A week ago Monday I was the guest speaker at a Centre for Policy Studies lunch, talking about how to speed growth and create more jobs. Whilst I was there they showed me the work they have just published on returning the state owned bank shares to the public.
They have come up with a good scheme. They propose that every taxpayer – or every voter – is given shares in Lloyds and RBS. Voters can only sell their shareholding once it has gone above the government’s original purchase price. On sale the government gets its money back, and the voter keeps the profit. Alternatively the voter can buy the share from the governemnt at the government’s original purchase price, and then subsequently keep all the money on sale. The government and the banks would also able to raise more money from the markets at the original government purchase price, as the threat of a sale of shares at that price or lower is lifted by the transfer of the shares to new owners who cannot sell at those lower prices.
I am keen for the government to start the process of selling its shares and assets in state owned banks. This scheme is an excellent way to line up the interests of the banks and the taxpayers more closely. Taxpayers would become the owners of RBS and would be free to choose the management and fix their remuneration. They would take more pleasure in the banks returning to profit and in the shares going up in value if they benefitted directly from that process.
It would still be possible to require the spin off of bank branches and loan assets to form more competitive banks in the UK retail banking market as well as doing this with the shares in the Groups concerned. We do need more and more competitive banks and must not lose this opportunity. One of the main problems impeding faster growth is the shortage of bank loans for many companies. Companies do need to borrow working capital and investment money fi they are to expand. More banks, with more bank capital, would mend this.