Money News

Brits could share in a bank sell-off bonanza

By Martin Fagan - news@consumerchoices.co.uk

The government’s stake in RBS and Lloyds TSB should be given to taxpayers who paid for the bail-out, says Nick Clegg.

A plan to distribute the government’s stake in RBS and Lloyds TSB to 46 million Brits has been proposed by deputy Prime Minister, Nick Clegg.

The government has an 84% stake in RBS, for which it paid £45.5billion when it bailed out the bank, and a 43% stake in Lloyds Banking Group, for which it paid £20.3billion of taxpayers’ money.

Under the proposal - which has yet to be approved by the Treasury - each qualifying Brit would be given 1,450 shares in RBS and 450 shares in Lloyds. As RBS shares currently trade at 38.6p and Lloyds share price is 47.3p, this would make each individual stake worth £770.

However, as the Treasury paid 52p per share for RBS in the bailout and paid 74p per share for Lloyds Banking Group, it is sitting on considerable paper losses.

Speaking on a trip to Brazil, Liberal Democrat leader Clegg said: "Psychologically it is immensely important the British people feel they have not just been overlooked and ignored.

“Their money has been used to the tune of billions to keep the British banking system on a life-support machine and they have absolutely no say at all in what happens when normality is restored.”

If the plan does go ahead, the Treasury will set a “floor” price which has to be achieved before the shares can be sold. It is likely the “floor” will be the price the government paid for the shares when the bail-out money was injected.

Individuals would only be able to sell the shares once the price is higher than the “floor” and keep any gains made above that floor price with the rest being reclaimed by the government.

For example, if each Brit received a combination of shares worth £770 and the “floor” was set at £1,000, if the share prices rose and a stakeholder decided to sell at £1,500, the individual would receive the £500 profit and the government would reclaim the £1,000.

According to a report by the think-tank Centre for Policy Studies (CPS), if shares were given to all UK nationals over 16 years of age, there would be around 46 million individuals involved.

Distributing the shares to 46 million individuals also removes the government’s major headache that selling its stakes in the bailed-out banks in one chunk would distort the markets, since recipients of the shares would probably sell their stakes at different times.