RBS and Lloyds HBOS

Hard on the heels of a £5bn loss by RBS came news of a £570 million loss at Lloyds HBOS. It all goes to preserve Gordon Brown’s reputation as the nation’s worst investment manager. He sold gold just before a huge bull run in the metal. He bought bank shares in time for a long run of losses. The taxpayers are still waiting for the share prices to return to the higher price Mr Brown paid for them.

There has been some discussion here of what should be done with the shares in RBS, with some contributors asking for my view. Assuming the government keeps RBS together in more or less its current form, there are four main options.

1. The government could give the shares to UK taxpayers or citizens, an equal number to each. We could then individually decide whether to hold or to sell. The bank would no longer sit on the state’s balance sheet or have recourse to the taxpayer from the day the shares were transferred.

This proposal has two major drawbacks. The first is the state spent £45 billion of our money on buying bank shares. On this model the state gets no money back for its largest holding, leaving a hole in the public accounts. The second is a large number of people might want to cash in their shares as soon as they could, depressing the share price badly and leaving them feeling cheated if they got very little for the shares in a disorderly market. It has the great benefit of privatising the bank quickly, and giving some prospect of some money to every family in the land.

2. The government could transfer the shares now to taxpayers as above, but say we cannot sell them until the RBS share price has risen above the government’s sale price. On sale we would have to surrender the government’s acquisition price of those shares to the government – or a large proportion of it. We would gain any profit above the reserved price. This model removes the objection to 1 that the state does not get any money back, and helps somewhat to create a more orderly market, by getting people used to the idea that they have to hold the shares for a time period.

3. The government could sell the shares in the market like the 1980s large privatisations. Some shares could be offered more cheaply to employees, and there could be a discount offer of a limited number of shares for each taxpayer interested. The state would get money back from the operation, and the bank would be transferred to the private sector.

4. The government could offer tranches of shares to control the impact of the large sales on the market. It could sell some tranches to strategic investors prepared to take minority stakes in a large global bank.

There is another approach which I tend to favour. The government could require the further break up of RBS. Individual assets and companies, like Citizens Bank, their US bank can be sold off individually. This route has several advantages. It reduces the scale of any individual sale. It creates more manageable units. It could create more competitive banks for the UK market if the main clearing operations were split up.

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  1. lifelogic
    Posted March 2, 2013 at 6:50 am | Permalink

    It look to me as though Cameron, who shows every sign if being as bad as Gordon Brown, is planning to use RBS shares as an electoral bribe. Rather like Mr Brown used the absurd baby bonds. I cannot imagine it will work, given how unpopular he is with his pro EU tax borrow and waste, no growth and artificially high energy bills by government design.

    The main need is to stop RBS/Natwest/Coutts from crippling industry as it still is doing by refusing loans, over charging and calling in perfectly good and profitable loans from job creating and productive industry.

    I see Cameron seems powerless to stop the absurd restriction on Banker’s bonuses from the EU. I see Boris has said:- “People will wonder why we stay in the EU if it persists in such transparently self-defeating policies,”. Most sensible people already do wonder and have for years. We have already had the insane gender neutral insurance and pension nonsense nodded through by EUphile Cameron without any complaint.

    Still we would not want to be a greater Switzerland would we. Could Cameron tell what he has against this plan? Can he think of a single sensible reason?

    • lifelogic
      Posted March 2, 2013 at 6:52 am | Permalink

      So your break up option is the way to go. The electoral bribe with be the way Cameron does go just before he takes up a new job with the EU one assumes.

      • A different Simon
        Posted March 2, 2013 at 11:01 am | Permalink

        Life his Mentor butterfly Tony Blair , Cameron must be getting bored of domestic issues and being P.M. by now .

        The lure of the world stage will be irresistible .

        • lifelogic
          Posted March 2, 2013 at 7:50 pm | Permalink

          It seems so.

    • lifelogic
      Posted March 2, 2013 at 6:57 am | Permalink

      So the break up option is the way to go making some good banks out of the mess. The electoral bribe distraction will surely be the way Cameron will go, just before he takes up a new job with the EU one assumes.

      After superficial distraction politics (and a defective compass) is what Cameron is from tip to toe.

    • Jerry
      Posted March 2, 2013 at 9:43 am | Permalink

      @lifelogic: “It look to me as though Cameron, who shows every sign if being as bad as Gordon Brown, is planning to use RBS shares as an electoral bribe. Rather like Mr Brown used the absurd baby bonds.

      As indeed Mrs Thatcher did in pre election tax cuts and discounts for people wanting “The right to buy their council house” – just think if the same logic (that these tenants had already paid rents on these properties and thus deserved such discounts) was applied to the private sector, giving private tenants, enshrined in law, the right to buy the property from their landlord with anything up to a 2/3 discount off the market price…

      We have already had the insane gender neutral insurance and pension nonsense nodded through by EUphile Cameron without any complaint.

      Nothing insane about it, unless the complainer is female and/or wants lopsided equality, woman are just as likely to have (at fault) accidents, but if not they will soon build up their maximum no-claims discount which is after all the only correct measure as to the risk. Are you Female LL, you seem to have a bee under your iPad about this?!

      As for the UK becoming a greater Switzerland, bring it on, but just think for a moment, a referendum on if non-doms should for-fit their property portfolios, or that those earning over a £100k pm should pay Super Tax? No I’m not so such that those like LL would actually like the UK to be like a greater Switzerland come to think about it. It would be as daft as Blair’s “Café Culture”, forgetting that whilst one can import the rules one can’t remove the existing underlying culture, thus we now have a 24/7 binge culture.

      • Nicol Sinclair
        Posted March 2, 2013 at 3:59 pm | Permalink

        @Jerry. This happened to my wife and myself under the Labour Government years ago. We were presented with a modest property in Eaton Mews in London years ago as a marriage settlement. The incumbent tenants – a couple of gays – were allowed (by a new – not New – Labour law) to purchase the property earlier prices for the value of the LAND WITHOUT A BUILDING UPON IT. We lost what, in effect was her dowry.

        That is why I , whoever I vote for, will never, ever vote for Labour…

        • Jerry
          Posted March 2, 2013 at 4:34 pm | Permalink

          @Nicol Sinclair: Oh right so as long as you are not affected by the law and all that hypocrisy? Sorry but that smacks of “I’m all right, sod the others”, nor was I proposing such a law (and indeed you have remind me that such a silly and spiteful law did exist) but two wrong laws didn’t make a ‘right’ (pun intended).

          Some people, for what ever reasons, are reliant on LA housing and the secure tenancy that it (used to) provide, I have no problems if people want to buy their own properties but not at the expense and inconvenience of others.

          Also quite why it made any difference that these people were “gays”, I bet you would not have said such a crass comment (nor John allowed it) had these people been of Afro-Caribbean ancestry…

          • Edward2
            Posted March 2, 2013 at 8:05 pm | Permalink

            The point is Jerry that freehold law is a bedrock of a free democratic society.
            If the State can rip the land or home you own from you, then there is no free society
            The “right to buy” was a idea which added a freedom for tennants to actually become freeholders.
            They were given a discount related to the amount of years of rent they had already paid.
            The local authority is the worst landlord of all with its high rent estates, poor design and poor maintenance.
            Just look at the council estates all over this country and compare to housing association or private landlord property.
            If I were “king for a day” I would ban councils from ever having any control over housing.
            It was up to local authorities to replace homes bought by tenants.
            Some went into partnership with charities and housing associations and did so, others sulked and did not.

          • Nicol Sinclair
            Posted March 3, 2013 at 1:56 am | Permalink

            @Jerry. It made no difference, of course, that the purchasers were gays. It was a simple matter of fact. It was not a crass comment.

