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Lib Dem urges RBS and Lloyds shares giveaway | Lib Dem urges RBS and Lloyds shares giveaway |
(about 7 hours later) | |
By Andrew Bryson Business reporter | By Andrew Bryson Business reporter |
Senior Liberal Democrats want the government to give away billions of pounds of its shares in Royal Bank of Scotland and Lloyds Banking Group to the general public. | Senior Liberal Democrats want the government to give away billions of pounds of its shares in Royal Bank of Scotland and Lloyds Banking Group to the general public. |
The radical idea would see most of its stake in the banks shared between 46 million adults on the electoral roll. | The radical idea would see most of its stake in the banks shared between 46 million adults on the electoral roll. |
A floor would be set so the shares could not be sold until they had passed the price paid by the government. | A floor would be set so the shares could not be sold until they had passed the price paid by the government. |
Individuals would only keep any gains made above that floor price. | Individuals would only keep any gains made above that floor price. |
The government spent £65.8bn buying shares in the banking giants. | The government spent £65.8bn buying shares in the banking giants. |
It owns 83% of RBS and 41% of Lloyds. | |
The idea is set out by Stephen Williams, Liberal Democrat MP for Bristol West, in a pamphlet for the think tank Centre Forum. | The idea is set out by Stephen Williams, Liberal Democrat MP for Bristol West, in a pamphlet for the think tank Centre Forum. |
He said: "There is danger that when the banks return to the private sector, it is business as usual. There is a general feeling in this country that we need to get something positive in return for the bailout. | He said: "There is danger that when the banks return to the private sector, it is business as usual. There is a general feeling in this country that we need to get something positive in return for the bailout. |
"This plan would recoup the public's investment and allow the taxpayer to get the benefit from any increased value in the banks." | "This plan would recoup the public's investment and allow the taxpayer to get the benefit from any increased value in the banks." |
Under the proposal, shares would be deposited in individual trading accounts. | Under the proposal, shares would be deposited in individual trading accounts. |
Popular appeal | |
At current prices, every adult would receive shares worth just under £1,000. | |
Each account would be set up with a default option to sell the shares over two or three years, although individuals could opt to hold the shares for longer. | Each account would be set up with a default option to sell the shares over two or three years, although individuals could opt to hold the shares for longer. |
The idea may have popular appeal - but it was not conceived by politicians. | The idea may have popular appeal - but it was not conceived by politicians. |
The city firm Portman Capital devised the model for the Liberal Democrats as a way round some of the problems the government could face in a traditional share sale. | The city firm Portman Capital devised the model for the Liberal Democrats as a way round some of the problems the government could face in a traditional share sale. |
Privatisations in the 1980s saw shares offered at a big discount. | Privatisations in the 1980s saw shares offered at a big discount. |
That tempted institutional investors to buy in, but led to criticism the government was "selling the family silver" off too cheaply. | That tempted institutional investors to buy in, but led to criticism the government was "selling the family silver" off too cheaply. |
In 2008 and 2009 the government injected approximately £45.5bn into RBS by buying shares, and £20.3bn into Halifax Bank of Scotland, which was taken over by Lloyds. | |
Stagger | Stagger |
UK Financial Investments, which manages the public's stakes in the banks, is currently expected to sell them through conventional means. | UK Financial Investments, which manages the public's stakes in the banks, is currently expected to sell them through conventional means. |
That is likely to include placing the shares with pension funds and sovereign wealth funds, as well as offering them to retail investors. | That is likely to include placing the shares with pension funds and sovereign wealth funds, as well as offering them to retail investors. |
UKFI is likely to have to stagger the sale of the shares over a number of years in order to get the best price so that the market has time to absorb the huge amount of shares on offer. | UKFI is likely to have to stagger the sale of the shares over a number of years in order to get the best price so that the market has time to absorb the huge amount of shares on offer. |
The shares are currently trading a few pence below the government's "break even price" of 51p for RBS shares, and 74p for Lloyds. | The shares are currently trading a few pence below the government's "break even price" of 51p for RBS shares, and 74p for Lloyds. |
Toby Fenwick from Portman Capital says the shares suffer from an "overhang" - a situation where the market knows a lot of shares are likely to be sold and consequently depresses the share price. | Toby Fenwick from Portman Capital says the shares suffer from an "overhang" - a situation where the market knows a lot of shares are likely to be sold and consequently depresses the share price. |
"Under the current scenario there is one seller with a very big stake to unload and the market knows its break-even price," he said. | "Under the current scenario there is one seller with a very big stake to unload and the market knows its break-even price," he said. |
"A share distribution would create a new scenario with tens of millions of sellers each with a small stake and no incentive to sell below the 'floor'." | "A share distribution would create a new scenario with tens of millions of sellers each with a small stake and no incentive to sell below the 'floor'." |
The idea is backed by Mr Williams and Lord Dick Newby, the Liberal Democrats' Treasury spokesman in the House of Lords. | The idea is backed by Mr Williams and Lord Dick Newby, the Liberal Democrats' Treasury spokesman in the House of Lords. |
It is not official Liberal Democrat policy, although the party's ministers are understood to be sympathetic to exploring whether the idea would work. | It is not official Liberal Democrat policy, although the party's ministers are understood to be sympathetic to exploring whether the idea would work. |
A source close to Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury said: "No decision has been taken about how or when this issue is going to be dealt with. But this is a welcome contribution to the debate." | A source close to Danny Alexander, the Liberal Democrat Chief Secretary to the Treasury said: "No decision has been taken about how or when this issue is going to be dealt with. But this is a welcome contribution to the debate." |