Why the public must get their share of RBS and Lloyds

My Lib Dem colleagues and I will not stand by and watch private investors reap all of the benefits once the banks are taken off intensive care.

Despite its importance to our economy, the world of finance has never elicited such a visceral repulsion from the public. This feeling can be summed up in three words: banks, bankers, bonuses.

The effects of the financial crisis of 2008-9 are still felt throughout British society and around the world. While the stewardship of the coalition government means interest rates remain low, the cost of bailing out the banks (an eye-watering £66bn) means that few Britons are immune from the deficit reduction plan necessary to return the nation’s books to good health. With this in mind, my Liberal Democrat colleagues and I strongly favour giving the public something back for the pain visited on them by the financial sector’s actions (we hope they will punish Labour politicians in 2015 for their own role in not saving for a rainy day). In a 2011 Centre Forum paper, in conjunction with Portman Capital, I proposed a public distribution of the government-owned RBS and Lloyds shares with a floor price built into the sale, meaning the government would re-coup its original investment in the two banks with the public gaining in the increase in the share price. This idea will sound familiar as several groups have since proposed similar ideas, most recently Policy Exchange. 

How does the floor price work?

For illustrative purposes only, let us assume that the price of the share is 1000p on the day of distribution with the floor set at 850p. When an investor sells, the Treasury receives the first 850p and also Capital Gains Tax on the difference between the floor and the sale price. The investor receives the balance. In our example, if the investor were to sell immediately at 1000p she would receive 123p, with the Treasury receiving 877p. However, if the investor waited and sold at 1500p his return would rise to 533p per share, with the Treasury receiving 967p. When you sell your shares, the "floor price" is deducted from the sale price, with the public receiving the difference. The floor price will be based on the prevailing market price, but will be at least the 51p per share we paid for RBS and the 74p per share we paid for Lloyds.

Why a conventional privatisation should be rejected

A "share overhang" is when the market expects a large sale from one seller, the situation we would find ourselves in if a normal privatisation is pursued.  Worse, as the government owns such a large proportion of the banks, the market is unable to absorb all of the shares at once, requiring the staging of sales over a number of years. Thus, the shares would have to be sold below market price, with the initial sales being the most heavily discounted, destroying value for British taxpayers. This happened when the US government sold its shares in GM Motors, with the first tranche of shares selling for $11 less than the break-even price to recoup its original investment.

A YouGov poll shortly after my policy was announced found that the majority of the public, across all political parties, supported my idea. The list of supporters has grown since then to include MPs from all sides and think-tanks from across the political spectrum (most recently  the Tory-facing Policy Exchange). The Chancellor should now join the list and announce that the coalition’s intention is to begin a public distribution once a sale of the shares is feasible. The Lloyds share price is sufficient enough to be considered for a sale in the near future, though RBS, despite Stephen Hester’s suggestion that it could be privatised by as early as next year, needs more time to regain strength before we will be confident of recouping our bailout cost from its share price.

The issue of what to do with the government-owned shares in RBS and Lloyds will dominate the next couple of years of the coalition, leading up to the 2015 election. I hope that this debate will focus on the nuances of a public share distribution (who should be eligible? how will voting rights be awarded?), rather than criticism of a typical privatisation whereby rich individuals profit from institutions saved by the taxpayer. My Lib Dem colleagues and I will not stand by and watch private investors reap all of the benefits once the banks are taken off  intensive care; the public must get their share.

Stephen Williams is MP for Bristol West and co-chair of the Liberal Democrat Treasury Parliamentary Policy Committee

An employee of the Royal Bank of Scotland walks inside the company headquarters at Gogarburn in Edinburgh. Photograph: Getty Images.

Stephen Williams is the MP for Bristol West and co-chair of the Liberal Democrat Treasury Parliamentary Policy Committee

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GM should not be the monopoly of a few multinational corporations

People may be opposed to GM crops and ultimately consumers will decide what they want to eat. But people facing malnutrition or starvation do not enjoy that choice.

My parents researched malnutrition and under-nutrition in India, especially among children, and found that many diets recommended by Western nutritionists were in fact completely inapplicable to the poor. So they formulated cheap, healthy diets based on indigenous food with which people were familiar. Yet despite their many other efforts, a quarter of people in India and nearly one in nine people around the world do not have enough food to live a healthy active life.

