Selling bank shares

The government has announced it is going to sell more Lloyds Bank shares, and start selling RBS shares. That is a good idea. The Labour government was wrong to buy the shares in the first place, as we discussed at the time. They should have found other cheaper ways of supporting what had to be supported in the banking sector, by loans against security with controlled administration for banks that could not meet their obligations. The state should not be an owner of banks, as it has to be their regulator and financier of last resort.

I see in recent press coverage the issue of the Bank levy is being discussed. One of the factors the government should take into account when setting the levy is the impact it has on the value of the taxpayer shareholdings in banks. If you tax yourself too much, you lose out on the capital value of what you own when you come to sell.

Lloyds and RBS each pay around £250 million a year in bank levy, a total of £500 million. Barclays shares currently sell at 14 times adjusted net profits or earnings. Lloyds and RBS are still recovering their earnings, so their multiple of past profits is far higher. If we take say 12 times profits as an approximation of what the market would pay for additional profits of a bank, allowing a discount for the two banks with large government share overhangs, gives us a capital cost of £6 billion in the total value of the two banks from continuing with the Bank levy. The actual loss will be smaller, as the government does not own 100% of either bank,though it still owns most of RBS. That of course is a one off loss, whilst the levy is annual. The bank levy is also paid by banks where the government does not have a shareholding.

Nonetheless, it does pose a question for the government. If you were thinking of reducing the bank levy for other reasons anyway, there would be some compensation in a higher receipt for bank shares being sold.

(PS I do not have any financial interests in banks and last worked for a merchant bank 26 years ago)

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

82 Comments

  1. Richard1
    Posted June 8, 2015 at 6:07 am | Permalink

    They should be sold in a way to maximise taxpayer value. The process should not have silly class war type restrictions such as those Vince Cable imposed on the IPO of Royal Mail. The main thing we should note is what a foolish and unnecessary idea it was of Gordon Brown and the Labour govt to buy these bank shares in the first place. In the discussion of MPs pay I heard Andrew bridgen MP make the excellent point that labour MPs are particularly expensive because they bankrupt the country every time they get into office.

    • stred
      Posted June 8, 2015 at 12:37 pm | Permalink

      The banker, when interviewed by the HoC committee over the sale of the Post Office at a price much below the opening market value, said that to sell to ‘Sids’ would not result in the sort of ownership they thought best. (or something similar) They sold to their counterparts in the city, who made a large initial profit. Now it is reported that the next part will be sold to institutional investors. The sale of RBS and Lloyds will no doubt be handled by banks too. Why is it not possible to do the same as the first privatisations and sell to anyone on an open market, based on the existing share price? Perhaps it is just too complicated, like allowing inflation on CGT.

      • Richard1
        Posted June 9, 2015 at 9:38 pm | Permalink

        In his desire to promulgate class war Mr Cable excluded rich Sids from Royal Mail and limited small Sids to meaningless investment. This probably dampened demand and certainly gave the upper hand in price setting discussions to institutions. Book building can work well – but only when there is real competitive tension.

    • Lifelogic
      Posted June 8, 2015 at 4:48 pm | Permalink

      John Major and the Tories did just the same, by taking us into the predictable disaster of the ERM (as chancellor) then staying in as long as he could (wasting billions and destroying homes/lives and countless businesses) as Prime Minister. Not even an apology from the pathetic (if it is not hurting it is not working & interest will have to go up if we leave the ERM) man. Ted Heath was complete a disaster too.

      Alas Cameron seems to be following in both their foot steps.

    • Jerry
      Posted June 8, 2015 at 5:32 pm | Permalink

      @Richard1; “The process should not have silly class war type restrictions such as those Vince Cable imposed on the IPO of Royal Mail.”

      What was so silly?

      “I heard Andrew bridgen MP make the excellent point [about the Labour party]”

      Indeed, an excellent party political point, not entirely correct, that totally ignores the context of then world economic and political events, never mind inherited domestic events.

      • Richard1
        Posted June 9, 2015 at 9:42 pm | Permalink

        See above re the Royal Mail.

        OECD data confirm the UK went into the financial crisis with the highest structural deficit of any developed nation except for Greece and Hungary. The global financial crisis was the fault of many actors – including the Labour govt. Labours bank bailout was a foolish and unnecessary measure and it is widely acknowledged this would not happen in any future crisis. I’d say it would be worth paying Labour MPs £1m pa each to agree never to accept office.

        • Jerry
          Posted June 10, 2015 at 7:53 am | Permalink

          @Richard1; As I said, wonderful party political point scoring, and of course no blame lies with previous Tory governments, without whose policies (along with the ‘Reaganomics’ in the USA) it is doubtful that the financial market would been able to become “to big to fail”.

          • Edward2
            Posted June 11, 2015 at 7:38 am | Permalink

            It was spendthrift President Clinton and his “mortgages for all” in the USA who like “save the world” Brown was the politician behind the crisis.
            Too big to fail was a Brown propaganda meme to force through his hugely expensive disaster of rapid nationalisation.
            Even revisionist Labour leadership candidates are now accepting they overspent at the wrong point of the economic cycle leaving the UK in the weakest position when the crisis hit.
            But some still try to blame even Reagan and Thatcher
            I’m surprised they dont try to go back further and blame Macmillan and Churchill

          • Jerry
            Posted June 12, 2015 at 5:45 am | Permalink

            @Edwaerd2; Never heard of the 1980s and the financial markets “Big Bang”…

            But you’re so right, Clinton’s policy was silly, so why didn’t Bush Jnr. in his eight years in the White House do something to halt the problems in their tracks before they got out of control?

