McDonnell. Under the plans, RBS would undertake the lending activities of the new national investment bank Labour would establish should it come to power.
Establishing a national investment bank was one of the key recommendations of the Institute for Public Policy Research’s commission on economic justice, which includes the Archbishop of Canterbury, Justin Welby, senior business leaders and economists.
A Labour source said: “Labour’s model of public ownership and plans for reform of the banking sector will deliver the stability and reliability our public service and economy so desperately needs.”
This article was written by Richard Partington, for theguardian.com on Wednesday 12th September 2018 17.39 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010
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