          • Jerry
            Posted March 3, 2013 at 9:34 am | Permalink

            @Nicol Sinclair: If it was irrelevant to the substance of the story then why mention their sexuality, thus it was a crass and unwarranted comment.

          • Jerry
            Posted March 3, 2013 at 1:38 pm | Permalink

            Edward: “The “right to buy” was a idea which added a freedom for tennants to actually become freeholders.

            Strew-man argument, they already had that freedom, it was called saving up for a deposit and then applying to a building society or bank for a mortgage, all the “Right to Buy” did was reduce the over all socail housing stocks to a level that drove up the cost of private rents – which I suspect was the idea, otherwise the LAs would have been allowed to replenish their socail housing stocks with the money received from the Right to Buy scheme.

            Reply Councils could spend capital receipts from houses on new homes, if they had repaid the borrowing against the homes. Otherwise of course they had first to repay the debts. They could apply to build more on newly borrowed money.

          • Bazman
            Posted March 3, 2013 at 4:03 pm | Permalink

            Freehold law is a bedrock of a free democratic society.
            If the State can rip the land or home you own from you, then there is no free society. This is why Russia cannot move forward until these laws are passed. Low tax or no tax the land is not yours and can be stole off you by the next government and their chums.
            As someone who lives in an ex council house your claims of poor build quality are wrong and unlike privately built housing the rooms are a human size with a quite large 60′ foot garden and garage. Some council built proprieties such as flats are poor, but it rather depends on when and which authority build them. Next door to me is a housing association owned house and they constantly maintain it to a high standard. The rent for private would be about £600 to £675. The Housing association is about $400, so again you are wrong. The privately built ones in this area had illegally small rooms and as some found to their cost when buying new furniture. It would not fit through the passages. 2/3 size furniture was used. Who has been prosecuted for the below building regulation size rooms? Nobody. What does that tell you. You would be made to demolish the property if you had built it.

          • Jerry
            Posted March 3, 2013 at 5:44 pm | Permalink

            @JR reply: Which in the 1980s, with economic climate as it was, this wasn’t going to happen and didn’t, hence why the socail housing groups and charities were set up.

      • lifelogic
        Posted March 2, 2013 at 7:24 pm | Permalink


        Thatcher did not council flats below market value they were sold below the “vacant possession market value”. The tenanted value (with a small rent and sitting tenant for life) was in most case well below this true value. It was sound economics to sell and anyway they should really charge market rents.

        Gender neutral insurance is patently insane, if you cannot see even this (like Cameron) I cannot really help you. It will result in deaths many additional accidents, the wrong premiums, people walking home late at night on dark roads and pointless expensive electronics (which will be able to work out the gender anyway from the driving style). Making everyone poorer for no reason.

        I am not female and do not have an over priced, trendy, toy computer with build in redundancy (Ipad). Switzerland looks considerably better run and richer than the UK to me. All the figures support this position too.

        Cameron does not but seems unable to say why.

        • lifelogic
          Posted March 2, 2013 at 8:21 pm | Permalink

          Gender neutral insurance affects life cover and annuity rates too it is total madness. It does not benefit woman or men just ensures a poor allocation of premiums and risk and wastes money.

          • Jerry
            Posted March 3, 2013 at 11:21 am | Permalink

            Lifelogic: Re the right to buy, so these properties were sold at a discount as there was no sitting tenant if the tenant was the buyer – duh!

            Gender neutral insurance is totally logical if you believe in true gender equality, nor will there will be any more deaths or injuries, stop being so melodramatic, although I suspect your were actually off on some other irrelevant rant, something about street lighting!

            Re Switzerland, my point was about their flavour of democracy and how it might transfer to the UK, as I said, anyone want to sign this petition for a referendum on higher taxes for people earning over £100k pm?! Perhaps you idea is to cherry pick what you like about Switzerland rather than being a true and democratic “Greater Switzerland”

    • Nina Andreeva
      Posted March 2, 2013 at 11:48 am | Permalink

      LL have a read through a report in the “Economist” website on the UK and the EU that was published early last December (JR is quoted in it too). There you will find all the reasons why the EU is no longer offering Swiss like arrangements for anyone who does not want full EU membership. Also as I have said here before Swiss direct democracy, through referenda, is now being frustrated by Brussels too. The proposed law to ban the construction of minarets is being prevented from being introduced into the Swiss parliament because it does not fit with all the human rights stuff that the Swiss are enmeshed in too.

      With regard to a share sale for the part state owned banks it would be a very brave investment bank who would want to underwrite that sort of stuff. Being that do the “Sids” have the cash to subscribe or the appetite for risk to invest in something that is emblematic of the current crisis? While would they be able to offload any unsold shares to the institutions? Fund managers that actually make money for their investors seem wary of banks at the minute, even JRs FT portfolio shows no interest in FS related ETFs. As we are still not out of the woods yet timing of the sale would also be crucial and could be guaranteed to happen at the wrong moment i.e. just before a correction/crash.

      • Nina Andreeva
        Posted March 2, 2013 at 11:49 am | Permalink

        sorry should be after a correction/crash

      • lifelogic
        Posted March 3, 2013 at 8:22 am | Permalink

        I am sure Switzerland is inconvenienced by the EU but far less than they would be as full members.

  2. stred
    Posted March 2, 2013 at 7:10 am | Permalink

    Thr fact that the largest shareholder, HMG, wishes to sell at the earliest opportunity must have a depressing effect on the current price of shares.

    • Jerry
      Posted March 2, 2013 at 9:48 am | Permalink

      @stred: Indeed, it would be better if HMG, politicos and the media would just keep quite, when the time is right (to do what ever) then it should be announced in the usual way – at 7am, to the markets, on the morning or as a statement at the despatch box.

      • stred
        Posted March 2, 2013 at 11:52 am | Permalink

        Jerry. The big investors must be aware of the big dump coming and will be pricing accordingly. How to keep politicians and the media quiet is an interesting one. The best way to flog the shares may be to do it a bit at a time once the price reaches the buying value, but quietly.

        Or better still, ask Gordon Brown how to do it and then do the opposite.

      • lifelogic
        Posted March 2, 2013 at 8:23 pm | Permalink

        With cast iron Cameron the the time will never be right – as we have seen.

  3. Alan
    Posted March 2, 2013 at 7:37 am | Permalink

    I think Gordon Brown was right to sell off as much as possible of the Treasury’s gold, although obviously he should have waited until after the economic crisis to get a better value for it. With the advantage of hindsight that is obvious (it was not so obvious using only foresight). In my opinion the Treasury should now sell the gold it still holds.

    I don’t think it is the job of the Treasury to speculate in precious metals. There is a free market in gold: if I want to speculate on its value I can do so with my own money. I don’t think HMRC should forcibly take money from me and hand it to the Treasury so that it can speculate in the metals market on the government’s behalf with my money.

    Similarly, speculating in bank shares should not, in my opinion, be part of the Treasury’s mandate. I can accept that it was necessary to nationalise the banks when the crisis began, but the Treasury should not continue to hold the shares as a speculation. I think that as soon as it is practicable, they should be sold.

    • JimF
      Posted March 2, 2013 at 7:59 am | Permalink

      The government should hold investments to back its debts, based on the contributions it has received. Where should your NI payments go to pay for your future state pension and healthcare? Into a black hole? I know they do, but they damn well shouldn’t and that is another reason the Tories will lose the next election.

