A couple of tweets crossed my timeline this morning about a piece from the Guardian last month by former Labour MP Chris Mullin arguing that a readjustment to restore the balance in Gordon Brown reputation. In it he argues that Brown’s handling of the crisis was world leading:
It was the British government’s decision, announced on 8 October 2008, to take a controlling interest in three major banks that prompted the Europeans, followed quickly by the Americans, to do likewise. Indeed, the Europeans made no secret of this. A few days after the British had acted Brown was invited to address the 15 eurozone heads of government.
How we view the decisive action Gordon and Alastair took on the banks will be coloured by the decisions the current Chancellor, George Osborne, takes on the publicly-held stakes in Lloyds TSB and RBS either later this month in his Budget statement (or later this year as the Spending Review and possible Winter Statement come into view).
It’s clear that some sort of decision is being put together in haste. Stories in media earlier this month were that Osborne was doing some clarification about how the Government could divest its stock: either if a share price of 73.6p has been reached for a given period of time or the Government has sold at least 33% of its shareholding at prices above 61p.
This week the Governor of the Bank of England, Mervyn King, told the Banking Standards Commission that the Government should sell the banks:
The whole idea of a bank being 82 per cent-owned by the taxpayer, run at arms’ length from the Government, is a nonsense.
It cannot make any sense. I think it would be much better to accept that it should have been a temporary period of ownership only, to restructure the bank and put it back.
That has certainly piled pressure on Osborne to act. Now it seems Treasury ministers are planning to stage a “Tell Sid”-style cut price sell-off of shares to the public. That Policy Exchange are going to pronounce on the idea in a couple of weeks time gives it credence but it could potentially give Osborne a distracting announcement for an otherwise depressingly meagre Budget statement.
Osborne has form on doing something seemingly clever but ultimately foolish. Still, if he does go with a public sell-off he can take comfort in the cover the Liberal Democrat-leaning think tank Centre Forum will have given him in floating something similar but crucially different last year. Tim Montogomerie was picking up something similar even earlier.
Eye-catching ideas to one side there needs to be pressure on Osborne to state what success looks like in respect to the £37 billion investment the Government made in these two banks.
With banks “stabbing businesses in the back” in respect to lending, the banking reform bill still in draft and the banking standards commission still considering a wide range of issues relating the banks, playing politics with £37 billion looks like an awfully big risk.
This is especially true given just how Osborne has made considerable mileage out of bashing Gordon Brown for costing the taxpayer “£9 billion by selling the gold cheap“. If the now-Chancellor was keen for the taxpayer to pay attention to the bottom line then he should expect just as much scrutiny this time around.
Secondly, a public sell off which puts money in the hands of ordinary people is potentially something Labour should applaud, if a fair investment can actually be shown to reach ordinary people. Frankly if the chief executive of Lloyds TSB is going to make £1.4m out of any share sell-off, then it has got to be worth more that a token gesture for “Sid”. That’s especially important when saving the banks has overall cost every man, woman and child £20,000.
Labour should be holding Clegg and Cable to the principle that any effort should “socialise the profit” and ensure that the Government (in serious need finance-wise) does not sell the family silver off cheap.
If after investing £37bn to save banks there is nothing but a continuing litany of appalling behaviour when it comes to bonuses, Libor, bank charges, and lending—not to mention the lack of visible reform— then George and David will need to be clear about what they’ve achieved in finishing what Gordon and Alistair needed to start.