Osborne should nationalise RBS, but he won't

Cabinet ministers are reportedly pushing for the full nationalisation of RBS.

Back in the halcyon days of May 2010, George Osborne probably hoped to use the government's RBS shares as the basis for a pre-election giveaway. Now, he'd be lucky not to make a loss. Based on current trading conditions, the Treasury has already conceded that the chances of a sale of taxpayers’ shares before 2015 are "virtually nil". Indeed, so much has changed that the government is now considering the reverse: buying more shares in RBS.

Today's FT reports that senior government figures are discussing the possibility of "fully nationalising" the bank amid frustration at the paucity of lending to British businesses. Acquiring the 18 per cent of RBS that it does not already own would allow the government to direct the bank to increase its lending to companies without fear of legal challenge from the remaining private shareholders. One official tells the paper: "This is a conversation that takes place all the time."

Though he is not named in the report, it's safe to assume that Vince Cable is one of those leading the charge. It was the Business Secretary who recently accused the banks of "throttling the recovery" by failing to lend to small businesses and who called for part of RBS to be converted into a National Investment Bank. But Osborne, the man who voted against the nationalisation of Northern Rock, is unsurprisingly opposed. In a statement, the Treasury said:

We are committed to repairing and returning RBS to full health so that it is able to support the UK economy in the future, and the current strategy is working to achieve that. The government’s policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.

With the economy now in a deep recession, the nationalisation of RBS is exactly the sort of game-changer the government should pursue. But Osborne's ideological preference for the private sector will, one suspects, again prevent a necessary step towards recovery.

Update: My colleague Rafael Behr suggests another reason why Osborne is opposed to nationalisation: "Nowhere to hide in bonus season when it is 'state bank' paying out."

Cabinet ministers are discussing the possibility of taking full control of RBS. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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