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Getting Your share of the Banks

March 7, 2011

Today I launched my proposals for the distribution of shares in the state owned banks to the public.  Since the government stepped in to save Royal Bank of Scotland and Lloyds Banking Group in 2008 the Treasury has owned about 118 billion shares in the companies.  They cost us all about £66 billion to acquire and at some point the government will want to recover the money.

When the banks are stable and trading at a full profit (both have just reported operating profits) the Treasury is likely to return them to the private sector.  Everyone is expecting a conventional privatisation or even sales to sovereign wealth funds of other countries.  That would get back the £66 billion but the public would see no future benefit.

My proposal is much more radical.  It would enable the Treasury to recover its debt AND for the public to enjoy the future  growth in value of  the companies.   I propose that the Treasury transfer ownership of  the shares to every UK adult citizen.  That’s roughly the 46 million people aged 18 and over who are eligible to vote.  If people want to sell their shares they would have to give back the acquisition cost (51p per share for RBS, 74p for Lloyds) to the Treasury but any proceeds above that would be theirs to keep.  In the meantime of course they would be entitled to dividend income and votes as shareholders.

I’ve launched these proposals as Co Chair of the Lib Dem Parliamentary Committees on Treasury and Business.   The next step is to have formal discussions with my Coalition government ministerial colleagues.  I’m grateful to Portman Capital for technical advice and for the think tank Centre Forum for publishing the pamphlet.  You can read it here and let me know what you think!

http://www.centreforum.org/assets/pubs/getting-your-share-of-the-banks.pdf

9 Comments leave one →
  1. March 7, 2011 4:01 pm

    and here is BBC Economics and Business guru Robert Peston’s take on what I’ve said:
    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/03/should_we_all_get_a_piece_of_r.html

  2. March 7, 2011 4:05 pm

    It would be a good idea to get an online petition set up to build some momentum behind this proposal. Can Centre Forum or someone at Lib Dem HQ look into this?

  3. March 7, 2011 9:10 pm

    Great stuff Stephen. Democratising the stake the the public has in the banks both sends a powerful message to the City and also allows people to benefit from the recovery (and indeed gives the public a reason to want the banks to return to health again!)

  4. David Gould permalink
    March 7, 2011 9:58 pm

    Ah but Mark, the only message the City understands is one in £. Or $. Don’t bother with € – they’ll just laugh at you.

    People will already benefit from the recovery and, don’t go around telling them this, but that £700bn heading towards £1 trillion debt actually belongs to the public. Though it will reduce UK’s population dramatically.

    I looked up fraud on the electoral register and found this article circa 2007:
    http://www.timesonline.co.uk/tol/news/uk/article1687496.ece

    I don’t remember action being taken on this since then so do we still have roughly 2 million ‘ghosts’ on the electoral register? Would help explain the massive bias towards Labour.😀

    From the PDF
    “This proposal is designed to maximise the likelihood of recouping the entirety of the
    government’s 2008 investment in RBS and Lloyds.”

    Now, why is this even an issue? I’d have thought it more likely that the state/people would make a profit. Just don’t give the job to Gordon Brown.

    Secondly, this proposal is likely to leave the state/people a long way short. No money will be recouped until these special shares are sold (so losing interest). Especially with the gearing, it will become a matter of national debate as to _when to sell them_. It is also likely that ~20% will never be sold – what happens when the shareholder dies?

    Anyway, the only other point to do this is to increase share ownership more widely than privatisation. A laudable objective since hiving off £65+bn of shares off to a co-op isn’t really on the cards.

    Alternative suggestion: sell the shares with a view to maximising return. Delay the Banking Commission report until the week after they’ve all gone. Hopefully, it will include a recommendation to split up the banks or something similar and the share prices will come crashing down on all the new investors.

  5. Michael Paynter permalink
    March 17, 2011 3:51 pm

    This is a great idea, in theory. Distributing ownership of the means of production is classic Marx, or rather his modern-day equivalent Philip Blonde (rather than sadly bastardised version of his vision embodied by “The Big Society”). Rather than ownership of capital by Big State in the name of ordinary citizens, ordinary citizens have hands-on control of their own share.

    I still think that the poor will, sadly, lose out, though. Even if there are penalties for immediately selling up, if you can pay off that red fuel bill now, then you are going to do it. Capital will inexorably end up concentrating, once again, into a small number of rich shareholders. To make it work, you will have to allow Big State to control sales of shares in order to protect people’s best interests and then you’re almost back where you started.

    An aggressive strategy of mutualisation and co-operative ownership would not only increase people’s productivity and improve equality, but would also make Britain more resilient against the vagaries of global finance.

    • Mike Drew permalink
      May 15, 2012 10:28 pm

      Capital is not concentrated in a small number of rich shareholders but in large institutions such as pension funds. The problem is that it is very difficult for the owners to exercise control. A someone who sit on the board of trustees of a medium size pension fund how do we get involved in the 4,000 odd shareholder decisions that come our way each year. Particularly when we obliged to maximise returns. So control falls to the financial advisors.

  6. Dan Course permalink
    June 2, 2011 8:01 am

    It would be interesting if the shares could not be sold for a year and we all had to sit and watch them grow/shrink. It’d be like a national investment we all shared in and talked about. Also it would set people’s mind to saving rather than spending.

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