Think-tank Urges Chancellor to Distribute RBS and Lloyds Shares among Taxpayers

on Jun 10, 2013

The influential think-tank Policy Exchange is urging Chancellor George Osborne to start a sell-off of the government’s stake in bailed-out Royal Bank of Scotland Group Plc (LON:RBS) and Lloyds Bank Group (LON:LLOY) by offering shares worth £1,650 a person to 48 million taxpayers, The Guardian has reported.

Policy Exchange has suggested in a report that Osborne should ignore the split-off scenarios for RBS proposed by some members of the UK Parliamentary Commission on Banking Standards in favour of a scheme to distribute shares to voters, who would buy them at a later date, alongside a sale to big City investors that could raise new capital. The suggestion could influence Osborne’s thinking as he prepares to signal his intention to return the two banks back into private ownership in his Mansion House speech to the City next week, The Guardian reported today, June 10.

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The RBS share price rose 1.41 percent to 332.00p in early morning trading in London today. The Lloyds share price remained flat at 62.34p.
**UK’s largest privatisation**
The Government owns 81 percent of RBS and 39 percent of Lloyds, the result of it bailing out the two banks during the financial crisis. Reports suggested at the weekend that the Chancellor could select a traditional privatisation and sell Lloyds first but it remained unclear what methodology would be used.

Osborne is expected to consider a range of options, including four proposed by the Policy Exchange report.
According to the think-tank’s calculations, the Chancellor could argue that the Government was making a profit of at least £1 billion on its stakes at current prices even though shares in both banks are worth £18 billion less than the £46 billion it paid for them in the bailout in 2008 and 2009.

**Four options**
!m[The RBS share price was 331.50p as of 10.02 GMT, 10.06.2013](/uploads/story/2905/thumbs/pic_1_inline.jpg)
Policy Exchange has proposed four scenarios to conduct a sell-off of the Government stakes: staged sale (in tranches); traditional privatisation; giveaway; and the already described scheme of distributing the shares alongside a sell-off to City investors. Under the fourth scenario, favoured by Policy Exchange, taxpayers apply for shares at zero initial cost, but the Government fixes the price at which they will pay for the shares later.
“Crucially, it allows a sale of shares to City and retail investors to take place at the same time. This would allow the banks to raise extra capital,” The Guardian noted in its article.
**The RBS share price was 331.50p as of 10.02 GMT, 10.06.2013**
**The Lloyds share price was 62.63p as of 10.02 GMT, 10.06.2013**


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