The World Bank estimates that we will need to produce about 50 per cent more food by 2050 to feed a population of nine billion people. And the past 50 years have seen agricultural productivity soar – corn yields in the US have doubled, for example. But this has come with sharp increases in the use of fertilisers, pesticides and water which has brought its own problems. There is also no guarantee that this rate of increase in yields can be maintained.

Just as new agricultural techniques and equipment spurred on food production in the Middle Ages, and scientific crop breeding, fertilisers and pesticides did so for the Green Revolution of the 20th century, so we must rely on the latest technology to boost food production further. Genetic modification, or GM, used appropriately with proper regulation, may be part of the solution. Yet GM remains a highly contentious topic of debate where, unfortunately, the underlying facts are often obscured.

Views on GM differ across the world. Almost half of all crops grown in the US are GM, whereas widespread opposition in Europe means virtually no GM crops are grown there. In Canada, regulation is focused on the characteristics of the crop produced, while in the EU the focus is on how it has been modified. GM crops do not damage the environment by nature of their modification; GM is merely a technology, and it is the resulting product that we should be concerned about and regulate, just as we would any new product.

There are outstanding plant scientists who work on GM in the UK, but the Scottish, Welsh and Northern Irish governments have declared their opposition to GM plants. Why is there such strong opposition in a country with great trust in scientists?

About 15 years ago when GM was just emerging, its main proponents and many of the initial products were from large multinational corporations – even though it was publicly funded scientists who produced much of the initial research. Understandably, many felt GM was a means for these corporations to impose a monopoly on crops and maximise their profits. This perception was not helped by some of the practices of these big companies, such as introducing herbicide resistant crops that led to the heavy use of herbicides – often made by the same companies.

The debate became polarised, and any sense that the evidence could be rationally assessed evaporated. There have been claims made about the negative health effects and economic costs of GM crops – claims later shown to be unsubstantiated. Today, half of those in the UK do not feel well informed about GM crops.

Everyday genetic modification

GM involves the introduction of very specific genes into plants. In many ways this is much more controlled than the random mutations that are selected for in traditional plant breeding. Most of the commonly grown crops that we consider natural actually bear little resemblance to their wild ancestors, having been selectively modified through cross-breeding over the thousands of years that humans have been farming crops – in a sense, this is a form of genetic modification itself.

In any case, we accept genetic modification in many other contexts: insulin used to treat diabetes is now made by GM microbes and has almost completely replaced animal insulin, for example. Many of the top selling drugs are proteins such as antibodies made entirely by GM, and now account for a third of all new medicines (and over half of the biggest selling ones). These are used to treat a host of diseases, from breast cancer to arthritis and leukaemia.



Millions of acres growing GM crops worldwide. Fafner/ISSSA, CC BY-SA

GM has been used to create insect-resistance in plants that greatly reduces or even eliminates the need for chemical insecticides, reducing the cost to the farmer and the environment. It also has the potential to make crops more nutritious, for example by adding healthier fats or more nutritious proteins. It’s been used to introduce nutrients such as beta carotene from which the body can make vitamin A – the so-called golden rice – which prevents night blindness in children. And GM can potentially create crops that are drought resistant – something that as water becomes scarce will become increasingly important.

More than 10% of the world’s arable land is now used to grow GM plants. An extensive study conducted by the US National Academies of Sciences recently reported that there has been no evidence of ill effects linked to the consumption of any approved GM crop since the widespread commercialisation of GM products 18 years ago. It also reported that there was no conclusive evidence of environmental problems resulting from GM crops.

GM is a tool, and how we use it is up to us. It certainly does not have to be the monopoly of a few multinational corporations. We can and should have adequate regulations to ensure the safety of any new crop strain (GM or otherwise) to both ourselves and the environment, and it is up to us to decide what traits in any new plant are acceptable. People may be opposed to GM crops for a variety of reasons and ultimately consumers will decide what they want to eat. But the one in nine people in poor countries facing malnutrition or starvation do not enjoy that choice. The availability of cheap, healthy and nutritious food for them is a matter of life and death.

Alongside other improvements in farming practices, genetic modification is an important part of a sustainable solution to global food shortages. However, the motto of the Royal Society is nullius in verba; roughly, “take nobody’s word for it”. We need a well-informed debate based on an assessment of the evidence. The Royal Society has published GM Plants: questions and answers which can play its part in this. People should look at the evidence – not just loudly voiced opinions – for themselves and make up their own minds.

The ConversationVenki Ramakrishnan is President of the Royal Society, and Professor and Deputy Director at the MRC Laboratory of Molecular Biology, University of Cambridge

This article was originally published on The Conversation. Read the original article