All governments use the fresh impetus and legitimacy that the post-election honeymoon period provides to set out their stall for the Parliament to come, while senior ministers use ‘the first 100 days’ to force the pace of their own personal programmes.
Yesterday George Osborne started re-privatising the Royal Bank of Scotland, with other sell-offs to come.
This is a huge decision which demands a big debate. Despite the fact that the public owns 79 per cent of the Bank, a share-holding equivalent to around £30bn at current market values, we’ve heard next to nothing from government or opposition.
This stake comes from the vital, world-leading action taken by Gordon Brown and the Labour government between December 2008 and 2009, but the real risk was carried by those who would have borne the consequences if the investment turned bad – the British public.
And it’s on their behalf that Osborne’s decision, driven by ideology rather than sound economics or fiscal discipline, should be challenged.
First, on the question whether the government is using its large majority stake in the bank wisely. Or whether it should be a more active shareholder, doing more to direct lending to industries and areas of the country where financing is weak, and to curb bad practices including excessive top pay.
Second, on whether the decision to sell off the bank at all is the right call. While the UK’s financial infrastructure is failing businesses across the country, the public holding in RBS offers a once in a lifetime opportunity to reshape the landscape for business lending – with a regional network of business investment banks given a public interest remit to reflect the public stake. The more diverse German model of banking does a far better job in supporting a more balanced long-term economy.
Third, on how the public gets its money back. No-one in the country will be as complacent as the Chancellor was in his June Mansion House speech when he said it didn’t matter whether or not the Exchequer is fully compensated for its 2008/9 investment – some £45bn. Most people will find it incomprehensible that the same Chancellor that said cuts to vital tax credits are unavoidable in one breath, says we can afford to lose billions on our RBS stake in the next. And most will take some convincing that shares bought at £5 but sold at £3.30 is a good deal for the taxpayer.
Fourth, on how the proceeds of any sale should be spent. Re-privatising RBS is a one-off windfall and so will do nothing for the deficit, an irony for George Osborne who is obsessed with shrinking the size of the state.
Instead it is in the Chancellor’s power to put the proceeds to productive use. He could use the sale receipts to set up a sovereign investment fund for housing and infrastructure – low carbon energy, transport, super-fast broadband and affordable homes built for rent and sale.
This investment spending doesn’t just bring short-term stimulus when the economy is producing below capacity. It’s also pays for itself in the long-term as a sure-fire way to lock in both higher growth and higher productivity – raising the country’s productive potential, bringing down the deficit and benefiting Britain for the future.
So far George Osborne has felt no obligation to account for his to rush sell off RBS, yet this decision is too big to go unchallenged. On RBS the public deserve a debate, and now’s at the start of this new Parliament is exactly the time to have it.
John Healey is a Labour MP and former treasury minister.
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