            As for Macmillan and Churchill, yes Ed, you would blame them if it meant protecting Reagan and Thatcher, latter two must be the only two politicos who never placed a foot wrong economically it would seem!

          • Edward2
            Posted June 12, 2015 at 8:47 am | Permalink

            The post by richard1 is correct.
            It is not a party political post, just raw facts.
            The OECD have said the Labour Govt came into the financial crisis running the biggest deficit of any major economy.
            It was a major weakness in our ability to weather the crisis.
            The point I was trying to make mentioning Churchill etc Jerry, was to get you to consider just how far will you go back in history to apportion blame to avoid the obvious one due to your own political bias?

    • yosarion
      Posted June 8, 2015 at 9:49 pm | Permalink

      Lloyds chairman was strongarmed into buying the Scottish Ponzzi banks by a Scotsman called Brown, I now see TSB is now back in Scotland as a consequence.

      • Richard1
        Posted June 9, 2015 at 9:43 pm | Permalink

        Yes the charge sheet against Mr brown in the history books will be very long indeed.

  2. Lifelogic
    Posted June 8, 2015 at 6:22 am | Permalink

    The way the banks were rescued by “save the World/no return to boom and bust” Gordon Brown was totally incompetent. They should not have been purchased at all as you say.

    The main problem with the UK banks is a total lack of competition in the market. To many barriers to entry they get away with murder. How can they get away with paying .0025% interest for unsecured deposits, yet charging perhaps base plus 3% up to 30% for loans and overdrafts. Many of which are secured and made to borrowers who are a far better credit rating than the banks. They are now very slow and inefficient too. Get some more competition stop regulating them in totally the wrong ways and concentrate on what matters their financial stability and some real competition.

    Do you think HSBC will go JR? I would have thought it is in the clear interest of their shareholders.

    I understand that some banks were even taking bank notes back into their cashpoints (if the customer did not take it it in time) but then not returning it to the customer’s account. (Shouldn’t this be investigated? ed).

    • Lifelogic
      Posted June 8, 2015 at 6:33 am | Permalink

      Why for example do the banks pay far less interest on company deposits than on personal deposits. What difference does it make to them money is money. It clearly shows a dysfunction market and lack of fair competition, why does the government not sort it out?

      Why do they charge far more for lending against commercial property security than residential property security. Even when the risk on the former is lower. This seems to be due to the slotting regulations which seem to be very poorly designed.

      • Hope
        Posted June 8, 2015 at 7:32 am | Permalink

        If UK banks had to be sold off/reduced in size because of EU directive for national bail outs, what happened in the case of the IMF saving the Euro and bailing out French/German banks via Greece?

        Cameron already making his threats to his ministers, no purdah, bias question. Do you still trust him?

        I note Jnnker and Tusk at the G7 table. What country do they represent? If they represent the EU superstate because of Lisbon Treaty then why was Cameron, Merkel Holland there? If the EU is sovereign, as our Defence Secretary Hammond made clear yesterday, over the countries Over our country then it will have to conform to their instructions. Why do the puppets show up, to con the public? Time for Cameron and other politicos to stand down from office if they do want to govern our country.

        • Denis Cooper
          Posted June 8, 2015 at 9:02 am | Permalink

          If Hammond said that the EU is sovereign then he was wrong.

          Actually I would like Cameron to go further and make it clear now that all members of the government, down the lowest levels, will be expected to sign up to whatever he may agree after the “long, hard negotiations” and then vigorously campaign to keep us in the EU with the “big and significant improvements on the previous terms” which will give “Britain a New Deal in Europe”. No skulking in the background, no excuses about painful wisdom teeth, either get out there and help bamboozle the voters or get out of the team.

          • Hope
            Posted June 8, 2015 at 10:54 am | Permalink

            Read Hannan in the DT. He clearly thinks Cameron will achieve nothing and be successful. Once more, to the surprise of his EU comrades who thought they might have to give something up!

            Obama is not a friend of the UK, as we saw in the events over BP, an ally may be, but nothing more.

          • acorn
            Posted June 8, 2015 at 4:15 pm | Permalink

            Denis, you know there are 109 statutory “ministers”. I think the last government had about 131, so-called, ministers, and about 43 PPS as well!

          • Denis Cooper
            Posted June 9, 2015 at 7:35 am | Permalink

            What, Daniel Hannan’s article with this headline?

            “David Cameron has confirmed that he will do anything to keep us in the EU”

            Cameron hasn’t actually “confirmed” that, the sub-editor at work misleading readers again, but it’s been obvious for a long time that this is the case.

            As I’ve said before, the US government is very much in favour of European integration, for both good and bad reasons, but our government does not have to do what Obama or any other US President says.

        • Mitchel
          Posted June 8, 2015 at 9:53 am | Permalink

          When Cameron is not parading his Europhile credentials, he’s enthusiastically binding us to the Wolfowitz doctrine.Truly the wretched man is everyone’s creature but our own.