      • Alan
        Posted March 2, 2013 at 8:56 am | Permalink

        I disagree with you when you say that NI contributions should be invested by the government. I think it is more economic to regard it as a tax that is imposed on present day workers in exchange for a ‘promise’ to pay their pensions and health care out of taxes that will be paid in the future. Otherwise the Treasury must employ experts in investment, or pay management fees to investment companies, to manage its investments, and this is an unnecessary cost. The Treasury has in any case an implicit investment in British industry because it is industry and its employees who will be taxed to meet this future commitment.

        Paying taxes and health care out of taxes is, I think, cheaper than paying them out of the proceeds of investment, because the cost of collecting taxes is lower than the cost of managing investments.

        • Alan
          Posted March 2, 2013 at 9:32 am | Permalink

          My last paragraph should have said:

          Paying pensions and health care out of taxes is, I think, cheaper than paying them out of the proceeds of investment, because the cost of collecting taxes is lower than the cost of managing investments.

        • JimF
          Posted March 2, 2013 at 10:50 am | Permalink

          The reasons you are wrong are too numerous to go into completely. But just consider one- say we need to draw on reserves to fight a war next month, and we have no reserves. What does the government do, ask people to empty their piggy banks?
          Your thinking is indeed 5* Gordon Brown, the guy who got us into this mess.

          • Alan
            Posted March 2, 2013 at 7:54 pm | Permalink

            Well, maybe there are many reasons why I am wrong, but the one you have given does not in my opinion seem to be one of them. If we had to fight a war next month and we had no gold in the Bank, we would either use the foreign money that the bank holds to buy what we needed, or we would borrow money, or we would print it, or we would indeed ask people to “empty their piggy banks” – that is impose more taxes.

            Better not to fight wars, or indeed do anything else, that we cannot afford.

      • a-tracy
        Posted March 2, 2013 at 9:02 am | Permalink

        I agree with JimF. I am also losing faith that the Tories can get a grip on how the UK can move forward to achieve set goals. In fact I’m beginning to wonder what the objectives are.

        Why can’t we get a return from RBS, the government should be working to represent the shareholders not the bonus hunting executives.

        Natwest have always been a good bank to us, with helpful advice, encouragement, infact they’d love us to acquire and take on loans right now. They are very supportive to our goals a bit like a good parent, cautious and careful but not hindering our development. I was horrified when they were acquired by RBS as we’d had bad business dealings with them previously. Is Natwest still big enough to stand alone or with Coutts and would it be a profitable division to be sold to the highest bidder?

        • JimF
          Posted March 2, 2013 at 10:54 am | Permalink

          Well the depositors don’t get a return, the shareholders don’t get a return, and the borrowers are screwed to the wall with charges and high interest rates on relatively low risk propositions (we would be one if I wanted to go there). That leaves one connected group who seem to be doing pretty well, doesn’t it?

        • lifelogic
          Posted March 3, 2013 at 8:29 am | Permalink

          Natwest are simply not remotely competitive on lending margins, fees or terms – where they lend at all. The are mainly calling in loans, this causing great inconvenience to their good (and soon to be ex customers).

          The government owned bank has (not-ed) been (helping-ed) the economy.

      • Nicol Sinclair
        Posted March 2, 2013 at 4:03 pm | Permalink

        Why not go back to the Gold Standard to guarantee our debts?

    • oldtimer
      Posted March 2, 2013 at 8:51 am | Permalink

      Clearly you do not have a grasp of the timing of events. Brown signalled his intention to dispose of gold reserves before the event thus depressing the price he actually achieved. This was inept, to put it mildly, and it was pointed out to him at the time. Being Brown, he paid no attention. In consequence he got a rock bottom price.

      Governments hold gold as a reserve, in part to buttress their currencies and also, these days because they believe it is a better bet than hold US treasuries.

      • Alan
        Posted March 2, 2013 at 9:40 am | Permalink

        “A better bet” – so it is speculation. That is what I was arguing against. If I want to bet I can do it myself: I don’t need the government to employ civil servants to do it for me.

        Similarly, arguing that Mr Brown was inept at investment also makes my point, whether or not I agree with your assessment of him: I’d rather make my own mistakes than have the Treasury make them for me.

        I’m only saying the Treasury should not be speculating with our (the taxpayers’) money.

        • A different Simon
          Posted March 2, 2013 at 11:13 am | Permalink

          Browns ineptness is replicated across the civil service .

          We see this manifested in the laws which are made , and absence of effective regulation .

          So much regulation is just designed to make money for legal industry and the financial services sector –
          – eg in a stocks and share ISA purchases and disposals of foreign shares have to be in sterling which makes a nice commission for the financial services industry on the currency conversion .

          Looking after insiders is dressed up as protecting vulnerable unsophisticated investors .

          Public servants have no need to be aware of pensions , investing for their old age because it is all done for them .

          They have no skin in the game . Whatever the outcome in real life the outcome for them is guaranteed .

          You can’t run a country like that .

          There is no item in the inflati0n basket for making provision for your old age even though it will require saving rate to be over doubled from 10 years ago to receive the same pension .

          • lifelogic
            Posted March 3, 2013 at 8:31 am | Permalink


          • M.A.N.
            Posted March 3, 2013 at 1:56 pm | Permalink

            Saw the Andrew Marr show not long ago, had the host, Balls, and sir Ian Blair on one episode. Can you imagine the future liability for that shower? Is there enough money in the country?. Some lower paid individuals must be working there whole life JUST to pay for one of these clowns future standard of living. Absolutely ludicrous. Beat them at thier own game, go self employed and avoid paying tax, retire with nothing, let the state support you.

      • Nicol Sinclair
        Posted March 2, 2013 at 4:05 pm | Permalink

        Indeed: “This was inept, to put it mildly,” it was unforgivable crass stupidity by the ‘son of the manse’.

        • lifelogic
          Posted March 2, 2013 at 8:31 pm | Permalink

          Indeed not return to boom and bust! He did not seem to have learned much from his first Class Honours degree in history (Edinburgh) did he.

    • Jerry
      Posted March 2, 2013 at 9:53 am | Permalink

      @Alan: “I think Gordon Brown was right to sell off as much as possible of the Treasury’s gold, although obviously he should have waited until after the economic crisis to get a better value for it.

      His mistake was to pre-announce the sale, the price understandably fell as a result, then rose again afterwards. I fear that the same mistake is likely to be made in relation to these bank shares, a grand off-loading will be pre-announced and the price will suffer, good for the speculators but very bad for the tax payer.

      • Bob
        Posted March 2, 2013 at 9:51 pm | Permalink

        “His mistake was to pre-announce the sale”

        Was it a mistake, or was it his intention?

        Reply Refers us to a blog piece which argues Mr Brown wanted to drive the price of gold down to help the banks. I think that is very unlikely. In my experience there is more incompetence and less conspiracy in government than outsiders think. Another explanatino of his conduct is at the time I seem to remember there was pressure on the UK and others to buy more Euros for the reserves as part of the EU’s wish to make their currency more global.

        • Bob
          Posted March 3, 2013 at 12:00 pm | Permalink

          @Mr Redwood

          It’s very worrying to imagine that a person of such incompetence could be in a position to arrange the sale of 60% of the UK’s gold reserves. Did he not seek advice from someone with some common sense?

          Did you delete the link because you disagreed with the thrust of the Thomas Pascoe article?

          Reply I know of no evidence to prove its allegations against banks or to establish their power in this issue.

          • Bob
            Posted March 3, 2013 at 1:44 pm | Permalink

            “Reply I know of no evidence to prove its allegations against banks or to establish their power in this issue. “

            In the light of Brown’s subsequent bank bailing activities, would you not at least give consideration to the article and allow your readers to do the same?

            Reply They are free to google it.

