Who owns the family silver?
I am sorry to see my former colleague, James Barty, putting forward such an ill-conceived plan as Policy Exchange’s proposal for handing shares in RBS and Lloyds to the public. The scheme was demolished in the Financial Times’s Lex column on Tuesday, but reappears in an opinion column in today’s Times.
There is no need for me to repeat Lex’s arguments, but another more fundamental point should be made. Barty explains that a conventional privatisation at a discounted price would not meet his objectives, since “only wealthier taxpayers would be likely to buy the shares, even though all taxpayers contributed to the bailout.” But he misses (or chooses to miss) the point that the bailout was funded by UK taxpayers unequally, as taxes are so computed in this country. By retaining the shares in public ownership, and (optimistically perhaps) assuming they go up in value (if not his scheme will fail anyway), they will contribute to reducing the burden on taxpayers, also unequally. There is an element of unfairness in that those who have paid heavy taxes in the past may not precisely correspond to those who face the heaviest taxes in the future, but there is at least a rough correlation.
The recipients of Barty’s proposed largesse will however be (in equal measure) “anyone with a national insurance number who is on the electoral register” [my emphasis], many of whom have paid little or no tax.
So instead of reducing my future taxation by any appreciation in the shares, the proposal is that I be robbed again.
Government’s failure to supervise the banks five years ago may have been unfortunate, but this proposal looks more than careless. Since I doubt that George Osborne will confess to socialism, we can only conclude if he adopts the scheme that he is anxious to obtain the goodwill of these national insurees – another name for whom, as Barty has this morning revealed, would be “voters”.
Postscript, 15 June 2013
To avoid confusion, I should explain that I drafted the letter which appeared in this morning’s Financial Times on Tuesday morning, before the Times article appeared.
PPS, 16 June 2013
Some of you may be thinking that it is only fair for wealthier people to contribute more to the RBS rescue as they are more likely to have benefited from the protection of deposits. Maybe you’re right – although I’d argue – as Sir Mervyn King has reconfirmed – that we had a legitimate expectation that our deposits would be safe. But more important is the narrative the Government will attach to any privatisation, arguing that RBS has been saved by temporary intervention and that no one lost a penny. That will be a false claim if the wealthy have had to contribute – including depositors above and below the financial services compensation scheme limit, so that this covert raid will have pulled off a political coup the Cypriots couldn’t manage, namely taking money from people without their noticing. And taking it from depositors, not from the banks who fund the FSCS. The plan gives a new twist to the old communist slogan “From each according to his ability, to each according to the need [for his vote].” Long live the kleptocracy.