Investing
Taxpayers to pocket £1.5k of shares under plans to sell off Govt stake in RBS and Lloyds
Every UK taxpayer could receive over £1,500 worth of RBS and Lloyds shares under a new plan to privatise the state-owned banks.
The proposal, devised by the think tank Policy Exchange, would see 70% of the Government’s £48bn of shares in the two banks end up in taxpayer hands.
British residents over the age of 18, who have a National Insurance number and are registered on the electoral roll, would be able to apply for a share worth as much as £1,650
Under the proposal, 50-55% of shares in RBS and 30% of shares in Lloyds would be distributed to taxpayers who would be able to apply for them at no initial cost.
The report said there would be no downside for the taxpayer.
A floor price would be established when shares are sold and taxpayers would be entitled to the profits from any rise above this floor price.
If the share price never exceeded the floor price, the shares would be returned to Government ownership after 10 years.
At the same time as the mass distribution to the taxpayer, 25% of RBS shares and the remaining Lloyds shares would be sold to institutional and retail investors with the Treasury pocketing £17-18bn.
Author of the report, James Barty, the former head of global equity strategy at Deutsche Bank, said: “Any privatisation has to be done in a way that will strengthen the banks and allow them to compete on a fully commercial basis when back in private hands. In our view that means finding a solution that moves the banks quickly from the public to the private sector, while at the same time generating a stable share price and an opportunity for the banks to raise capital. It is also key that the taxpayer still benefits from any further rise in the share price.
“A distribution to taxpayers with the government to be repaid on sale, combined with an institutional and retail placing, is the only option that allows almost all the Government’s stake in the banks to be sold ahead of a 2015 election. It also offers the most stable share price as distributed shares would not be sold below the price to be repaid to the Government.
“This proposal will create a whole new generation of shareholders. We urge the Chancellor to take on the doubters and move ahead with this scheme.”
