Latest post on Left Futures

Five good reasons why Osborne’s selling off RBS and Lloyds is wrong

Osborne in a money shower Osborne as usual is taking advantage of Labour’s distraction at this time to sell off RBS and Lloyds to the private sector at a huge losses to the taxpayer, to accountability of the banks, and to the future of the British economy. This is motivated by his ambition eclipse even the Thatcherite privatisation boom of the 1980s and to oversee the biggest ever sale of publicly owned corporate and financial assets in one year, as well as of course elevating his prospects for the coming Tory leadership race and premiership. But what may be good for his party and for him will certainly not be good for the country.

First, it is a thoroughly bad deal for the taxpayer. Osborne has agreed to cut the public shareholding in RBS from 79% to 73%, but at a loss to taxpayers of £1bn. The scandal of this unnecessary sale is one main reason why it was announced in the summer recess when Parliament wasn’t sitting so that he could avoid hard questioning about its implications. The £2.1bn of RBS shares were sold at 330p per share, far below the average of 502p per share that the helpless taxpayer was forced to purchase them.

But that is not the real reason why Osborne’s policy is downright misguided. The banks’ overmighty arrogance, recklessness, and incompetence were the prime reason behind the worst global financial crash for a century, and there not a jot of evidence that they have accepted their responsibility, shown any remorse, or are committed to any serious reform. Indeed they have fought tooth and nail against reform, have extracted major concessions from a weak Osborne like his caving in by reducing the bank levy in response to their lobbying, have pushed back the time limit for any statutory changed to 2019, and are demanding a very early return to pre-crash business as usual.

Moreover there are 5 specific reasons why the banks should NOT be returned to the private sector. Their deregulated lending – for overseas speculation, for deployment of artificial tax avoidance devices on an industrial scale, for exotic derivative financial constructs which were highly lucrative but were at the heart of the crash, and for for prime property sites in central London – do not benefit British industry, but only their own selfish interests for profit maximization. Only 8% of their lending last year went towards productive investment in Britain.

There has been far too little reform to prevent another massive crash, mainly confined to increasing the capital reserve ratio and setting up ‘Chinese walls’ between the retail and investment arms of banks. They are still ‘too big to fail’, so that the implicit taxpayer guarantee is still in place. There is no structural reform: Britain needs smaller, regional, specialist banks that helps Britain in the same way as the German Mittelstand. And the dark forces of the next crash – the rise of shadow banking and a re-run of the most dangerous derivatives – are not being countered.


  1. J.P. Craig-Weston says:

    An excellent article that summarizes many of the problems with our banking sector very succinctly indeed.

    Unfortunately for Labour and notwithstanding the fact that anyway they lost the last general election massively; they have a massive credibility problem here in the form of the too well heeled Labor, “club,”individuals such as Blair, Ed Miliband himself a multimillionaire and his brother David, (who is a banker,) and who was another former candidate for the Labor leadership is even worse.

    As for the odious Ed Balls addressing the the Bilderberg Group what message was that supposed to be sending ?

    1. J.P. Craig-Weston says:

      In fact at the root of many of this countries, social, economic and political problems it could be argued is nothing more complex than one mans gullibility, ambition and inexperience.

      I still imagine The Great Charlatan, Blair, as younger man, still uncorrupted, middle class, gauche and very much over impressed with himself and by the personal wealth and social status of many of people he suddenly found himself rubbing shoulders with as a minister and later as, “El Presidente.”

      “You know Cherri, these rich blokes aren’t nearly as evil, corrupt and rapacious as everyone says they are; they’ve been really helpful to me, and all they want in return are the revenues of the NHS, the benefit system, the Armed Services, etc and cut of every government service and for every publicly owned asset to be transfered to them, (preferably at no change,) and when you think about it, is that really too much to ask ?”

      “Trust me on this.”

      The rest as they say; is history.

