Fully nationalise RBS, says Nigel Lawson

Banks' threats to leave the UK are "a load of nonsense", says the former chancellor.

Got the blues: Lawson encourages Osborne to act tough. Photograph: Getty Images

The former chancellor of the Exchequer Nigel Lawson, who sits on the parliamentary commission on banking standards, has urged George Osborne to fully nationalise the Royal Bank of Scotland. The bank is currently 82 per cent owned by the UK government.

Lawson said that as a result of the Libor scandal, RBS is expected to be fined at least £500m and may not pay bonuses in 2013.

In an interview with the Financial Times, Lawson said that lenders should stop worrying about “losing star performers” in the event that bonuses are cut. He said that the youthful energy needed to be a trader was not in short supply: “They’re all of them easily replaced, particularly in today’s labour market.”

Criticising the appointment of Stephen Hester as RBS's chief executive by the last Labour government, Lawson said: “It is absurd to put a lifetime investment banker in charge of an entity which is overwhelmingly a retail and SME [small and medium enterprise] type bank.”

Lawson urged Osborne to take into consideration the advice of the cross-party banking commission chaired by Tory MP Andrew Tyrie to enhance retail banking. He said that there was a “huge amount of bank lobbying” over the implementation of Vickers commission proposals, which recommended a ring fence to save high street lenders from riskier investment banking operations.

Lawson also urged Osborne to toughen up liquidity ratios for banks and not to move away from inflation targeting. He added: “I don’t think the government needs to be frightened of the banks in the slightest. One does hear from time to time threats that they will up sticks but that's a load of nonsense.”

The former chancellor urged Mark Carney, the incoming Bank of England governor, to concentrate on sorting out the banking system.

“I’m sure Mark Carney is a very clever young man but I think that the government would be mad to move from inflation targeting to money GDP targeting,” Lawson said. Money GDP data was “not worth the paper it’s written on”.