          The timing of the renewed fighting in Ukraine is interesting-just in time for this G7 and ahead of the decision whether to renew EU sanctions on Russia at the end of the month.Cui bono?

    • Jerry
      Posted June 8, 2015 at 5:42 pm | Permalink

      @LL; “How can [banks] get away with paying .0025% interest for unsecured deposits, yet charging perhaps base plus 3% up to 30% for loans and overdrafts.

      It’s called paying/charging the “Market rate”, just like Landlords get away with charging the “Market rate”. Capitalism, don’t we just love it when it works for us, but hate it to the hilts when it works against our own personal interests…. Ho-Hum!

      • Edward2
        Posted June 9, 2015 at 2:35 pm | Permalink

        How many banks make up the market they are in, compared to the huge number of landlords in their market?
        Not a very good comparison Jerry.

        • Jerry
          Posted June 10, 2015 at 7:57 am | Permalink

          @Edward2; Of course it ids a good comparison, you just do not like it ‘cos is busts your market forced arguments!

          • Edward2
            Posted June 11, 2015 at 7:42 am | Permalink

            Its raw facts Jerry.
            A cartel of a dozen or so banks control a one market.
            Versus a few hundred thousand landlords and housing associations and local authorities in another.

            ps I dont understand what a “market forced argument” is

          • Jerry
            Posted June 12, 2015 at 5:59 am | Permalink

            @Edwards2; “Its raw facts Jerry.”

            Indeed it is Ed, something you are lacking it would seem.

            “A cartel of a dozen or so banks control a one market.
            Versus a few hundred thousand landlords and housing associations and local authorities in another.”

            But is not few hundred thousand landlords and housing associations, it’s a few hundred at most as private landlords tend to go through letting agencies – Largely unregulated, in comparison to banks. So both banks and landlords use market forces, after all the rental fees in Mayfair are not the same as in Deptford are they?!

            “ps I dont understand what a “market forced argument” is”

            You don’t understand a simple “typo”, were are the “S” and “D” keys on your keyboard then? Do stop arguing for the sake of it Edward!

          • Edward2
            Posted June 12, 2015 at 8:57 am | Permalink

            I would not have asked if I had realised it was a typing error but I did not realise so I did ask.

            You are wrong about the number of landlords. A simple internet search shows various unbiased sources saying over 1.5 million individuals.
            Too many small players for a cartel.

            You say rents are different in Mayfair to Depford.
            However bank choices and their charges are the same.

  3. Graspingatstraws
    Posted June 8, 2015 at 6:27 am | Permalink

    Every single intervention or regulation by government is a total disaster. What we have now are a few too big to fail banks that run the economy, dictate state policy and rig markets at will. No politician has the intelligence or power to control them.
    New more efficient and honest banks have to run the gauntlet of massive regulatory barriers designed to limit competition.
    If there was the will to improve the situation we would do away with all the regulation, end the state as a lender of last resort, remove all guarantees and replace all of it with one requirement. Every single financial organization should have to put a huge sign saying “Buyer beware” above it’s doors.
    Make the banks have to persuade their customers that they are competent and honest enough to be in charge of other peoples money. If they gamble on some stock market or other scam and lose let them go bankrupt. If they steal someones money send the police to arrest them not the Bank of England with wads of cash.
    The free market would very, very quickly dispose of the corrupt and stupid (i.e all of the big banks) and we would go back to an economy undistorted by government and it’s ridiculous and ineffective laws.
    None of this will happen, of course, because banks and government depend on each other to feather their mutual nests.

    • Lifelogic
      Posted June 8, 2015 at 7:40 am | Permalink

      “None of this will happen, of course, because banks and government depend on each other to feather their mutual nests.”

      You are surely right here. A similar thing keep all the greencrap going, the HS2 and much other nonsense.

      • Hope
        Posted June 8, 2015 at 10:58 am | Permalink

        The best regulation is making a banks’ director(s) responsible for its actions. Once there is personal liability it focuses the mind. The same for government ministers with no get out clauses. Make them truly accountable for their actions.

        Cameron seems keen to clear up corruption let him use his disinfectant at Westminster before considering other bodies. He could then look at DiFED and drastically cut the woeful overseas scam for fat cat consultants, corrupt regimes and dictators.

        • Bob
          Posted June 8, 2015 at 12:06 pm | Permalink

          @Hope

          ” …drastically cut the woeful overseas aid scam for fat cat consultants, corrupt regimes and dictators”

          A couple of quotes from David Blair’s article in the Telegraph 16th Jan:

          “Once you subordinate everything to hitting a spending target, you turn the rules of rational management on their head”


          “In November and December 2013, it [DfID] suddenly gave £1.7 billion to multilateral organisations. In particular, Britain gave £415 million to the Global Fund to fight Aids, TB and malaria.
          There’s nothing wrong with this, of course. In the end, the cash wasn’t wasted. But it’s never a good idea to make spending money a target in itself. And if Dfid’s role is increasingly going to be writing cheques for international organisations, then does it really need a staff of 2,700?”


          Couldn’t have put it better myself.

        • acorn
          Posted June 8, 2015 at 4:45 pm | Permalink

          Have you noticed that the US Department of Justice is going flat out, with the US FBI, to hammer the FIFA bandits world wide!

