Talk to most Tory advisers about RBS and Lloyds, and they soon get round to symbolism. For now, they reckon, the state-owned (or partially state-owned) banks are symbols of all that was wrong and debased during the pre-Crash years. But in future… in future, all will be different. Returning the banks to the private sector, they say, will be symbolic of an improving economy. These dead weights will have become dead good.
Shuffling through the papers this morning, it seems that this transformation is well on course. After making a £2 billion profit in the first three months of this year, the share value of Lloyds Banking Group is close to the level at which the Government would break even were it to sell off its 39 per cent stake. Both the Mail and the Times (£) contain editorials urging George Osborne & Co. to consider how this might be done.
The Treasury’s stated position is to wait and see. Lloyds still needs to fulfil several requirements before a sell-off can be properly organised. This may even take until after the next election, perhaps 2016.
This is sensible politics as well as economics: a rushed privatisation could lead to accusations of incompetence, similar to those that the Tory leadership enjoyed levelling at Gordon Brown after his great gold sale. But Messrs Cameron and Osborne will still hope that the banks become part of a pre-2015 good news story. Not only is there all that glorious symbolism, but there’s also the ongoing struggle to reduce the deficit. A windfall from the banks could relax the Exchequer’s straining finances, and perhaps even loosen the spending settlement for the next Parliament. Other privatisation stories in today’s newspapers should be regarded in that context.
But all this is assuming that the Government will choose a sell-off. One alternative that’s been mooted – by Nick Clegg, among others – is to give away shares to the public. As the Times notes in its editorial, “if the shares were given to everyone who applied and who had a national insurance number, an individual holding could amount to a few hundred pounds.” This would be a very pleasant way of, as someone once put it, sharing the proceeds of growth. And – who knows? – it might even help redeem the banks in the public’s collective mind.
Given, however, the administrative complexity of such a measure – as well as Government’s ability to turn any goodwill gesture into a big, bad cock-up – a sort of middle-way may be preferable. This could involve selling the banks to
the highest bidders, at a propitious time and all that, and then using the proceeds to fund a tax cut. Some of the money could still be used for the cause of deficit reduction, too.
Whether any of this will count around election time – as something that has been achieved, or as a manifesto commitment, perhaps – depends on factors ranging from Lloyds’ share price to the growth of the economy. But the Tory leadership had better get round to thinking about it soon, if it isn’t already. The Lib Dems will be poised to make whatever policy emerges their own.