    • lifelogic
      Posted March 2, 2013 at 10:32 am | Permalink

      I agree that governments holding gold, they guarding it in expensive building is rather mad and now is a good time to sell it. We have real assets producing real returns and jobs. Still it is funny that the economics “expert” Brown sold at the bottom of the market and even announced it in advance. What a p***.

      We do not need investments like gold, HS2, pointless olympics stadia, green deals, wind farms, pv nonsense or three times the number of bureaucrats actually needed.

      I see true to form BBC radio four has, coming up “In Defence of Bureaucracy
      Episode 1, Gus O’Donnell argues that bureaucracy is now an essential part of a functioning democracy.

      Well first the UK, no longer has a functioning democracy in any real sense (thanks largely to bureaucrats like Gus and similar at the EU) and secondly no one is saying it is not an essential part. The argument is whether 5% of GDP is a sensible part or nearly 50% is a sensible part? Doubtless this question will not be addressed at all by the BBC, it never is.

      • lifelogic
        Posted March 2, 2013 at 10:33 am | Permalink

        I meant “We need real assets producing real returns and jobs.”

    • Nina Andreeva
      Posted March 2, 2013 at 12:05 pm | Permalink

      Al the BoEs traders essentially do not speculate in PMs to gamble and make a profit. Gold’s main purpose is to give some credibility to our currency ie its backed with a real asset of which there is a finite amount (two Olympic sized swimming pools full at the minute). Thats what separates it from the Zimbabwe $ for example which was just printed until they ran out of paper. A book I would suggest you read is “Currency Wars” by Jim Rickards (which has just come off the NY Times bestseller list) which explains what the central banks are doing with gold at the moment. If you do not own any gold at the moment I suggest you by a couple of Krugs and hide them in an old sock, your livelihood may depend on them quite soon

    • forthurst
      Posted March 2, 2013 at 1:53 pm | Permalink

      1. Gold is money. It is money in the sense that a dollar bill is not. i.e. it has intrinsic value, universally recognised, which cannot simply be reproduced by e.g. the banksters that own the private secret Fed creating some more out of thin air by pressing a button on their statutary monopolitistic electronic printing machine and selling it to the US taxpayer. The Bank of England should hold money in its Reserves. There is clear evidence that several major economies are getting fed up with producing goods and services in return for bits of paper denominated in dollars with no obvious intent to future redemption.

      (makes allegation about Mr Brown and his decision-ed)

      Reply: Gold is not money in most countries – I cannot take a gold coin to a shop and spend it. Gold can be readily converted into money when the gold market is open. It is a commodity.

      • forthurst
        Posted March 2, 2013 at 3:58 pm | Permalink

        “Gold is not money..”

        I admit that gold coins are not generally circulated anymore; however gold is held by Central Banks in the same way as other foreign currency reserves and is presently used to transact international trade such as with Iran selling oil to China etc. It is entirely possible that this might become more common rather than less in the future as real producers refuse to accept bits of paper of no intrinsic worth.

      • lifelogic
        Posted March 2, 2013 at 8:42 pm | Permalink

        Gold does not really have an “intrinsic value” any more than a Picasso or a £50 note does. It is just a shiny, heavy, long lasting metal. It is worth what you can get some one to pay you for it. Its value depend of what people think is will be worth in the future.

        Gold does not even have that many industrial uses, unlike many other commodities that are actually consumed by industry. If we had confidence in Cameron the pound would be more valuable relative to gold but so few do.

        • Bazman
          Posted March 3, 2013 at 3:47 pm | Permalink

          Gold does not really have an “intrinsic value” any more than a Picasso or a £50 note does?
          I think you will find it value is because of its rarity and the intrinsic value of it proprieties. The given value on any day can change this is true. The Picasso and the note have no intrinsic value other than their perceived value. What planet are you on?

  4. JimF
    Posted March 2, 2013 at 7:56 am | Permalink

    Take your pick.

    The serious contemporary answer is that the bank should be split up. However you have been recommending that for some time, and it is one on a list of things that your Party in government hasn’t bothered to do and is now beginning to suffer for at the polls. What is the point of taking over from the grim reaper Brown only to preserve the situation on aspic?

    The flippant but possibly correct answer in the long run is that the currency will be depreciated away to nought, so that these and other debts appear trivial and the shares will then be sold “at a profit” or given away harmlessly to a gullible electorate.

    Reply The bank is selling some of its assets off individually, and it looks as if it will now sell off some shares in Citizens.

  5. The PrangWizard
    Posted March 2, 2013 at 8:38 am | Permalink

    I’m just an old sentimentalist, but I’d like to see the merger unravelled. Recreate Natwest as an independent bank. It all seemed to go horribly wrong for them after RBS bought it. NatWest for England and Wales and NI, RBS for Scotland. It wos the Scots wot did it.

    • stred
      Posted March 2, 2013 at 12:05 pm | Permalink

      It would be good to see Lloyds get rid of Bank of Scotland too. Another of Gordon Brown’s clever deals which decimated the share price. Thank God he spends his time in charge of UN childrens education now and stays away from the HOC.

  6. Mike Stallard
    Posted March 2, 2013 at 8:45 am | Permalink

    I don’t think the government or the Labour/LibDems have quite got the message of Eastleigh. It is this: pull you finger out and stop faffing! We need action this day.
    Mrs Thatcher and her ministers did things. They pulled the country round from the 1970s. She usually (not always) got it right too.
    This lot does far too little and then presents it as a wonderful achievement based on Tony Blair’s “hard choices”.
    So think then sell it off like she did (choice 3).
    But I am not holding my breath. And in 2015 I full expect to see a divided right letting the lefties in to cause untold damage. Strange how we never learn….

  7. Brian Tomkinson
    Posted March 2, 2013 at 8:47 am | Permalink

    The one thing that shouldn’t be done is your option1 which is precisely what Cameron is most likely to do in a desperate attempt to bribe voters into voting for your party which is failing the country under his leadership. It always surprises me to read that polls tell us that Cameron is more popular than your party when in my opinion it is quite the opposite.

    • lifelogic
      Posted March 2, 2013 at 10:36 am | Permalink

      Indeed it is probably the plan for option one that is helping to prevent the bank functioning sensibly at the moment. It is still doing huge damage to its business customers that remain.

  8. alan jutson
    Posted March 2, 2013 at 8:51 am | Permalink

    Just beak it up sensibly by selling off parts for as much as you can get, let us cut our losses, and get the taxpayer off the hook.

    Write the toxic debts down to zero on the books, but still make an attempt to get some repayment from the borrowers.

    The Government should never have purchased the shares in the first place as they were worthless, as are all Bankrupt Company shares.

    The fact that it bought shares at an inflated price (at the time) and did not renegotiate terms and conditions of all of the employees at the same time was another major error.

    Yet another Brown disaster, which hangs around the governments/taxpayers neck.

    The idea that the shares would be profitable in a few years was always a sick a joke, as billions more (above the original purchase price) have been allocated/spent trying to prop up these organisations in the form of guarantees and the like.

    • A different Simon
      Posted March 2, 2013 at 11:18 am | Permalink

      If they had waited till the bank declared insolvency they wouldn’t have had to honour the bonuses either .

      Old Gordon just loved spending money , especially other peoples .

      • alan jutson
        Posted March 2, 2013 at 1:36 pm | Permalink


        “….honour bonuses……..”

        My point exactly.

        Also standard payments for people being made redundant.

        No large Director pay offs or enhanced Pension schemes.

        Those who were being re-employed could have been given new terms and conditions.

        Seems so logical.

        • A different Simon
          Posted March 2, 2013 at 8:44 pm | Permalink

          Alan ,

          I can think of another good reason why insolvency practitioners should have been brought in – to lock down the assets .