          Strangely, it hasn’t had the same enthusiasm to go after the fraudsters in the US investment banking empire. The individuals whose greed originated the Great Financial Crash of 2008.

          Why do you think that might be???

        • Michael Walzer
          Posted June 8, 2015 at 4:49 pm | Permalink

          Please let me know what I have to do to make a bank’s director responsible for their actions. As a shareholder via a pension scheme, I can do, right now, nothing. As a direct shareholder via an investment platform, nothing either.

          Maybe if the government were putting pressure on the banks (one can dream), something could happen. Unfortunately I do not expect MPs to play any real direct pressure on bank directors. Moreover the balance between the power of MPs and that of the government(s) has been so skewed towards the government over the last 30 years, I am afraid the MPs will even not attempt anything.

          Over the last few weeks, on this blog a lot of contributors have been talking, some rather loudly, about “democracy”, Magna Carta, … usually in the context of the EU. Fair enough, but is there anyone here interested in the continuing weakening of Parliament, and the government becoming less and less collegial.

    • Jerry
      Posted June 8, 2015 at 5:54 pm | Permalink

      @Graspingatstraws; “Every single intervention or regulation by government is a total disaster. What we have now are a few too big to fail banks that run the economy, dictate state policy [etc.]”

      Indeed but I’m not sure what you mean by “now”, the problems you cite have been around for years, even since the carpetbaggers were able to move against the building societies with the intent of demutualising them and bagging the profit gained.

  4. Ian wragg
    Posted June 8, 2015 at 6:51 am | Permalink

    Whatever happens we the taxpayer are going to stand a colossal loss. The financially
    incompetent liebor government should have let them sink and just compensate domestic savers. Why profit should be private but losses nationalised I will never understand.
    I see Dave is true to form getting Obama to speak for the Stalinist EU, cancelling the purdah period and sacking any opposition

    Free and fair referendum. Dream on

    • Lifelogic
      Posted June 8, 2015 at 7:25 am | Permalink

      So we have the Cameron/Obama intervention, the hugely biased funding for each side, the state sector allowed to issue propaganda up to the bell, the blatant BBC bias, the biased question and the choice of timing left to Cameron.

      How much more bias is Cameron to introduce?

      • alan jutson
        Posted June 8, 2015 at 9:01 am | Permalink

        Lifelogic

        “How much more bias is Cameron to introduce”

        Afraid Mr Cameron is acting true to form, even more may come out after tomorrows debate.

        Given there is over 100 Ministers, he has in effect gagged one third of the Conservative Party already, as few will resign.

        I hope enough people will support JR and his colleagues and opposition Eurosceptics to at least put pressure on for a sensible referendum.

        Also hope some of the media will see this for what it really is, and will thus cover the out argument in rather more detail than has been the case so far.

        Guarantee that the Government will put the best possible (taxpayer funded) spin on any concessions gained, no matter how small to try and maximise the stay in votes

        • Hope
          Posted June 8, 2015 at 11:00 am | Permalink

          Perhaps postal votes for all would help his cause!

      • zorro
        Posted June 8, 2015 at 7:39 pm | Permalink

        How about using all the Civil Service resources to support a ‘Yes’ vote…. Indeed, tricksy CMD strikes…..

        zorro

    • DaveM
      Posted June 8, 2015 at 8:01 am | Permalink

      “I see Dave is true to form getting Obama to speak for the Stalinist EU, cancelling the purdah period and sacking any opposition”

      US Govt policy for the past 200 years has been to demean and reduce British power and influence so it’s no surprise that Obama should take this stance.

      Conservatives for Britain needs to consolidate all anti-EU groups into “For Britain” (as was suggested on another website yesterday) and start pushing out positive and negative info.

      Although, being told how to vote by Cameron, Merkel, and Obama is a surefire way to make the British public do the exact opposite.

      And what on Earth is Juncker doing at the G7? Of which country is he the elected leader?

      Apologies for being totally OT Mr R.

      • DaveM
        Posted June 8, 2015 at 8:04 am | Permalink

        PS – I realise the EU is invited to join discussions at the G-whatever, but he’s behaving like a head of state.

        • Hope
          Posted June 8, 2015 at 11:01 am | Permalink

          He is under Lisbon. This is the EU constitution.

  5. Leslie Singleton
    Posted June 8, 2015 at 6:59 am | Permalink

    Should one have heard of “Controlled Administration”? Google does not appear to have. Unless it is a defined term in the Insolvency Act or somesuch I cannot see that (Motherhood apart) the word “Controlled” adds much–indeed one might have thought that Administration is already controlled, or at least as much as is possible. Maybe I am reading the wrong papers. What does it mean please?
    Reply I explained it at the time – splitting up the damaged banks and offering Central Bank lending to the parts that matter.

    • Lifelogic
      Posted June 8, 2015 at 7:22 am | Permalink

      It was the businesses, the borrowing customers of the banks that needed protecting. Instead the government rescued the bank bond holders and let the banks suck cash back from good customers. This caused the huge damage we saw. It was largely pointless damage to the real economy as was Major’s ERM farce.

      Can some one rescue us from total incompetents like Brown with his bank mis-regulation/rescue, Blair with his idiotic wars, Cameron with his expensive energy/green crap religion and Major with his ERM/Maastricht These were all entirely predictable disasters.

