Who should get RBS and Lloyds shares?


I blithely write that we as taxpayers own Royal Bank of Scotland and Lloyds - or rather the state controls 81% and 39% of these recuperating banks respectively.

But as and when they are privatised (and as you may recall, RBS hopes that'll be next year), who actually deserves to own them?

To become sententious for an instant (don't moan), this is a political, ethical and practical question.

The starting point is this: the Lib Dem bit of the government is keen on Portman Capital's notion of distributing all the shares to us, to citizens, for free, and the Tory part is not ideologically opposed; a more traditional Treasury approach would be to offer a portion of the shares being privatised to retail investors (people, not institutions) at a discount.

Let's ignore the logistical challenge (ahem) of registering as owners of these shares some 30 million or so different people, which would be required by the free-shares-for-all scheme. Or to put this another way, I am going to make the heroic assumption that if you chuck money at this problem (and it would be a good deal of money), it could be solved (which may be the lesson of the non-disastrous sale of tickets for the London Olympics).

The question is, who actually has a right to the free shares windfall?

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Perhaps... the shares should go to all British citizens. But should that include prisoners, or those on community service, or people on remand?”

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When people like me write or say that taxpayers implicitly own them at this moment, there is an implication that only those who make a net contribution to the costs of running the state and its apparatus have that ownership right.

In other words, perhaps the free shares should only go to those people who pay more in taxes, perhaps, than they receive in cash benefits and tax credits.

But that number would be millions and millions of people fewer than all citizens. And most of these would be on relatively high incomes (to state the bloomin' obvious).

That narrow distribution would certainly be seen as very unfair by those who lost their jobs or cannot find work as a consequence of a banking crisis that not only led to the semi-nationalisation of RBS and Lloyds but also precipitated the worst recession since the 1930s.

It would exclude, for example, something like a million unemployed young people aged 18 to 24.

Also left out would be those whose incomes have been squeezed by our economic plight to a level where they are net recipients of benefits. Would that be just?

And what about the vast numbers of retired people on relatively low pensions who currently pay no income tax, but who paid tax all their lives, prior to retirement? Should they be deprived of the shares?


Social harmony would probably not be promoted if those who continue to coin it in our stagnating economy, including our friends the bankers, were to receive the free shares.

Perhaps the definition of taxpayer should go wider, given that it is impossible for any of us to avoid paying VAT and duty on booze and fags. If we think the shares should go to taxpayers, should they simply go to everyone, since we all pay indirect taxes?

But on that definition of taxpayers, the shares should go to children and foreigners, as well as income-tax payers.

In fact if paying tax is the qualification, foreigners resident here for tax purposes should certainly receive the shares. So does it feel fair to you that those only passing through the UK should receive RBS and Lloyds shares?

Perhaps therefore the shares should go to all British citizens. But should that include prisoners, or those on community service, or people on remand?

And here we also get into a practical difficulty, which is - as the Home Office is painfully aware - there is no reliable database of all British citizens.

Then maybe it should be those with National Insurance numbers who get the bank shares. But that would include lots of foreigners and prisoners. And, I am told, it is quite hard to prevent shares going to fraudsters, if the relevant dataset is those with NI numbers.


An alternative qualification would be registering to vote. But that would be seen as in effect imposing a financial penalty on those exercising their important right to opt out of the democratic system.

Or to put all this another way, the chancellor and prime minister would have to make quite a hard policy decision when deciding precisely who is entitled to the free shares.

And before taking the plunge in deciding who has really earned an entitlement to these shares, Messrs Cameron and Osborne may remember that the proceeds of a conventional privatisation by sale would be enjoyed by all of us anyway, in that those proceeds would reduce the national debt.

So our leaders may wonder why they should go to all the expensive bother of handing shares to everyone, if flogging the banks in the normal way would be a boon to all "taxpayers" (to use that imprecise word again).