      1. David Ellis says:

        New Labour’s task that it set itself in accordance with neo-liberal doctrine was to change the state from provider to customer. Instead of providing public services that would now be the job of the private sector the state would merely pay for these services whilst keeping a regulatory eye over delivery. Capitalism was put on a drip and this was paid for by the enormous tax take from the bankers’ ponzi scam. Naturally the Tories supported these levels of public spending because it was the companies owned by their school mates that were swimming in public cash providing substandard public services with zero democratic (regulation? pah) control and skimming off 20 per cent from front line services for fat cat salaries and corporate shareholders. What a jolly circus the whole endogenous growth theory malarky of Gordon Brown was.

        Of course it was a house of cards and when the massively over-leveraged banks collapsed in 2008 owing £6.7 trillion in Britain alone public finances collapsed with them and on top of that the state picked up the tab for the bankers 30 year ponzi scam compounding its own bankruptcy. Capitalism is now in the process of self-liquidation which will end either in barbarism or socialism. No doubt New Labour thought this was all a jolly wheeze but the working classes sure are paying for it now.

        1. J.P. Craig-Weston says:

          Which is a very dry way of putting things and which whist still being undoubtedly and indisputably quite true, still leaves insufficient scope for laying the onus and culpability for the current moral, financial and emotional destitution of the UK where it rightly belongs.

          The obscene prosperity of the upper percentile groups is increasingly at the expense, (quite literally,) of the weakest and the most vulnerable in our society and every extra bottle of Port or of, “that jolly old Bollinger stuff,” or our private health-care plan or a private education or that extra car or that second home we so desperately, “need,” or our gold plated pension scheme or yet another buy-to-let property, (“not for us you understand, but just something to leave to the children,”) or that extra holiday (all the Blair period perks, (bribes if you like,) for the middle classes; now being seen increasingly as entitlements,) which are being paid for in blood and from levels of sickening destitution and social deprivation that were previously unimaginable during my life time.

          I’m no longer as young as I used to be and I had step behind a wall in Manchester to service my bladder last week; and what I encountered were perhaps a dozen or more homeless people sleeping rough under bits of tarp or paper or cardboard; some of them were obviously very ill physically, (for whatever reason,) from the stink of them, (well beyond lack of hygiene,) and as for mentally, if they weren’t when they started sleeping rough they probably are now.

          Hanging in the top corner of an huge advertising hoarding was small hand made massage to anyone who still even cares, “Cameron has blood on his hands.”

          It’s true enough, but what we forget at our peril and what is so poisonous and repellent about the hypocritical charade of compassion from all the Nu Labor Luvvies is that all this is the true legacy of the Blair period, (during most of which Cameron was but a callow lad being led astray, warped and abused; by seemingly disinterested and uncaring parents and by our horrible public school system to which I wouldn’t condemn my worst enemy.)

          Cameron is certainly a symptom of everything that’s gone wrong and which continues to go wrong with UK post Blair, politically, morally and socially but the hand that rocked the cradle was Blair’s.

          1. Chris Warwick says:

            For Cameron and Blair alike, the matter is one of control. For Cameron, the notion that ordinary people have a right to benefits, health care, decent housing, reasonable and efficient transport is anathema. Sure, you can have all these things, but not as a right: only if we say you can. This class hatred has set firm in Labour now, too. Only Jeremy Corbin amongst the candidates for Labour leadership is set against this undermining of the rights of the citizen. It matters not what the other candidates say, in terms of personality, personal suitability, or even policy, to win approval. As for the tories, so for New Labour; no going back to the days where British politics would be influenced by the agendas of the working class. Socialists want a society that honours the sacrifices and support for collective provision embodied in the Welfare State by generations of working people. This is what we want to pass on to our children; not the cash equivalent.

  2. Bazza says:

    Yes and Hedge Funds gave £50m to the Tories and got tax cuts of £145m the following year. All courtesy of the Tories (and Lib Dem Dimwits).
    And guess who is likely to gain the most from these £2b of shares (being sold at £1.70p per share less than when they were first acquired)? Yes Hedge Funds – something is rotten in the state of…

© 2024 Left Futures | Powered by WordPress | theme originated from PrimePress by Ravi Varma