      A random selection of the public would have made non of these idiotic errors I suspect.

    • Leslie Singleton
      Posted June 8, 2015 at 10:23 am | Permalink

      Dear John–Thanks–Does this mean the Government replacing the usual Administrative Receiver with someone who had perforce to do as you describe? Something like America’s Chapter 11 might also have been considered. I have always thought the whole Administrative Receiver business (with everything in the lap of a bean counter) nothing to be proud of.

      Reply My idea was developed into the living wills which now surround modern banks.

  6. alan jutson
    Posted June 8, 2015 at 7:25 am | Permalink

    Had not thought about the Bank levy being an income for the taxpayer from the bailed out Banks before, although obvious when you think about it.

    Given all of the miss selling, PFI, interest rate faults, and I guess a host of other scandal still to come to light from all of the Banks, share value in many of them is also depressed for this reason as well.

    Thus the taxpayer/shareholder gets with one hand, and pays out with the other yet again.

  7. agricola
    Posted June 8, 2015 at 7:27 am | Permalink

    I too have no interest in banks or bank shares and in any case there are much bigger political fish to fry at the moment.

    I have only been on a weeks holiday to re-acquaint myself with flying sailplanes and find that Cameron is showing his real colours ref the EU.

    I read that, as far as ministers are concerned, and there are about 100 of them, it will be a case of back me over staying in the EU or leave the government. So much for his view on democracy. He apparently said it was a manifesto commitment to stay in the EU, but I cannot find a word suggesting that there would be anything other than a referendum.

    Over the weekend we are told that Cameron has sanctioned the acceptance of unlimited EU funds,(Our taxes) to promote the stay in the EU case. No doubt he also accepts that the EU can pay similar funds to the BBC and CBI for the same purpose. Such funding, contrary to normal election practise, will be allowed to be used up to the point of us marking our ballot papers. The Election Watchdog declares itself “Disappointed and concerned”. My verdict is that it is absolutely OUTRAGEOUS.

    Can I suggest that Cameron is hauled to account and told in no uncertain terms that this is totally unacceptable behaviour, and that the consequences for him and any government legislation could be terminal. I expect any government ministers with a conscience to resign en mass or publicly declare that what Cameron is proposing suits their career plan perfectly.

    I was planning to complete my flying re-training in September , but now doubt that you can be left to govern in my absence for another week.

    • A.Sedgwick
      Posted June 8, 2015 at 7:53 am | Permalink

      The threat of a mass defection to UKIP by disgruntled MPs could concentrate Mr. Cameron’s mind.

      Reply Conservative MPs are free to campaign and vote for Out! NO need to join UKIP to do it. It will take the 331 Conservative MPs to vote through the referendum – UKIP’s 1 MP could not do it on his own.

      • Brian Tomkinson
        Posted June 8, 2015 at 1:42 pm | Permalink

        Reply to reply,
        You have told us endlessly that the Conservative party is eurosceptic. If all government ministers eventually have to resign if they want to campaign for Out, how would the government be able to continue to function?
        Simple really isn’t it? There just won’t be many, if any, who will.

    • Denis Cooper
      Posted June 8, 2015 at 9:29 am | Permalink

      Well, among other things the Tory manifesto said:

      “we will negotiate a new settlement for Britain in Europe, and then ask the British people whether they want to stay in the EU on this reformed basis or leave”.

      As the government is a team the presumption must be that all its members, down to the lowliest, will be satisfied with the new settlement which their leaders have agreed – after the inevitable “long, hard negotiations” – and so they will actively campaign to persuade us to stay in the EU on that “reformed basis”, or they will do the honourable thing and remove themselves from the team.

      But note also that neither the franchise nor the referendum question presently prescribed in the government referendum Bill accurately reflect that manifesto promise. It will not be a case of asking “the British people”, but instead asking the British people plus sundry foreign residents, and it will not be a case of asking whether they want to “stay in” the EU or alternatively “leave”, it will be worded as “remain a member of” the EU, wording which introduces a significant bias, maybe as much as 8%, in the government’s favour.

      • Lifelogic
        Posted June 8, 2015 at 11:33 am | Permalink

        The blatant bias Cameron is introducing is indeed appalling, it gets worse with each development.

    • M Davis
      Posted June 8, 2015 at 10:27 am | Permalink

      … My verdict is that it is absolutely OUTRAGEOUS. …

      My verdict is unprintable!

      Time to read and take note, “Leaderless Revolution” – (Carne Ross).

    • Leslie Singleton
      Posted June 8, 2015 at 10:30 am | Permalink

      Agricola–Did he really say that it is a Manifesto commitment to stay in? God help us. Mind you every word he utters (“sufficient concessions to stay in” etc) is nuanced towards “remaining in” (as with “stay with nurse”). All one can say in self comfort is that it would have been even worse under Miliband and the Unions.

      • Leslie Singleton
        Posted June 8, 2015 at 5:00 pm | Permalink

        Postscript–Having listened to the News all afternoon in the car I wasn’t kidding. Half the problem is the word Eurosceptic, which of course means everything and nothing. How wonderful it would be if Cameron would say something like, “We are angry and if we do not get fundamental reform then I am going to be recommending Out”. At present despite all the baloney and pie in the sky about (unlikely) successful negotiations Cameron seems clearly, though not explicitly, to be saying that even if we can’t negotiate a thing he will still be fighting to stay In.

