Monday 7 March 2011

Lib Dems propose Bank Giveaway - sense from the Loonies.

Now the Chancellor has hinted that he likes this idea of the Government shares in banks being given away in the past. Indeed, it is a good capitalist idea, people being made shareholders. In addition, once people owned bank shares they would stop being so keen to bash the bankers. It might help if the banks in question were in a fit enough state to re-start dividend payments.

The only doubts are the cost of execution, which are not properly dealt with in any media that I see. Ideally, all the shares would be paid into ISA accounts and also help to encourage people to start saving. However, for millions of people, many of whom would have to sign up to new accounts, this would be difficult. I guess you could make an opt-in solution whereby you only get your stake if you want it? overall though the costs of making this happen may stretch to tens or even hundreds of millions which is a high price to pay - and one lucky broker is going to have a very good year off the back of it!

Also the small problem of a £40 billion whole in the Country's balance sheet has to be taken into consideration, for in effect this giveaway is like a giant one off tax cut (the money was borrowed to pay the banks and now the liability is going to get stuck on the Government balance sheet with no off-setting asset) - and as such will be difficult to execute in the next couple of year with spending so tight and tax revenues still at low levels. Still, although the above points need addressing, the idea is one that merits being worked through.


Old BE said...

Peston envisages a mechanism where only the "profit" goes to the taxpayer and not the initial outlay.

If this was to happen it would need to be done very simply. I suggest that a voucher would be sent to everyone on the electoral register shortly after the next update. The voucher could be used to open or top up an ISA, kept like a share certificate or retailers might accept them in lieu of cash.

Anonymous said...

I'm surprised that this latter day "Tell Sid" campaign has emerged from the LibDems.

Seems suspiciously like the Thatcher's children (with all due respect to Mrs T) are testing some concepts here.

Jan said...

I can't see this will ever happen. Governments don't like people having a bit more to spend. They could just lower taxes instead but of course this doesn't have the same appeal even though the end result would be the same.

Of course looking on the bright side they could start up a whole new administrative system to distribute the windfalls so reducing unemployment. Better still give it to the banks to do so that public sector employment isn't increased again.

I am deeply sceptical as you can probably tell!

Bill Quango MP said...

This is remarkably similar to BQ's ideas from back in the Northern Rock days.

IIRC no one thought much of it then. Probably even less so now.
But the idea was to give the taxpayers something for being forced to bail out the banks.

Timbo614 said...

Well, if George wants to send me shares to buy me off for lending the banks £13,000 (was it? each taxpayer/person) then... I agree with Nick Clegg! And I hope they are worth approaching that £13,000! [returns to dreaming].

I can see someone making a lot of money!

And how many would never get cashed/drawn on?
Mrs. Bloggs - 'ere our Dave wot's this share fing in the post? Your bank is the 'alifax init?

Dave: yeah, it's one o' them "you've won £100,000 fings, that's a scam init.

[Sound of certificate hitting bin]

KoR said...

Not a good idea and costly. Everyone adult would get roughly about a 1000 shares in RBS, say, and probably try to sell them quickly to make a quick profit. The share price would collapse further and the bank might then need another bailout.

UKFI should hold on to them for a long time with only small, gradual sell-offs.

GSD said...

Perhaps a simple "you are entitled to buy X shares at 1p/share" certificate & the buyer has to cover any brokerage fees? That wouldn't cost the government too much would it?

Eckersalld said...

Perhaps somehow placing them in trust for the next generation? After all, we've been busy mortgaging the taxes of the nations future...

Every British child born in 2012 is entitled to shares, registered at birth and then divvied up equally in 2013 and placed in trust until they're 18, profits and dividends tax free. The Olympian Babies would inherit both a cash and shares ISA when they came of age.

It'd get the middle classes shagging in the hope it'll pay for juniors university education ;)

Richard Elliot said...

When I first heard of this idea my initial reaction was positive, but I agree with many of CUs concerns and those in the comments:
- You'd spend millions on administration.
- It would create a whole in the country's balance sheet.
- If you wanted to have a give away, there are more economically efficient ways of doing it.

Richard Elliot said...

Another question I meant to raise was how do you determine who is eligable. That could be another mine field, I'd be an interesting case in point. On the electoral roll, submit a tax return, have a UK address, but don't actually live in the UK at the moment.

CityUnslicker said...

Nice comments all - I think on balance I like he idea, prety sure it won't happen though.

Hopefully, the Government will at least engineer a sell-off at above real break even and reduce the national debt.

tory boys never grow up said...

I'm not so sure that if the people owned shares that they would not want to bash bankers. Look at how Barclays shareprice has fallen since 1997 while the wage bill has nearly doubled and the annual result is about the same. Perhaps if those responsible for managing our investments really had their investors interests at heart Mr Diamond and co would have been turfed out long ago.

Funny how Tories stop worrying about reducing the deficit when they can smell middle class handouts and giveaways of state assets.

Timbo614 said...

The one suggestion that I saw that could make some sense to every one, is to fund the suggested "People's Bank" with the 40 Billion of shares, that we already own in the others! With the option open for Lloyds etc to but the shares back at market prices.

Let's see how they like having a major shareholder as competition!! They would soon find a way to buy them back - watch those bonuses fall :)