How Osborne backed down on an RBS firesale

Having previously briefed that Osborne was planning a pre-election give-away of shares, the Tories changed tack after Balls's intervention.

It's now thought unlikely that George Osborne will use his Mansion House speech tonight to announce plans for a quick-fire sell-off of RBS, but that's not what the Tories were briefing a few months ago.

As recently as February, it was reported that Osborne had ordered Treasury officials to plan for a pre-election give-away of shares in the bank, with a source telling the Independent: "One of the options could be to put it in our manifesto – but then Labour could do that as well. Wouldn't it be much better if voters were getting a check for £400 a few months before election day?" Another Treasury figure suggested that selling the shares at a loss would be better than the "political headaches" associated with retaining them. A few days later, David Cameron confirmed that the government was examining the "interesting" idea of distributing shares to taxpayers and was reported to have ordered RBS executives to "accelerate" preparations for a pre-2015 sell-off. 

Then, in May, a minister close to Osborne suggested that it was "unrealistic" to expect the RBS share price to return to its 2008 level in the near future and that the government may have to sell the shares while they were "under water". Later that month, speaking to reporters in New York, Cameron refused to rule out selling the shares at a loss and said he was open "to all ideas and proposals".

It was soon after this, on 27 May, that Ed Balls intervened, warning in an interview with the Times that a loss-making firesale would "add billions to the national debt" and urging Osborne not to put "politics before economics". Osborne was later reported to be planning to use his Mansion House speech  to set out his strategy for an RBS sell-off, with the Treasury examining proposals from Policy Exchange on a share give-away.

But by mid-June, the government had started to rapidly shift its position. The Treasury insisted that it had no fixed timetable or share price in mind and Cameron remarked that taxpayers were "more interested than getting their money back" than the timing of a return to the private sector. Having previously talked up the possibility of Osborne unveiling plans for an RBS sell-off in his Mansion House speech, the Treasury now suggested that the speech would focus on the sale of Lloyds' shares and would not set out a firm timetable for privatisation for either bank. Then, on 18 June, Osborne himself told the Today programme that he wanted to make sure that "the taxpayer gets value for money" and that the return of RBS to the private sector was "a matter for the market". Having previously expressed a bias in favour of an early sell-off, the Chancellor had backed down, heeding the warnings of Balls and others that a firesale was not in the public interest. 

Score this one for the shadow chancellor. 

George Osborne leaves 11 Downing Street earlier today. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The promises of Brexit can't be kept. You can only decide which bits to betray

Vote Leave's great success was in presenting a menu of contradictory options as if they could all be secured. 

If Britain leaves the European Union but retains its membership of the single market and the customs union, has it really left? Barry Gardiner doesn’t think so. Labour’s shadow trade secretary, writing for the Guardian, argues that to satisfy those who voted Leave, Britain must regain control of its own borders – forcing it out of the single market in order to lose free movement rights – and its own laws, forcing it out of both the customs union and single market to avoid regulatory harmonisation.

Jeremy Corbyn has argued that single market membership and EU membership are one and the same, as has Caroline Flint. They have kept the options open on the customs union. Are they right?

As I wrote yesterday, it’s hard to explain what drove Britain’s Brexit vote without conceding that objections to the rules of the single market played a significant role. Gardiner is undoubtedly right to say that two of the biggest drivers of the vote were control over borders and laws, both of which cannot be achieved while remaining within the single market. Neither can the third biggest driver, which was more money for public services in general and the NHS in particular – that £350m a week. Because if the United Kingdom retains its single market membership, it will continue to “send money to Brussels”.

There’s a “but” coming, though, and it’s a big one. The first problem is that while the majority of people who voted to leave did so for reasons that cannot be fulfilled if we remain in the single market, those votes weren’t enough to take Britain out of the European Union. Leave only triumphed because it also secured the votes of people who thought it would take the country out of the political project but would retain a Norway-style arrangement.

The second is that those three big mandates cannot be reconciled with each other. If the United Kingdom leaves the single market and the customs union, then the promise of more money for the NHS will be difficult, perhaps impossible, to deliver, at least not in the way that people envisaged. (When people said they wanted £350m extra in the NHS, they didn’t mean “in order to pay for drugs that are more expensive, to recoup the cost of our new regulatory regime and to plug the recruitment gap left by EU citizens with high-priced locums”. They meant that the NHS would do everything it does now and more, not run to stand still.)

The great success of Vote Leave was in presenting a whole menu of contradictory options as if they could be served on one dish. But you cannot have the Extra Hot and the Lemon & Herb on the same piece of chicken. You have to choose. The big failure of the political class has been not to advocate for one of those options over the other. (Theresa May has effectively been running on a ticket of “Extra Hot, Lemon & Herb, and the French will pay for it”.)

You cannot have a Brexit that unlocks trade deals with India and the rest of the BRICS (five major emerging national economies) and reduce the uncontrolled flow of people from elsewhere around the world to the UK. You can’t have a more generously-funded public realm and pursue a Brexit that makes everyone poorer. You have to choose. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.