      • Leslie Singleton
        Posted June 8, 2015 at 6:32 pm | Permalink

        Post PS–Best I can now gather Cameron is “making it clear” that he only insists on his Ministers’ support during the negotiations but not the vote itself. Presumably the vote will be in secret so that loses me a bit. THE question of course is whether the Ministers can campaign freely. I have tried and failed to understand the latest pronouncements as regards this.

  8. alan jutson
    Posted June 8, 2015 at 7:39 am | Permalink

    Off comment.

    John, much news is being made of the Royal Navy now (so called) rescuing thousands of people from Libyan waters.

    From where is this cost being taken, the Overseas aid budget, or the Defence budget.

    What are we doing in Libyan waters so close to shore, we may as well stop off in a Libyan port, load people onboard and cut out the middle man, given the rewards, incentive and desperation for those wanting to escape into the Europe.

    Carry on like this for a few months and we will see north Africa empty of people, such is the message given out by our actions.

    What is the long term plan for these people.

    Indeed is there any plan at all, just looks like absolute chaos to me.

    With the message, get on a boat, any boat, and we guarantee to rescue you and take you to the EU.
    The more this message gets out, the more will come, no documents needed, no health checks, no background checks, convicts, terrorists or not, all no matter what nationality, are welcome.

    Meanwhile the United Nations does what !!!!!

    • Hope
      Posted June 8, 2015 at 11:06 am | Permalink

      Make efficiency savings for the increased mass immigration to the EU. ypu can be sure a number will tune up here.

      • Jagman84
        Posted June 8, 2015 at 4:50 pm | Permalink

        Forget the Defence & Foreign aid budgets. The money should come out of our daily contributions to the EU. They are encouraging the mass influx so we should cut out the middleman and finance the operation from our payments. £55 million/day should cover it.

    • zorro
      Posted June 8, 2015 at 7:51 pm | Permalink

      Of course, these interventions by the RN will do nothing but increase the number of ships attempting the passage across the Med. These politicians have the memory span of gnats, the pull factor is already being evidenced in increased migratory movements throughout the Med, and, once in Europe, to Calais.

      zorro

    • stred
      Posted June 9, 2015 at 12:41 pm | Permalink

      BBC news last night had their enthusiastic reporter going with rescuers and helping out, then interviewing two healthy looking young men from Nigeria, who seemed delighted to be on the way. Unfortunately, the reporter missed the opportunity to ask them why they had been forced to leave one of the more prosperous countries in Africa and whether, if threatened by terrorists, they could have moved to an area of Nigeria which was safe from the nasty Bocos up north.

  9. mick
    Posted June 8, 2015 at 7:59 am | Permalink

    Good Morning Mr Redwood,
    I now see your leader Mr Cameron is threatening to sack his staff if they don`t support his stance on the EU, sorry but Cameron only employed them in his cabinet post and not as MP`s it was they public, so before these MP`s want to put the party first and back Cameron think on this country is bigger than you and we won`t take any turn coating or back stabing to us, your loyalty is to the British People and not Cameron

    • Hope
      Posted June 8, 2015 at 11:10 am | Permalink

      Ah, you forgot the pleb gate saga concerning his minister Mitchell etc ed. And you seem to think that he was serious when he said the public are his boss. Not mention of it regarding the three line whip to prevent an EU referendum taking place.

      If we’re not for UKIP and the EU elections, here and across the continent, this refer dum would not be taking place.

      Don’t blame me I voted UKIP.

      Reply Conservative MPs secured a change of policy to offer a referendum, and Conservative MPs will vote one through this Parliament for you.

      • Hope
        Posted June 8, 2015 at 3:25 pm | Permalink

        Your memory is short lived. Last parliament your colleagues voted against an EU referendum at the instruction of Cameron. Your colleagues also voted in 2011 for EU supremacy over parliament. They also got us into the mess called the EU and ever closer union ever since by stealthy treaty change. So I will hold my breath for your party to put national interest above the EU as the record speaks for itself. You carry on trusting Cameron.

        UKIP and EU election results changed his mind not Tory MPs. Good articles by Peter Hitchens and Owen Patterson today. Worth a read for those deluded to trust Cameron.

        • Jerry
          Posted June 9, 2015 at 11:48 am | Permalink

          @Hope; ” [Mr Redwood’s] memory is short lived. Last parliament [his] colleagues voted against an EU referendum at the instruction of Cameron.”

          Or did they simply realise that without a working majority, caused by UKIP (and much boasted about by them from the morning after the GE 2010), there was little point in pushing the issue to an inevitable defeat which would have ether been used as a brickbat against the Tory party if not the entire coalition government – even perhaps causing the fall of the coalition and at that time almost certainly a Labour government of some sort.

      • Jerry
        Posted June 8, 2015 at 6:15 pm | Permalink

        @Hope; “Don’t blame me I voted UKIP.”

        But many do, without ‘UKIP’ this Brexit question could have been sorted years ago, pre Cameron, whilst New Labour and Blair might have been a one (or two at a pinch) term government…

        • Edward2
          Posted June 9, 2015 at 2:45 pm | Permalink

          Or you could argue the rise of UKIP has encouraged change in policy towards the EU by the two main parties hastening the opportunity of a referendum.