          (rest of post takes a very dim view of bankers and makes a series of unsubstantiated allegations about what they got up to.-ed)

        • lifelogic
          Posted March 2, 2013 at 8:45 pm | Permalink

          Indeed total economic insanity from G Brown but alas with others money as usual.

  9. oldtimer
    Posted March 2, 2013 at 8:57 am | Permalink

    In the immediate future, I favour your preferred course of asset disposal where these can achieve respectable prices. Handing out millions of shares to millions of taxpayers, with the bank in its present condition, is a complete waste of time and money (on needless administration). Shares should be offered for sale when a sensible price can be secured for the taxpayer. That means continuing with the present programme of slimming down the bank accompanied by piecemeal disposals of those parts that can sensibly be sold off. Political gestures should have no place in this.

  10. James Reade
    Posted March 2, 2013 at 8:58 am | Permalink

    If we’re on hating Gordon Brown, can you remind me again how successful the 3G mobile phone auction was? How many billions did that make?

    And can we then compare and contrast that to the 4G auction?

    • lifelogic
      Posted March 2, 2013 at 10:42 am | Permalink

      Yes the huge lack of confidence in Cameron/Osborne/the UK/the economy/growth prospects and Labour in 2015 does not help. But they are not really comparable – if you have 3G then 4G is only a minor improvement.

      • James Reade
        Posted March 2, 2013 at 8:39 pm | Permalink

        The point is – Brown’s Treasury got billions more than expected, this one got billions less.

        This incompetent Brown, this Brown that sold the gold, yada yada yada.

        Go on, make excuses all you like but the facts remain.

        And that’s before we start on the growth records of various Treasury administrations…

    • Mark
      Posted March 2, 2013 at 10:53 am | Permalink

      The 3G auction was in game theory terms a classic case of winners’ curse. The phone companies learned and so have been more cautious in their bids this time: if they make good profits from doing so, those will be taxed in due course.

      So far as the wider economy is concerned, it was effectively a deferred tax raising exercise (paid via higher mobile tariffs) that damaged growth and promoted Brown’s profligacy. Brown was fond of borrowing money from the future to waste in the present. He found many schemes to do so. We ended up with public sector net debt of around £2.3 trillion when he left office in consequence – and that excludes the off balance sheet stuff.

      Reply Mr Brown’s auction was a triumph for the Treasury b ut a disaster for the industry. It took too much money out of the industry, setting back the investment in UK telecoms.

      • James Reade
        Posted March 2, 2013 at 8:43 pm | Permalink

        Damaged growth? You serious? It sounds a lot like you bought, hook line and sinker, the sob stories of the mobile phone companies.

        I think their profits over the years are a pretty good indicator, and they all seem in quite fine health thank you very much, as far as I can see.

        But by all means, show me the share prices, show me the evidence, instead of your unsubstantiated assertions. Same goes for the reply.

        The fact is that Brown’s auction made use of the best auction theorists around (some of who do admittedly have a little bit too high an opinion of themselves). Did Osborne’s? A successful auction leads to the prices being paid reflecting what the bidders were prepared to pay. All evidence suggests that Brown’s auction achieved that. I don’t know the facts but I’d be interested to know who consulted Osborne on his.

        Again – let’s get past the bluster and political biases and get to the facts.

        If you do want to get on to the wider economy, we can do, but again we have a lot to talk about – and again, the facts will kind of get in the way of your politically biased assertions. (e.g. the size of the deficit/debt bore more relation to the economic downturn than any small deficits run in the 2000s pre crisis. But I know, like John, you don’t like to cyclically adjust, do you? It means you might have to revise up your opinion of someone from a different party.)

        • Mark
          Posted March 3, 2013 at 8:34 pm | Permalink

          The profits of the multinational phone companies are the sum of their profits in many markets. They paid rather different prices for their 3G stakes elsewhere (the UK 3G auction was the first). Some reading to you, James:


    • JimF
      Posted March 2, 2013 at 10:58 am | Permalink

      It made billions at a cost to the end users of mobiles- a tax in all but name. Brown could equally have announced a 3G mobile usage tax, infact I’m surprised he didn’t in addition!

      • James Reade
        Posted March 2, 2013 at 8:45 pm | Permalink

        No, it made for the Treasury what the bidders were prepared to pay.

        Start addressing your opprobrium at the right people – those in the mobile phone sector who paid too much.

        You can’t blame it all on Labour, funnily enough….

        • Mark
          Posted March 3, 2013 at 8:39 pm | Permalink

          Blame can go to the game theorists who got it wrong advising the companies. But even then since it was only the first round of a global series of auctions in a complex repeated game, they might have the view that sacrificing the first auction allowed effective tacit collusion that undervalued subsequent ones as comment on the degree of overpayment was extensive. IT was the UK market that suffered, even if it gave Brown funds to blow with profligacy.

    • Richard1
      Posted March 2, 2013 at 11:45 am | Permalink

      I dont see the relevance of this point by James Reade. Both auctions were necessary in order to allocate spectrum and allow the industry to develop. The prices achieved were a function of market circumstances at the time – clearly totally different for the 4G auction than the 3G auction. Have you a better suggestion which would have yielded higher proceeds from the 4G auction?

      • James Reade
        Posted March 2, 2013 at 8:46 pm | Permalink

        I’m commenting on outcomes. One did much better than pundits expected, the other much worse.

        What I would like to know is who Osborne consulted in the design of the 4G auction – that would be interesting. I shall have to do some research on to that.

        Why is that irrelevant exactly? John got us off topic with his anti-Brown rant, figured I’d pitch in.

        • Richard1
          Posted March 3, 2013 at 10:55 am | Permalink

          It is irrelevant because the price achieved in both auctions was a function of the telecom companies’ assessment of the NPV of the license at the time of the auction, based on projected revenues. In the case of the 3G auctions of course, the industry made a huge miscalculation. Governments dont determine market prices. The right way to allocate spectrum is through an auction, whether the price achieved is high or low has nothing to do with the government auctioning the spectrum. (Arn’t you an economist?!)

    • con
      Posted March 2, 2013 at 1:27 pm | Permalink

      Can I suggest that both the 3G and 4G auctions, which were by definition free market, not fixed price, achieved what the market thought they were worth?

      Estimate by the Treasury were wrong for both, naturellement.

      • James Reade
        Posted March 2, 2013 at 8:47 pm | Permalink

        No, the pundits, not the treasury. They were the ones proved wrong in both cases.

        One, the treasury got way more than the markets expected, the other, the treasury way less.

        I’m loving all these excuses – it’s really hard to give credit to someone of the other party isn’t it?

  11. Jerry
    Posted March 2, 2013 at 9:06 am | Permalink

    It all goes to preserve Gordon Brown’s reputation as the nation’s worst investment manager.

    No, it just goes to show how far up the creak the banks were, and still are, all Brown did was save yours and mine current accounts and you know it, stop playing party politics – these losses have happened 2 to 3 years into a Tory government so what is Cameron doing, why hasn’t he sorted out the mess, I mean, the deficit is still rising, banks are still awarding bonuses for failure, millionaires are still not paying their due taxes in full, (loop-holes have not closed)…

    But to the broader point you make, about shares, why can’t the government just hang on to these shares, after all if these banks shares are going to increase in value then why can’t we all (as a society) benefit, how many new hospitals, socail housing, up-graded roads and rail links (or even warships, to make Mr Hammond feel better…) could this money fund?

