Support 100 years of independent journalism.

  1. Business
  2. /
  3. Economics
  4. /
2 August 2012

Osborne should nationalise RBS, but he won’t

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

By George Eaton

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.

Sign up for The New Statesman’s newsletters Tick the boxes of the newsletters you would like to receive. Quick and essential guide to domestic and global politics from the New Statesman's politics team. The best of the New Statesman, delivered to your inbox every weekday morning. The New Statesman’s global affairs newsletter, every Monday and Friday. A handy, three-minute glance at the week ahead in companies, markets, regulation and investment, landing in your inbox every Monday morning. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A weekly dig into the New Statesman’s archive of over 100 years of stellar and influential journalism, sent each Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy

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.”