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George Osborne defends £1bn loss in RBS share sell-off

By Holly Williams

Published 05/08/2015

Chancellor George Osborne
Chancellor George Osborne

Chancellor George Osborne has fired the starting gun on returning Ulster Bank parent company Royal Bank of Scotland into private hands with a £2.1bn share sale, but faced criticism the taxpayer has been left short-changed after making a £1bn loss.

Mr Osborne insisted the move was the "right thing to do for the taxpayer", coming seven years after the Government rescued RBS with a £45.5bn bailout at the height of the financial crisis.

It marks a milestone moment for the banking sector as it puts the crisis behind it, while it also kick-starts the Treasury's plans for a bigger privatisation programme than in the 1980s with aims to raise more than £30bn by the end of next March.

But concerns have been raised over the timing of the Treasury's decision to sell-down its 78% stake in RBS after the taxpayer has been left nursing a £1.08bn loss.

UK Financial Investments (UKFI), the body that holds the Government's RBS stake, said it offloaded 5.4% of RBS at 330p a share overnight - far short of the average 502p price paid at the time of the bailout.

Labour questioned the Government's "rush to begin the sell-off" of RBS shares. Shadow chancellor Chris Leslie said: "Taxpayers who bailed out RBS and who have now lost out will want to know why the Government has sold these shares at a discount and while the bank is still awaiting a US settlement for the mis-selling of subprime mortgages.

"Getting back the taxpayers' money is not an impossible objective and the Chancellor is dismissing this too lightly."

Mr Osborne defended the move, saying RBS needed to be returned to the private sector for the benefit of the economy and to help the bank rebuild itself. He said: "This is an important first step in returning the bank to private ownership, which is the right thing to do for the taxpayer and for British businesses; it will promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy.

"While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands; the right thing to do for the economy and for taxpayers is to start selling off our stake."

He added in a tweet: "RBS bailed out by last gov. This gov is selling it back. Bank of England Governor says selling now is in 'interests of the wider economy'."

The move has reduced the Government's stake in the group from 78.3% to around 72.9% and the £2.1bn raised will be used to pay down Britain's national debt.

A previous report by investment bank Rothschild said that if all of the Government's stake was sold at current prices, the taxpayer would lose around £7bn, although some experts estimate the loss could be as much as £15bn. However, UKFI estimates that the RBS share price will rise as the firm returns to health and more stock is sold to the market.

Michael Hewson, chief market analyst at CMC Markets, said the timing was surprising given that markets are fairly quiet.

Belfast Telegraph

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