    • Richard1
      Posted March 2, 2013 at 10:07 am | Permalink

      There was no need for Gordon Brown to invest £70bn of taxpayers’ money into the equity of the banks in order to protect UK deposits. He made this decision – ludicrously describing it as ‘saving the world’ – without any due diligence on the condition of the banks. (Swedish banks were told informally by their govt at the time that if they showed up wanting equity, the price would be 0). What he could and should have done was provide the banks with liquidity, guaranteed UK deposits, and insisted on the banks restructuring, perhaps through bank of england administration. The bank bailout, so lauded at the time and even now, was one of the greatest errors of economic policy ever made by a UK chancellor. Brown was a disaster, and we will be paying the price of his period in office for many years.

      • JimF
        Posted March 2, 2013 at 10:59 am | Permalink


      • Edward2
        Posted March 2, 2013 at 11:39 am | Permalink

        An excellent post. I agree with every word you have said.
        Save the world Gordon had an inbuilt political bias that took him down the nationalisation path and he had an even stronger desire to save the Royal Bank of Scotland for obvious reasons.

        • Jerry
          Posted March 2, 2013 at 1:36 pm | Permalink

          @Edward: You mean like how some on the right have “an inbuilt political bias” towards the free market, even when it might not be the best thing (such as railways or utilities)…?

          • Edward2
            Posted March 2, 2013 at 5:03 pm | Permalink

            Well, obviously, yes, all politics is about opinions and inbuilt bias.
            We were debating Browns decison to do what he did with the failing banks and it seems his bias is costing us billions.

            Rail and utilities are not good examples of free markets.
            They are perrhaps good examples of State created monopolies and cartels.

          • Bazman
            Posted March 3, 2013 at 3:43 pm | Permalink

            The sun rising tomorrow. Would that be an opinion or a fact Edward? Just testing.

          • Edward2
            Posted March 3, 2013 at 6:19 pm | Permalink

            Neither Baz, it is just a prediction.

          • Bazman
            Posted March 3, 2013 at 7:48 pm | Permalink

            Just a prediction? A prediction with a 100% certainty. What is the prediction of the sun not rising tomorrow? In your prediction? Tells us a lot.

          • Edward2
            Posted March 4, 2013 at 8:48 am | Permalink

            If you ask a silly question Baz, then you often get a silly answer.

    • Gary
      Posted March 2, 2013 at 10:30 am | Permalink

      It would have been cheaper to bailout the current accounts and let the banks die.

      • Jerry
        Posted March 2, 2013 at 1:40 pm | Permalink

        @Gary: Indeed that might have been an option had it just been current accounts but we all know that the domestic customers (and small business owners) were exposed to or had involvement in more than current or deposit accounts, and just how would have such a ‘solution’ dealt with mortgages?

        • Edward2
          Posted March 2, 2013 at 5:07 pm | Permalink

          You assume that these failing banks would not have been taken over by other better run banks.

          Mortgages are profitable and would have been taken over by any number of alternative financial services businesses

          • Jerry
            Posted March 2, 2013 at 7:01 pm | Permalink

            @Edward: You assume that there were banks willing or able to take on such failed banks and their balance sheets/accounts. I suspect that at best names and buildings would have been bought, the bad debt would have been left in the hands of either governments or the liquidators…

          • Edward2
            Posted March 3, 2013 at 6:26 pm | Permalink

            Your scenario sounds ideal to me Jerry.
            The useless bits would have closed down and the useful bits would be bought up.
            It happens all the time in industry when liquidators take over a failed business.
            The debts are not taken on by the purchasing firm, thats the best bit about buying off a liquidator.
            There were several Banks waiting in the wings but Gordon was keen to nationalise.
            Too late now, you and me and the next generation now has a share of the debts.

          • Jerry
            Posted March 4, 2013 at 9:35 am | Permalink

            @Edward2: Typical muddled capitalist thinking, let the state pick up the debt whilst we take the cream… Sorry but these private companies would have had to take it all or non, if the state had to deal with the bad debt then better to restructure these banks into mutuals.

          • Edward2
            Posted March 4, 2013 at 11:16 pm | Permalink

            Again you misunderstand what would have happened if controlled administration of the banks had taken place.
            The state may have had to strengthen cover for depositors and account holders and that would have been a cost, but the real losers would have been bondholders and shareholders not the State (ie us the taxpayers) as is the position now.
            No muddled thinking at all.
            Billions saved.

          • Jerry
            Posted March 5, 2013 at 10:00 am | Permalink

            @Edward: As I said, vulture capitalists taking the meat and making the state take the bones, talk of bondholders and shareholders is just a straw-man argument as they will have lost out regardless if the bank in which they have gambled on has gone belly-up.

        • A different Simon
          Posted March 2, 2013 at 8:56 pm | Permalink

          They could have declared all synthetic credit default swaps null and void .

          This could and should have happened worldwide .

          That would have limited taxpayer exposure to banking activities .

          • Edward2
            Posted March 5, 2013 at 7:40 pm | Permalink

            Wrong again!
            It would not have been venture capitalists but other more successful banks that would have taken over.
            The losers would have been private sector investors who held bonds and shares not the State and the taxpayers as you keep on claiming.
            But I realise its no good arguing, your mind is made up.
            And of course, you are entitled to your opinion which I conceed, as all this is now hypothetical, may be right!

  12. The PrangWizard
    Posted March 2, 2013 at 9:15 am | Permalink

    And another thing – off topic but angry. Prescription charges go up to £7.85 in England on April 1st – April Fool’s Day – for the English that is. Free in Scotland, Wales and NI. Why? Because the UK government – from the English purse and without the direct consent of its people – gives them all so much money they can afford it. Who pays – guess who – just the English.
    Cameron and the Tories have just had a kicking in Eastleigh – they need another one over this kind of thing, and we should keep kicking until they feel some pain.

    • Jerry
      Posted March 2, 2013 at 10:13 am | Permalink

      @TPW: Attack the Scottish why not, but heck, I bet the devolved government would just love to withhold all that oil and gas tax revenue for themselves!

      England could have free prescriptions if the government wished, if they were not giving tax cuts to millionaires they might…

      • alan jutson
        Posted March 2, 2013 at 11:01 am | Permalink


        Are there not any millionaires in Scotland, Wales and Northern Ireland then ?

        But I do agree with you, England could if it wanted to.

        • lifelogic
          Posted March 2, 2013 at 8:53 pm | Permalink

          About 40,000 in Scotland it seems. The 2011 Barclay’s Wealth Map shows Scotland has 1.34 millionaires for every 1,000 residents. London and the south-east has 2.12 per thousand. Mind you £1M in London does not go very far.

          • Jerry
            Posted March 3, 2013 at 11:29 am | Permalink

            @Lifelogic: “Mind you £1M in London does not go very far.

            And whose fault is that, yes millionaires and speculators!…

          • Bazman
            Posted March 3, 2013 at 3:41 pm | Permalink

            This being the same person who is against the minimum wage it has to be said.

      • Edward2
        Posted March 2, 2013 at 11:45 am | Permalink

        You plainly did not read the post properly, TPW was not attacking the Scots at all.
        But he was correct in showing just how ridiculous the devolved UK has become.
        In a fair UK, prescription charges should be the same wherever you live.

