Should you & I profit from the banking bailout? How about bankers themselves?
The cost of preventing our banks collapsing has hung like a dead weight on the natonal finances since 2008.
And we’re understandably cross that general austerity is paying for the big bank bailout. With state debt at record highs thanks to the tens of billions of pounds we had to stump up to prevent several banks from failing, there isn’t a UK adult who hasn’t paid more or received less from the state in some way.
But with the UK banking sector on a steady recovery curve, believe it or not there’s now a fair chance of recovering some of that money.
There’s even the intriguing possibility that we might make some profit!
And with that comes a tricky dilemma. How should those profits be shared out?
And should those in the banking industry be among those who benefit?
Who should benefit from a bank shares windfall?
The Exchequer? (i.e. the taxpayer in general?)
The Chancellor, George Osbourne, has announced that he plans to sell off the country’s stakes in RBS and Lloyds Banking Group. Altogether we own 84 per cent of RBS and 43 per cent of Lloyds – stakes the Government spent £65.8 billion to acquire.
So even if those stakes go up just a bit in value, it should be a good money earner for treasury.
He is also planning to sell of the 70 branches Northern Rock, with retail deposits of £16.7 billion and mortgage loans of £12.2 billion. The price tag is expected to be £1billion – which, considering we put £1.4 billion of taxpayer’s money into the bank, is not exactly a glowing return. But ironically the £44 billion worth of ‘bad’ mortgages that the state plans to hold onto should make the exchequer a profit over the next 20 years.
So this banking bailout might in the near future no longer be such a millstone around our neck. A positive result, surely, if it spells the end of the climate of cuts that is perforating the fabric of British life.
But hang on a minute. Would it be right for any profit to go to the Chancellor to use as he pleases?
Not everyone in his own coalition seems to think so…
Or the individual taxpayer? (i.e. you and me?)
You see, the deputy PM, Nick Clegg, thinks publicly owned bank shares should be used to ease the burden on each one of us.
He thinks that giving us shares directly in the banks would be fair compensation for the financial crisis we have have endured so far.
A bold, populist move – but would it work?
Under his plans, every British adult would be handed a sheaf of shares in the two big state-owned banks. We would each receive around 1,450 shares in RBS and 440 in Lloyds, which we would be able to sell or keep as we wished.
However, the value would have to rise by more than 25% before you begin to make a profit. The Government would get the rest in order to break even. Of course, the markets can’t and won’t guarantee growth. But the idea is that, if there is a substantial windfall, we’d all be able to share in the profit.
I’m sure none of us would say no to a bit of unforeseen profit from this sorry saga. But is this really what is best for the country?
First of all should every British citizen get shares or only tax payers? Or should it also be those who pay no tax and receive only benefits.
And how about bankers themselves? Should they get shares, having caused the mess? If we’re going to exclude anyone, how should we go – directors, management, or all employed by the banking industry?
Which plan would you prefer?
Even if the share scheme would work without a hitch, the bigger decision is surely which plan would be best for the country overall.
What would you vote for: a belated banker’s bonus for the whole country, or the opportunity for an individual banker’s bonus for each of us?