Except of course that Portman has come up with the clever wheeze of saying that although the shares should be distributed to all of us for free, as and when we sell the shares the Treasury would get back from us a sum equivalent to what it has invested in the banks, and we would only get any profit over and above that

But this ruse to secure some money for the Exchequer would in effect lock up the Treasury's capital in the banks for years and even decades (it could not force the new owners to sell). And it would therefore be potentially very expensive for the Treasury (and, by implication, for "taxpayers" in aggregate).

All of which is a long-winded way of saying that the free-shares idea may be seductive, but it isn't a free lunch for government or citizens.

Public float?

So what about the more traditional "Tell-Sid" privatisation route, of offering the shares to all of us as individuals at a discount to the price that the investment institutions would have to pay?

Well here we run into the question of whether "caveat emptor" (buyer beware) can and should apply.

The point is that in a stagnating economy, and at this phase of their recovery, RBS and Lloyds are not the kind of solid, reliable utilities - gas, electricity, telecoms and so on - that were privatised in the 1980s.

They are highly geared bets on whether the British economy emerges from its long period of torpor.

Solid and sustained economic recovery could see their shares double or even treble. A return to painful contraction would be a short cut to painful impoverishment for their shareholders.

Posit for a moment that millions of British people invested some of their savings in Lloyds and RBS just before an election. And then the eurozone imploded, mullering bank share prices and the wealth of all those who bought them.

That might not be the backdrop that the Tories and Lib Dems would ideally choose for their general election campaigns.

The previous government took the decision to buy £66bn of shares in RBS and Lloyds over a weekend in the autumn of 2008. It's not altogether surprising perhaps that the successor government is taking rather longer to work out how to get rid of these shares.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 160.

    devil is in the detail as ever - but there is a lot in trying to get money into people's pockets so we can all use it to kick start the sleeping economy, by somehow sharing out bank assets controlled by the government - good idea, needs detailed working up

  • rate this

    Comment number 159.

    What sort of stupid article is this? How about we give 'shares' in the NHS, roads, Post Office, etc etc to all the individual taxpayers too so we can dispose of them as we wish.

    What's so special about the banks?

  • rate this

    Comment number 158.

    My fear is that the government will sell it at too low a price, i couldn't care less who buys/owns it providing every last penny that was used to bail them out was paid back. I do not want the bad debts to be locked into a so called toxic bank that we inevitably pay for in order to make the sale look attractive. I'll guarantee its sold for a huge loss, public money so they couldn't care less.

  • rate this

    Comment number 157.

    The obvious solution to me is that the Lloyds share holding is exchanged for Verde/TSB bank which the government can keep and run at a profit for as long as it wants before privatising. This way Lloyds gets the govt off its board, off loads Verde to appease the EU and the govt gets a profitable TSB back in its portfolio.
    What to do with RBS? Let Alex Salmond pay the UK govt back for the bail out!

  • rate this

    Comment number 156.

    The best option is to:
    Float the banks on the market, let whomever wishes to buy shares to buy them, at the fair market rate. Return the recouped moneys to us taxpayers via a tax refund next financial year. It was taxpayer money that bailed it out, we deserve the proceeds (if any) of our assets' sale.

    Lastly, wash our hands of this sorry tale and learn our lesson, don't bail out banks!

  • rate this

    Comment number 155.

    If "free shares" or subsideised shares are to be provided, the measure should be the electoral roll as at the local elections this year. It's easy to validate, for one thing. As for those who opt out of thir right to vote, that's a different matter to not registering to vote. If you don't bother to register then you shouldn't be allowed to care what the government decides to do.

  • rate this

    Comment number 154.

    What about a free shares give away just before the next election?

    That's my guess.

  • rate this

    Comment number 153.

    Privatisation has gone too far.
    When you see much of the NHS's services being leased for competitive tendering despite, you know things have gone too far.

    These banks were rescued by the taxpayer, but yet they will never operate in the taxpayer's interest.