        • Jerry
          Posted March 2, 2013 at 4:43 pm | Permalink

          Edward: Sorry but when TPW says things like; “Why? Because the UK government – from the English purse and without the direct consent of its people – gives them all so much money they can afford it. Who pays – guess who – just the English.” it certainly reads like an attack, hence my comment about oil revenue, people in England tend to forget just how much Scotland has ‘given’ to the UK over time (and why some south of the boarder a little worried that the Scots will go their own way…

          • Edward2
            Posted March 2, 2013 at 8:13 pm | Permalink

            Strange Jerry that there is a majority in England for Scotland to be independent whilst there is not a majority in Scotland for them to be independent.
            Its all about the fairness of the funding in the UK to the devolved areas.
            Many feel they are very well funded and therefore can afford things like free student fees and free prescriptions etc etc which England then finds even more difficult to afford for its citizens.
            And I will repeat, TPW was not attacking anyone just stating the situation correctly

        • uanime5
          Posted March 2, 2013 at 5:06 pm | Permalink

          In a fair UK, prescription charges should be the same wherever you live.

          In a federal structure each region is free to decide what level the prescription charges should be. So the Scottish and Welsh bodies have every right to subside prescription charges for the local people. The fact that they’re not subsidised in England isn’t the fault of the Scots or Welsh.

          • Edward2
            Posted March 2, 2013 at 5:11 pm | Permalink

            It is however much more difficult for England to afford to provide no student fees or free prescriptions when they are having to subsidise the rest of the UK who then use that excess money under the ridiculous Barnet formula to make these give away offers to their electorates.

          • Jerry
            Posted March 3, 2013 at 6:01 pm | Permalink

            @Edward: Sorry but how much oil revenue was sent to London last year and the last 30 odd years before that? I’m no Scot but you are totally out of order, the sole reason England doesn’t have free tuition or prescriptions is that successive UK government (made up of mostly English MPs) have decided that the English will not have them. Look south and east of the devolved borders for your scapegoats…

          • Edward2
            Posted March 4, 2013 at 12:55 am | Permalink

            “Im totally out of order”, what for saying something you dont happen to agree with, well Jerry this is a free country and I will put forward the opinions I have.
            England gives huge amounts of money to the other parts of the UK without which they would be in serious financial diificulties and would not be able to give free student fees nor free anything else.
            The balance is wrong and its time the ridiculous Barnet formula was changed.

          • Jerry
            Posted March 4, 2013 at 9:42 am | Permalink

            @Edward2: You are out of order for trying to blame the Scots, Welsh and NI governments for something that is the fault of the UK government made up of mostly English MPs, it is not about disagreeing with you, more of a case that you are blatantly wrong!

            If Scotland withheld their oil revenue the English chancellor would be in serious trouble, even more so if the Scots placed a tax (paid by England) on all gas following through their country, careful for what you argue Richard, loose cannons are dangerous…

          • Edward2
            Posted March 4, 2013 at 11:22 pm | Permalink

            Rubbish Jerry,
            The oil revenues are not Scottish that myth has been disproved legally over decades.
            And if they were sequestrated by the Scottish Government then Westminster would just reduce the huge subsidy that is annually paid to Scotland.
            Its all about the Barnett formula.

          • Jerry
            Posted March 5, 2013 at 10:08 am | Permalink

            @Edward2: Even if the oil its self is not Scottish (and no, it has not been proved whose territorial waters it is in, just who has the extraction rights) but the vast majority of it flows through pipe-lines in Scotland so a future independant Scottish government would be quite in their rights to tax that process – if the English oil companies don’t like it then they are free to build new pipelines that by-pass Scotland.

            As I said, in your quest to blame anyone bar the English for our own problems be very careful what you wish for and who you antagonise…

          • Edward2
            Posted March 5, 2013 at 7:49 pm | Permalink

            You are quite right Jerry when you say “careful what you wish for etc” because a Scotland that tried to declare a economic war on England and the major oil companies who have invested billions, by taking them into nationalised ownership and then taxing them and then controlling the pipeline flows, will find that they would be facing huge legal challenges and would in my opinion lose out hugely in the end.

      • Bob
        Posted March 2, 2013 at 11:12 pm | Permalink

        ” if they were not giving tax cuts to millionaires “

        or increasing the foreign aid budget by £4 billion p.a.

        Reply The aim of the Top Rate cut is to get more millionaires staying here or returning here to pay some tax. They are also cutting tax at the low end of the Income scale, as everyone needs a tax cut.

        • Jerry
          Posted March 3, 2013 at 11:36 am | Permalink

          @JR Reply: Trouble with that thinking is that those most harmed by these prescription charges are the very low paid, they have had no tax cuts because they pay no tax in the first place [1] and might not qualify for in-work welfare benefits that would exempt them from prescription charges.

          [1] in fact they have had a real terms, and damaging, tax rise in the shape of a 5% VAT hike

          • Edward2
            Posted March 4, 2013 at 10:34 am | Permalink

            This is nor correct Jerry because nearly all “the very low paid” will qualify for benefits which will exempt them from paying prescription charges.
            Also, there are a large number of other reasons you can be exempt, if you go onto the Gov’t website you will see there is a long list.

          • Jerry
            Posted March 5, 2013 at 10:15 am | Permalink

            Edward2: The government removed Tax Credits for anyone working less than 30hrs pw, and those on JSA benefits can only do 16 hrs pay work pw before their claim (money) is stopped, also most people are not suffering from the types of illnesses, or in the groups, that entitle them to exemption – as logic would suggest, otherwise if the majority were exempt there would be very little point in having prescription charges in the first place!

            Please feel free to find out the facts, not just the government spin.

          • Edward2
            Posted March 5, 2013 at 7:50 pm | Permalink

            Jerry just read the back of a prescription there is a long list of people who are exempt.

  13. waramess
    Posted March 2, 2013 at 9:54 am | Permalink

    Hard to see how any of the above will bring RBS back to good health if they continue to be saddled with a portfolio of bad and doubtful debts that sometimes even they may not be aware exist.

    How about just liquidating the bank? No point the government looking to recover its initial investment if the cost of so doing is to continue the status quo. Break the bank up, sell whatever assets will sell and if there is a surplus for shareholders then so be it.

    Other banks including the new ones on the horizon will buy the good assets and whatever good parts of the bank can be salvaged, The new banks will then be sufficiently strong to lend,

    Nothing to be afraid of because this is what should have been done at the outset, but quite a lot to be afraid of if the status quo is allowed to remain.

  14. Richard1
    Posted March 2, 2013 at 10:07 am | Permalink

    There was no need for Gordon Brown to invest £70bn of taxpayers’ money into the equity of the banks in order to protect UK deposits. He made this decision – ludicrously describing it as ‘saving the world’ – without any due diligence on the condition of the banks. (Swedish banks were told informally by their govt at the time that if they showed up wanting equity, the price would be 0). What he could and should have done was provide the banks with liquidity, guaranteed UK deposits, and insisted on the banks restructuring, perhaps through bank of england administration. The bank bailout, so lauded at the time and even now, was one of the greatest errors of economic policy ever made by a UK chancellor. Brown was a disaster, and we will be paying the price of his period in office for many years.

  15. NTropywins
    Posted March 2, 2013 at 10:12 am | Permalink


    I would be interested to know how you will identify ‘taxpayers’. Sounds to me like a dog’s breakfast in the making.

    • Bob
      Posted March 2, 2013 at 11:14 pm | Permalink


      Dog’s breakfasts is what they do best.

  16. Gary
    Posted March 2, 2013 at 10:25 am | Permalink

    Alan, you don’t speculate in gold, you speculate in fiat currencies. Gold’s value is denominated in fiat currency and that is falling steadily, gold itself is very stable. In 2003 Brown sold gold to hold fiat currency and every single currency in the world has fallen in value against gold since then :


    When we say one fiat currency is rising against another, they are both still falling in absolute value, as seen with reference to gold.

    • Geoff M
      Posted March 2, 2013 at 11:24 am | Permalink

      Gary, good posting, also gold and silver are used in industry to assist in the making of goods hence helping the economy by producing exports which are then unfortunatly bought and sold in fiat currancies.

