In his annual Mansion House speech last night, Osborne said that a “decision point” has been reached, signalling an initial sale of shares in the bank in the coming months.
“The longer we wait, the higher the price the whole economy will pay,” Osborne said, citing Bank of England governor Mark Carney’s comments that a sale would promote financial stability and a more competitive banking sector.
The Chancellor said his decision is also backed by Nathaniel Rothschild, commissioned by the Treasury to review a potential sell-off of the bank.
Rothschild’s review said an initial “small disposal” of shares would benefit all parties and improve the “marketability” of the government’s remaining holding.
“Sending a strong signal that RBS is on the road to normality may also bring further benefits to the bank and to the government as a shareholder,” the review said.
Carney, in correspondence with Osborne published yesterday evening, said it is “in the public interest for the government to begin to return RBS to private ownership”.
Several annual losses
RBS has suffered seven consecutive annual losses and Q1 2015 results suggest another year in the red.
The government’s stake in the bank is currently valued at £32bn, well below the £45bn injected into by Gordon Brown’s Labour government at the height of the financial crisis in 2008.
Rothschild’s report suggested fees paid by the bank to the Treasury since 2008 would reduce the loss to £7.2bn at current prices. The profit made on the Treasury’s reduction in its Lloyds Banking Group stake would also offset the taxpayer’s losses on RBS.
But critics argue other factors, such as the cost of capital involved in holding a £45bn stake over five years, should also be taken into account.
Osborne’s Mansion House speech also revealed a further £500m Lloyds stake sale, which lowers the Treasury’s holding below 18%, and a halving of the government’s 30% position in Royal Mail. The latter sale was completed this morning.
He remained tight-lipped over the future of the government’s bank levy, however, despite reports that the levy could be restructured.
The Chancellor also confirmed plans for a new “fiscal framework”, enshrining into law a commitment for governments to run budget surpluses “in normal times” in order to help reduce the national debt.