          • Jerry
            Posted June 10, 2015 at 2:47 pm | Permalink

            @Edward2; The point is that it has taken 20 plus years to get to this point, in that time a split eurosceptic vote allowed the Labour Party to take us ever further into the grasp of the eurocrats…

            But if you want to explore historical what ifs. What if UKIP (and similar parties) had never existed and thus there had never been the damaging splits and worse within the Tory party and/or eurosceptic vote who knows what would have happened between 1992 and 2015. Or what if there not been the whole scale attack upon the unionised left during the 1980s, Kinnock and the Labour party might never fallen for Jacques Delors promises with regards the EU protecting workers rights etc. thus persuading the Labour party to switch from being a europhobic (unilateral, manifesto pledge no less, Brexit) party to a very europhile party?

  10. Roy Grainger
    Posted June 8, 2015 at 8:13 am | Permalink

    The bank levy is annual and should continue until the end of time as far as I am concerned to compensate the taxpayer for bailing out that bunch of venally incompetent executives. Given that, a smaller loss on the capital value when selling shares is acceptable. I still simply cannot understand a supposedly private-sector company that pays its staff a bonus in years when they make a loss, it shows the market has broken down. I would be happy for HSBC to leave UK taking that giant risk off our UK balance sheet. What we need are multiple small banks, none of which are too big to fail, to foster genuine competition, I am not sure how we do that but continuing to fine and punish the big banks seems like a good start to me – having a few executives in jail would also have helped.

    • sm
      Posted June 14, 2015 at 9:45 am | Permalink

      Mostly agree.

      Whether we make a loss or profit on the sale of the shares is irrelevant.

      A more competitive (if we can truly use that word in relation to banks, goverment & money) market should be the outcome.

      How does we de-risk banks in an era of perpetual assets bubbles.

      Reduce the bank levy, and i suspect bank salaries would rise.

      I think we need to keep the levy and purchase gold using that to cover the depositors and working capital of firms up to certain limits , if we ever decide to let them fold.

      Large banks , i think are organizations selling public goods (the cost is in the money supply, money out of thin air) for private benefit.

      Market forces do not seem to compete away for example extreme rewards salaries? Why?

  11. Denis Cooper
    Posted June 8, 2015 at 8:26 am | Permalink

    I expect the government will sell the bank shares at a “tidy profit” for the taxpayer, because when they were bought that is what the most of the media reassured us would eventually happen. It was almost always a “tidy profit”, I’m not sure why, or even how one can tell a profit which is “tidy” apart from which is “untidy”.

    • Hope
      Posted June 8, 2015 at 11:11 am | Permalink

      Notes bundled together rather than loose dog eared and old.

      • Denis Cooper
        Posted June 9, 2015 at 7:26 am | Permalink

        I suppose that could be it.

  12. acorn
    Posted June 8, 2015 at 8:28 am | Permalink

    Labour should have nationalised both Banks on day one. They would then have been 100% backed by the Treasury which could have covered any and all bills, in Sterling, that arose.

    The payment system is the only part of the Banks that needed rescuing immediately. That is what the Banksters threatened the government with to get the bailout money. If the interbank settlement system had stopped operating, the crash would have been far far worse than it was.

    The Bank Levy is scheduled to pull in £3.6 billion this year and every year for the rest of this parliament, a lot more than just RBS and Lloyds pay. ALL the Banks, not just RBS and Lloyds, share prices are already adjusted for this. It means that the Treasury effectively gets a “special dividend” each year from RBS; Lloyds and the rest of the reasonably healthy Banks.

    It’s a bit like that bunch that said the government had left the VAT off the bill for HS2. The penny dropped eventually.

    • Gary
      Posted June 8, 2015 at 3:34 pm | Permalink

      the share price of RBS is saying the govt loses by selling. the share price went from 10.25 to just under 11 in the past few days, the news was sold slightly on low volume.

      there you go. The dumb govt is shafted again, or even worse, they’re looking after their bankster mates again.

  13. JJE
    Posted June 8, 2015 at 8:47 am | Permalink

    Funnily enough if you keep imposing large random and unfair taxes on people who are not prisoners here they eventually begin to wonder if they would be better off elsewhere.

    The State has still not come to terms with the need for it to radically shrink. It needs to do less and interfere much less in all our lives.

  14. Aatif Ahmad
    Posted June 8, 2015 at 9:27 am | Permalink

    The valuation multiple is based on today’s share price but are you suggesting prices will remain constant or go up?

    The fact that by removing the levy, share prices will go up is not a good reason to remove the levy. You could apply the reasoning to bank regulation as well. Removing the compliance burden associated with regulation might boost profits by, say, 50% and hence give us a higher share price. That doesn’t mean we should abrogate bank regulation.

  15. CHRISTOPHER HOUSTON
    Posted June 8, 2015 at 10:14 am | Permalink

    I would be bluffing if I were to come out for or against Mr Brown or JR in regard to buying/selling bank shares and “loans against security”. One imagines Ministers are advised by highly qualified and experienced experts when they make far-reaching decisions.

    Our media, sometimes years after events, invites ” an advisor to the Labour/Tory Government” to comment on this and that and it is a wonder why these people have not committed hari-kiri or the British equivalent since their advice seemingly led to billions of losses. But no, they are still in gainful employment advising like billyo or, ” like all get out”, if you happen to be American or perhaps Canadian.