      It is incumbent on government to hold a strategic amount of gold at least and as of Dec 2010 we had 310.3 Tonnes = 17.6% of FX reserves.

  17. sm
    Posted March 2, 2013 at 10:34 am | Permalink

    A small but salient point about ordinary people like me getting a small amount of shares: recently I had to deal with a close relative’s estate, as an executor and beneficiary. The deceased had a very small amount of shares, which in my innocence I thought I could ask my bank to sell for me (I’ve never dealt in shares before). It sensibly informed me that it would cost a lot of money, because a separate account would have to be set up, and then it would take a commission. So I then had to re-register the shares in my name (at a cost) and then sell it through an agency (at further cost). So, simply from an administrative point of view, giving every taxpayer a handful of RBS sharescould cause more trouble than it’s worth.

    • JimF
      Posted March 2, 2013 at 11:02 am | Permalink

      Indeed we should have a campaign to stop this route of sale before it starts.

  18. Lindsay McDougall
    Posted March 2, 2013 at 11:04 am | Permalink

    I favour your approach. Just so long as nobody expects the sell off to yield as much for taxpayers as Gordon Brown payed for the shares. He payed way too high because he didn’t do due diligence before valuing the shares.

    Recent statements by the Chancellor of the Exchequer seem positively designed to diminish RBS profitability. He wants it to shrink its investment bank operation and become mainly a retail bank. He has also foolishly played up the extent of the wickedness of fixing the LIBOR rate. There was a recent news item from Bloomberg in the States. The amounts that Barclays, HSBC, RBS and others are being sued for (civil damages, not the fines which are past) total more than their entire annual gross earnings there. The parasitic USA legal profession is in action again, and OUR Chancellor of the Exchequer has just given them moral support.

  19. Richard1
    Posted March 2, 2013 at 11:55 am | Permalink

    One thing to forget is the Governments in-price. Its a sunk cost. So ‘getting back our money’ is an irrelevance, we need to consider whats the best policy now given where we are. We see that even a free market politician like Mr Osborne is drawn to populist interference in the banks (on strategy, on bonuses), reminding us again what bad owners governments always are of businesses. I dont think spreading the shares is a good idea – it would give the banks huge numbers of shareholders and its not economic for individuals to hold very small shareholdings directly. The banks should be broken up as Mr Redwood suggests, to create a more competitive market. That process will involve detailed scrutiny of their balance sheets and may reveal facts which alter the current equity values dramatically. Perhaps there will be very little equity value once these banks are off the Government’s books. Even so it would be best to proceed with a break-up and just recognise the dreadful cost of Gordon Brown’s period in office. It beggars belief that Brown’s principle lieutenants, Ed Milliband and Ed Balls, are in serious contention to be in office again after the next election!

  20. John Maynard
    Posted March 2, 2013 at 12:06 pm | Permalink

    I like your preferred option, but it would be essential to protect the new fledglings from (Santander type) predators.
    I presume that would be an infraction of EU law ?

    reply I trust the Regulators and the Copmpetition Authorities have learned something from their huge mistakes allowing conglomeraiton in the noughties,and would block any such mergers. Alternatively, the companies could be floated with a Golden share to stop that, subject to Brussels agreement.

  21. behindthefrogs
    Posted March 2, 2013 at 12:46 pm | Permalink

    In the case of Lloyds HBOS the government could return some of the shares to existing shareholders. I would suggest a small number, say 500 to each shareholder. This would compensate the small shareholders for their loss of dividends in the past few years while being largely irrelevant to the large shareholders.

  22. Mark B
    Posted March 2, 2013 at 3:30 pm | Permalink

    Mr. Redwood MP, I agree with you last idea, the one that you yourself favoured. Break the banks up into smaller local/regional banks. Run them along the lines of a mutual ie no shareholders. Let the market decide if they go bust or not.

    • outsider
      Posted March 2, 2013 at 6:59 pm | Permalink

      Nice idea Mark B but it is not going to happen because:
      1)The Treasury/taxpayers would get nothing.
      2)It would require complex primary legislation.
      3) These are the guys who insisted on “privatising” TSB (which neither the state nor anyone else owned) for purely ideological reasons.

      Needless to say, TSB soon fell to a takeover bid, so the main benefit was to the City bankers, lawyers, traders and accountants who will now advise the government on what to do with RBS.
      Investment bankers are drooling over the prospect. If RBS is broken up, the parts will only stay independent and in British hands until bigger foreign banks feel confident enough to buy them up.

  23. uanime5
    Posted March 2, 2013 at 5:15 pm | Permalink

    The problem with 2 is that many people will sell the shares as soon as they can, so it will result in RBS’ share price being rapidly depressed sometime in the future.

    In other news the Defence Secretary wants welfare to be cut rather than the army. I wonder if these welfare cuts will apply to soldiers who have somehow lost a limb and are unable to work?

    Also given that the largest welfare costs are the pensions, housing benefit, and in Work Benefits it’s not possible to reduce welfare without abolishing the state pension, lowering the cost of housing, or raising salaries. So any meaningful cuts to welfare aren’t viable.


  24. David Langley
    Posted March 2, 2013 at 5:59 pm | Permalink

    There is a fifth option, carry on as you are doing right now, in other words do nothing. The write offs have largely cleansed RBS as others suffered the same fate. The underlying trend for RBS is profitable. Yes they have paid out for lots of criminal activity and will no doubt have a lot more bad and doubtful debt on the books. A staff member of Natwest told me that anyone having a claim registered for PPI would get paid whether it was valid or not. In other words there is a sense of pay up and get rid of it.
    I do not support that but understand it. In a year or two this bank will be back in rude health managed properly and all the retail staff particularly whose futures are tied up with the banks success will have jobs and contribute to a healthy and competitive financial institution.
    By the way John what is your opinion of the EU directive which will cap bankers bonuses. Do you agree with this and do you agree that we have to obey this directive no matter how much we whine and complain, because thats what being a member of the EU means?

    Reply I am against the Directive – it is foolish and dangerous, and will lead to some teams leaving the EU for less regulated areas, and some upping base pay substantially making the bank more geared. Yes, the Uk will have to obey it, unless we start the serious business of negotiating our new relationship sooner.

  25. outsider
    Posted March 2, 2013 at 7:24 pm | Permalink

    Dear Mr Redwood, there are other options.

    The tests should be :
    1) Netting the best for taxpayers
    2) Ensuring that the banks (whether broken up or not) remain independent and British rather than ending up as offshoots of foreign banks with no long-term commitment to British business.
    3) Avoiding vast fees and profits to the like of Goldman Sachs.

    May I once more repeat my suggestion that this would best be accomplished by turning UK Financial Investments (which owns all the government’s bank stakes) into a holding company and selling 51 per cent to institutional and private investors through a conventional public sale.

    The run-off mortgage portfolios in UKFI should provide enough cash flow to pay some immediately dividend so that its shares would be easier to value properly than,say, a controlling stake in RBS.

    Of course, the privatised UKFI could not own a majority stake in RBS as well as its other holdings for competition reasons so the RBS stake should be halved, with the remaining half being sold bit by bit in tranches to strategic non-bank investors (doubtless from the Gulf or China).

    My solution would meet tests one and two very well, although it would not fully satisfy test three.

    It would also work regardless of whether RBS were broken up as you suggest.

  26. Will Rees
    Posted March 4, 2013 at 8:28 pm | Permalink

    Assuming RBS gets sold off around the time on the next election. If the SNP win their referendum, given RBS has its registered office in Edinburgh and would presumably come under a Scottish FSA, would it be down to the Scottish Government to be their lender of last resort?

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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