It’s easy to accuse George Osborne of planning to sell off the Government’s stake in RBS ‘to his friends in the City’ on the cheap. Even if the bank’s share price remains stable throughout the process, the taxpayer is set to make a loss of around £7.2bn after bailing it out for £45bn in 2008.
But the chancellor’s plans do hold some water. First of all it's unlikely that the bank’s share price is likely to return to the level the Government paid for it anytime soon. Since 2008 it’s been hit by multitudes of fines and reputational disasters and been heavily restructured - and its P+L’s have been less than inspiring. RBS isn't the business it once was.
As Osborne said himself during his Mansion House speech last night, ‘I was not responsible for the bailout of RBS or the price paid then for shares bought by the taxpayer: but I am responsible for getting the best deal now for the taxpayer and doing whatever I can to support the British economy.’
What's more the overall bailout programme looks set to generate a profit. Rothschild analysis commissioned by the Government found that while it will make a loss on RBS, its more successful sell-off of Lloyds shares will mean it could turn an overall profit of £14bn. Talk of a sale will ring hollow with former RBS boss Stephen Hester who, had he been allowed to continue at the helm, would have probably left the taxpayer facing a better return by now.
But even if the taxpayer is never going to break even on the RBS bailout, is now the best time to get rid? The argument goes that the bank has begun the work of turning itself around and would now benefit from being liberated from the oppressive shackles of the Government. Investors seem to agree – RBS’s share price was up 1.7% this morning to 360.9p, despite the prospect of a flood of shares hitting the market.
But all of that’s not to say Osborne’s actions aren’t politically motivated. Though he may have the backing of the nominally non-partisan Bank of England governor Mark Carney, the sale of RBS is also about advancing the Government's agenda.
It’s no coincidence that this news comes so soon after Osborne confirmed he would be selling off the remaining taxpayer stake in Royal Mail. Both sell-offs will eradicate some of the Government’s debt pile, helping Osborne claim responsibility for fiscal prudence. Ditching RBS will also disentangle the Government from embarrassing controversies over the bank’s conduct and dizzying executive pay.
Critics will see the sell-off as a wasted opportunity. Some had called for the Government to use its stake to influence the way the whole banking sector operates, rather than rushing into a sale. But if we accept the premise that RBS needs to return to private hands in the not-too-distant future, then now seems a good a time as any.