    I listened to a Canadian Fund manager a year or so ago and he declared he would not buy any banking shares at all even Canadian ones which, were seen in some circles as more stable, because he reckoned banks were in fact devoid of any real sound financial basis and traded merely hot air.

    Well, personally, I would certainly sell any banking shares such as Lloyds and RBS and all others. I would never have bought them in the first place.

    For curiosity-sake I would trace precisely how the “toxic assets” were bundled, how they were subsequently divided into other bundles and sold on, who to, where they were then sold, and the relationships between the buyers and sellers, and, take note of the profits made from loans which were declared toxic ( and who declared them toxic in the first place ). Could it be that for reasons best known to themselves at the time, certain banks did not have a thorough and intensive method of collecting its own debts and “had to” farm out these debts to any fly-by-night collection agency who with 12 phone operators simply continually rang debtors and collected payments by credit card in millions?

    If only we could all buy people’s toxic/bad accounts ( portfolios ) for a penny per thousand like these agencies.
    Where to bank our awesome profits would be a major problem however.

    Regarding the latest from Rt Hon Mr Cameron MP and President Obama. I do not know why any American politician or citizen would approve of any nation belonging to the EU. The US Constitution would forbid it, on several counts, from joining the EU. No US political party has a manifesto which in any way would allow it to advocate EU membership or even an Associate Membership.. The American people would not vote for it. The EU would not allow the US to join anyway unless profound impossible changes were to take place in American economics, governance and society.

    I would be bluffing if I said I know why an American President would wish a massive commercial/trade competitor to itself like the EU to be strengthened by the addition of an English-speaking entity like the UK. One would think he would prefer the UK to be competitively neutral to the US at least and better still on its side. I guess the Republicans in the November 2016 Election will make full use of President Obama’s overseas comments.

  16. margaret brandreth-j
    Posted June 8, 2015 at 10:26 am | Permalink

    Osbourne was brave financially intimidating the banks. At least with RBS nationalised then they have to pay the 0.21% . If the banks are broken into little pieces then the 20 million liabilites clause would not be applicable.

  17. Gary
    Posted June 8, 2015 at 11:13 am | Permalink

    “The state should not be anowner of banks, as it has to be their regulator andfinancier of last resort.”

    and there is the beginning and end of our financial crises. The bankers know this, take advantage of this and you end up with a vast casino where lending is reckless, profits are privatised and losses are socialized. The govt becomes an agent for the banks and tax payer money is thrown at assets eg. property to keep the banks’ balance sheets whole.

    This is not capitalism, it’s not socialism, it’s fascism. This is a (just wrong ed).

  18. Mark
    Posted June 8, 2015 at 11:39 am | Permalink

    Raising levies and fines on banks that go beyond normal taxation is simply penalising some combination of customers and shareholders. Where bankers have done wrong, it is the individuals concerned who should be pursued. If they have gained undue wealth through manipulation of markets, that can be in part reclaimed under the Proceeds of Crime Act.

    We need our banks to return to having sound balance sheets, and pursuing prudent banking practices, so they participate in supporting our economy, instead of threatening to destroy it in a banking collapse. We are still quite some way from that: a signal of success would be the unwinding of QE that props up the balance sheets at present.

  19. Posted June 8, 2015 at 8:26 pm | Permalink

    They should have found other cheaper ways of supporting what had to be supported in the banking sector

    Whether the State should or shouldn’t own banks is a political issue. The left-of-centre govt in the UK didn’t do anything that the right-of-centre Bush administration didn’t do after the GFC, so politics isn’t necessarily what we might think it to be in times of crisis.

    Politics aside, there can’t be any cheaper way for a government to support a bank than by buying its shares, providing the price paid for those shares is a fair market price. The government’s balance sheet looks slightly different after the purchase than it did before the purchase, but it’s net position is just the same. It has just swapped cash for a tangible asset. That is if the bank still has a small net worth.

    The financial position of the bank, of course, isn’t any different just because it has a change of ownership. But, the involvement of the govt signals to the market that it won’t be a credit risk for anyone wishing to lend it money.

  20. Hefner
    Posted June 9, 2015 at 3:04 pm | Permalink

    Why is it that the idea of separating the investment and customer-related parts of banks has never been really followed?

    I would think the customer-related banks should/might be regulated, and the investment banks let absolutely free to do whatever they wish, without any intervention from states, i.e., when they cock it up, they just fail and disappear from the financial landscape.

    Why is it so hard for MPs and the government to implement such a “simple” idea?

  21. Posted June 16, 2015 at 10:22 pm | Permalink

    In 2012, the Government’s shares in Lloyds and RBS were worth £33 billion, about half of what Gordon Brown paid for them, so his decision to buy was inept. Luckily, the shares have risen with the general rise in share prices since then. However, if George Osborne announces that he is selling the shares at a profit, then he has failed to take into account the inflation that has occurred since purchase.

    John Redwood’s analysis must be right, and a statement from the Chancellor that he intends to reduce the Banking Levy steadily year by year would be helpful.

    Actually, I am not sure what the justification for the Banking Levy is. If it is because banking profits are excessive, perhaps more competition is called for. After all, we don’t have an Energy Companies Levy, do we?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page