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Should you & I profit from the banking bailout? How about bankers themselves?

Jul 13, 2011

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?

9 Responses to “Should you & I profit from the banking bailout? How about bankers themselves?”

  1. John Benfield Says:
    Jul 13, 2011 at 4:03 pm

    I for one am not daft enough to believe that the public will see a brass farthing from the sell off. Osbourne will use the money to fund overseas bail outs. The British public are taken for suckers all the time. There is more chance of hell freezing over than Osbourne handing back to us the what it cost to bail out the greedy fat cats of the banking industry.

  2. Mark Says:
    Jul 14, 2011 at 11:34 am

    Don’t you trust Nick Clegg to see it through? ;)

  3. Lou Garçon Says:
    Jul 15, 2011 at 9:59 am

    Surely, an alternative might be to create a new national bank from the Northern Rock branches (plus others – Maybe?)
    These could be folded into the Post Office somehow thus creating a truly National Bank for the people, where they could offer fair rates to mortgagees, and realistic deals for 1st time buyers – particularly aimed at supporting local councils and giving them something solid to offer their residents and make money for us – the Public, saving us a percentage of taxes…?

  4. Gareth Says:
    Jul 15, 2011 at 2:06 pm

    “We” did not pay for the banks that the UK now part-owns; they were paid for by increasing the national debt. If and when the UK share in those banks is sold the debt will reduce by the value of the selling price but the resulting debt will still be massive. There is no spare cash to bribe the electorate with. If everyone is given shares, that just means that we will keep a higher national debt than we need and pay more interest than we need by spending less on services than we want. It also means that the millions of tiny shareholdings without any effective vote will dilute shareholder power over the bankers’ future behaviour. Isn’t that all blindingly self-evident?

  5. Noel Russouw Says:
    Jul 20, 2011 at 11:32 am

    This whole system needs scrapping, and start the books from fresh again………….. stop bailing out the banks let them go bust…….. stop aiding foreign well fare and start looking at the problems this country has to deal with, unemployment, raising fuel costs, poverty and the list just goes on !!!!!!

    I have lost complete faith in both Cons and Lab…… no-one will get this right, it’s just gonna get worst….

  6. louise Says:
    Jul 20, 2011 at 3:54 pm

    i dont think any of us will benifit from any of. the rich get richer and the poor get poorer. all our money goes out of the country to help others and then houses all those from struggling countrys here. wotever happens the average citizen wont benefit. we never do. and voting is a waste of time. you can voice your opinion as many times as you want but you will never be heard thats why britain is slowly dying. there killing it

  7. John Evans Says:
    Jul 21, 2011 at 4:44 pm

    Successive Governments have ruined this country over the past 40 years – none of them is innocent in this. If I were 30-35 years younger I would be buying a one-way ticket to Canada – a country that values and shares our way of life and our outlooks. I fear for my children and grand-children. Government must see that the British people are sick of bailing out foreign lands and sacrificing the future of our own people.

  8. MICHAEL DEACON Says:
    Jul 21, 2011 at 8:24 pm

    This as well as other past governments hold the majority tax payers the working class as the bread winners to feed the rich, they don’t listen, I think they will push and push until we have riots like Greece and other countries where the governments have taken the population as cash cows to feed there greed.!!!!

  9. Mark Says:
    Jul 27, 2011 at 2:28 pm

    @Gareth: ” If everyone is given shares, that just means that we will keep a higher national debt than we need”

    Almost… The idea is that the Treasury gets back its capital, and by giving us each a share of the profits, that we’ll get spending again – to lead our shopping and services driven economy back towards an upturn.

    Of course this only works if we do spend, and spend it here rather than on a foreign holiday.

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