    They will just be sold off at a loss to some foreign bank, and it will be the taxpayer who covers the loss.

  • rate this

    Comment number 152.

    Who'll get the cash?

    With Lynton Crosby (the Tories new election advisor) busy in Downing St. sorting things out for his friends the shares will likely go to any form that employs his Lobbying firm.....

    The Queen's Speech was supposed to include bills to control lobbying & plain cigarette packets......Britsh American Tobacco are Lynton Crosby's lobbying form's biggest client......

  • rate this

    Comment number 151.

    The soared banks share price are illusive, mainly by cost cuttings and QEs. The banks haven't learnt a thing and still take the same risks, they just hope they don't get caught.

    If the government offers the shares in a sale process, don't take it. You will get burnt. All these fiat currency are devalued constantly as we speak.

  • rate this

    Comment number 150.

    I expect Gideon will just give away the shares to his pals, even though you and I have all been paying for the mistakes of bankers via Tory stealth taxes during the last 3 years.

    Why are no bankers in prison yet ? And why no regulation of the banks until 2019 ? Is Gideon scared of the bankers ?

    Just who is in charge of the UK right now ?

  • rate this

    Comment number 149.

    But who repays the government borrowings of debt? We do, our children will, and their unborn children will be.

    Or, the government just prints the money, taxing everyone equally as our currency is debauched making it worth less.

    *If they float shares at market value, what's of value will be purchased. You could buy shares yourself even, and receive a dividend.

  • rate this

    Comment number 148.


    I hope you are right wrt share buyers!

    As for bailing out the Banks, I don't think we paid extra tax, therefore that funding came from borrowing, which became debt, which hugely increased our deficit which is why we face such austerity.

    Repaying debt, will reduce interest payments, which will reduce the deficit, which should reduce austerity.

    Or am I being too simplistic?

  • rate this

    Comment number 147.

    Yeah, 138 sorry!

    "... although a tax refund only benefits those who pay tax,"
    I agree. But it was only the taxpayers who funded the nationalisation of the banks in the 1st place wasn't it? It's their banks so to speak, so the proceeds are theirs alone. Your gripe correctly highlights the inequity of government in banking.

    If the price is right, there will be buyers.

  • rate this

    Comment number 146.

    govt owned lbg shares should be given to lloyds shareholders who were looyds shareholders at the point immediately before hbos became part of lbg

  • rate this

    Comment number 145.


    I presume you meant the solution at 138 ?

    Sounds like a viable option, although a tax refund only benefits those who pay tax, while those that do not will still bear the full brunt of undiluted austerity measures.
    It would also mean UK Gov finding buyers for the shares currently held, and I'm not sure there are enough potential buyers (could be wrong)

    Perhaps a bit of both solutions?

  • rate this

    Comment number 144.

    Look at the current economy, unemployment, inflation, debt, gov deficits are high and people general wages are decreasing. Yet the stock markets are hitting new high and properties price going north!!! Thanks to all governments printing out of the debts.

    Numbers don't lie. We will have another bubble soon and this one will make 2008 like walk in the park.

  • rate this

    Comment number 143.

    Fair enough. I understand your reasoning.

    I feel that money printing, as in the case of Fanny Mae, is not the solution. It debases the currency of everyone holding pound stirling, including banks and countries who buy up our government's bonds when it borrows money to fund itself.

    I feel @140 would be a better solution.

  • rate this

    Comment number 142.


    I don't dispute any of what you write, but the question in the article is how should the Banks repay their debt to UK.

    I am only expressing the view that the best way would be to return the debt, via whatever means, to the Exchequer, as this would reduce the UK's debt and also give the Coalition the opportunity to reduce austerity (now, and that still to come).

    Seems sensible to me.

  • rate this

    Comment number 141.

    What ever the Coalition Government decide you can near Guarantee that the General Taxpaying Public will NOT get a Penny of this money..


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