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| RBS share sale explainer: why has Osborne started selling the taxpayer's stake at a loss? | RBS share sale explainer: why has Osborne started selling the taxpayer's stake at a loss? |
| (35 minutes later) | |
| Seven years since the UK Government was forced to buy up shares in the Royal Bank of Scotland to stop it from going bust, George Osborne has decided to sell off the shares again, but not everyone is happy about it. | |
| The Labour Government felt it had no choice. RBS had made risky short term investments – including buying another bank, ABN Amro, without proper checks – that did not stand up when the global financial crisis hit in 2008. It reported the biggest loss in UK corporate history of £24.1 billion in 2009. | The Labour Government felt it had no choice. RBS had made risky short term investments – including buying another bank, ABN Amro, without proper checks – that did not stand up when the global financial crisis hit in 2008. It reported the biggest loss in UK corporate history of £24.1 billion in 2009. |
| Fearing the collapse of RBS would spread to other banks, the UK Government supplied cheap funding and bought shares worth £45 billion amounting to a 79 per cent stake in the bank. Sir Philip Hampton, RBS Chairman, later admitted that taxpayers should never have had to rescue RBS. | Fearing the collapse of RBS would spread to other banks, the UK Government supplied cheap funding and bought shares worth £45 billion amounting to a 79 per cent stake in the bank. Sir Philip Hampton, RBS Chairman, later admitted that taxpayers should never have had to rescue RBS. |
| The Government bought shares at a price of just over 500p per share, but after the crisis hit, the share price dropped to historical lows of 90p. It made sense to wait until the share price had recovered before selling the shares again. | The Government bought shares at a price of just over 500p per share, but after the crisis hit, the share price dropped to historical lows of 90p. It made sense to wait until the share price had recovered before selling the shares again. |
| RBS stake sale "an important step," says Osborne. But the bank's share price is dropping. http://t.co/wjZ6SzeoGF pic.twitter.com/A01SEXFJSi | RBS stake sale "an important step," says Osborne. But the bank's share price is dropping. http://t.co/wjZ6SzeoGF pic.twitter.com/A01SEXFJSi |
| The share sale comes 18 months after the restructuring of RBS so that most of its risky assets are held in a 'bad bank', controlled by the government, freeing a 'good bank' to continue lending and other bank business. | The share sale comes 18 months after the restructuring of RBS so that most of its risky assets are held in a 'bad bank', controlled by the government, freeing a 'good bank' to continue lending and other bank business. |
| Not really. RBS shares are still trading 33 per cent lower than the Labour government paid for them, which means selling them now could incur losses of up to £1 billion. | Not really. RBS shares are still trading 33 per cent lower than the Labour government paid for them, which means selling them now could incur losses of up to £1 billion. |
| RBS had to be bailed out urgently, but Osborne doesn't have to sell it off at such speed, risking loses for taxpayer http://t.co/R88mxnFXVK | RBS had to be bailed out urgently, but Osborne doesn't have to sell it off at such speed, risking loses for taxpayer http://t.co/R88mxnFXVK |
| Labour has been particularly critical of the decision to sell the shares now, accusing the Chancellor George Osborne of selling up when the bank is still in the process of restructuring and when it has yet to settle all of its fines for past misconduct. | Labour has been particularly critical of the decision to sell the shares now, accusing the Chancellor George Osborne of selling up when the bank is still in the process of restructuring and when it has yet to settle all of its fines for past misconduct. |
| Many people doubt that RBS will ever be worth what Gordon Brown paid for it. | Many people doubt that RBS will ever be worth what Gordon Brown paid for it. |
| "It’s now abundantly clear that the Chancellor can't meet his promise to get the taxpayer’s money back by privatising RBS," says Christine Berry of the New Economics Foundation, of our current Chancellor George Osborne. Even Osborne has made an about-turn since the election, deciding that the time is now. | "It’s now abundantly clear that the Chancellor can't meet his promise to get the taxpayer’s money back by privatising RBS," says Christine Berry of the New Economics Foundation, of our current Chancellor George Osborne. Even Osborne has made an about-turn since the election, deciding that the time is now. |
| But the Bank of England-backed decision signals the start of a return to the status quo – where the taypayer does not own any significant shares in high street banks. | But the Bank of England-backed decision signals the start of a return to the status quo – where the taypayer does not own any significant shares in high street banks. |