If evidence is needed that we continue to be governed by cowardly politicians of the sort that I described in The Courageous State then George Osborne has done his best to provide it. As many papers have noted this morning, he has said that he is determined to sell off The Royal Bank of Scotland as soon as possible after the election despite the fact that it has lost £43 billion since it was nationalised in 2008, a sum almost equivalent to the entire £45 billion cost of the bailout at that time.
Such an aspiration shows the poverty of Osborne's thinking. It remains his presumption that the state is unable to own or manage an economic activity, even when, as in this case, it has gone to extraordinary lengths to distance itself from management, seeking to appear to be a passive shareholder, which should have meant that its ownership would have no impact upon the outcome of the Bank's fortunes.
In practice everything about this policy has been a mistake. Firstly, there should not be any such thing as a passive owner of a substantial majority stake in a company. If you've invested at least £45 billion in an activity you have an absolute duty to let your opinion be known, and to make clear what outcomes you expect. Instead George Osborne, and in fairness, Alistair Darling before him, both let RBS be run in the interests of the minority shareholders, and that was always an absurd policy. There was a duty to manage this company on behalf the state, and both failed to do it.
Secondly, given that way back in 2008 it was known that the model of British banking was broken and in need of urgent reform then rather than be a passive bystander whilst happening to own a bank, the UK government should be an active leader in delivering the necessary process of change that was essential if the UK financial services industry was to be transformed. Again, Osborne completely failed to achieve this obvious objective.
Thirdly, by refusing to both buy out the remaining minority shareholders in the bank and at the same time refusing to change its modus operandi Osborne has to bear significant responsibility for the remaining losses of the bank. There were many, me included, who said that from the outset RBS should have been stripped of its peripheral activities, including its investment bank which has consistently failed to make money, and all its non-core commercial activities, which could and should have been sold earlier than they were, and the remaining bank should have been transformed to be an engine for growth.
I always like the idea of RBS becoming the Real Bank of Sustainability, and being in effect the Green Investment Bank that we still so desperately need, and of which at present we have a mere charade.
And RBS was always, of course, the bank that should have lent green quantitative easing into the UK economy.
And it could still be the bank that is at the heart of refinancing small businesses, as well is being the bank that could be at the core of funding the new long-term infrastructure investment that is essential, and is another component of the Green New Deal.
But rather than have Courageous politicians willing and able to both see such opportunities, and take them, we have suffered cowardly ones who have walked away from their responsibilities, who have believed they are not as clever as the bankers when the latter had so obviously failed, and whose sole aspiration is to pass the functions of state to the private sector.
No wonder we are in trouble.
The saga of RBS proves it.
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I’ve no wish to undermine your concept of cowardly politicians Richard but I don’t see how the member of a party that is so close to big Finance can be classed as cowardly when all he is doing is looking after his fellow millionnaires.
In fact Osbourne can be desribed as ‘brazen’ (I get the feeling that he’s like that too).
You could certainly say that New Labour were cowardly in my opinion (or even hesitant), but Osbourne on the other hand is worthy of a different C word – ‘collusive’. This may better reflect the way in which Finance and their mates in politics have ‘captured’ public policy.
I also hold the view that the courageous politicians you (we) yearn for may not come from Labour or the ConDems. Such courageous politicians need to come from outside the establishment this time. Or at least I hope that they can (somehow).
Is it Osborne or Osbourne? These things matter!!!
It is neither. The real spelling is:
V A N D A L
Could this constitute another case of “Misconduct in Public Office” by the Chancellor perhaps?
Absolute insanity that Osborne is even thinking of selling our stake in RBS. With the number of fines it has incurred over the last few years for various illegal activities and billions more in reserve for future anticipated fines, there is no way we would get the £4.55 a share needed to recover the £45billion rescue bill in 2008.
So what is Mr Osborne going to do, sell it at a loss? What planet is he on?
He could also have used RBS as an example and brought an end to the insane amounts of money these banks pay in bonuses, especially to the same investment bankers who caused the bank to incur these fines with all their rigging and other illegal activities. So much for “no rewards for failure”
When RBS pays a fine to the UK Government nothing really happens, other than that the minority shareholders end up with less capital.
The real problem is when the US Government levies a fine most of which is really paid by the UK taxpayer. The US has finally found an efficient way to tax the citizens of other countries.
I have no issue with penalties that are used to reimburse individuals that have been put at a disadvantage by unacceptable arrangements, but these actions have nothing to do with that and they are punishing the general population of the UK rather than the perpetrators.
What nonsense?
Always wondered what would happen if the banking system went from private hands to public. Guessing that QE could be directed towards business over just going back into the banks which can already create money. Only problem I see is bank run would be a complete loss of trust in the UK so would be far more serious. I was expecting the bailouts to be a complete change in leadership and how the banking system was run but nope. Lack of reforms has been disappointing. Maybe this radical move would be what is required with major regulation coming back. Could allow private banks but public banking system could be used to kick start growth and redirect capital when required.
Just finished reading Ha Joon Chang Economics the user guide and has me asking more questions.
Good book
Can I also recommend his book ’23 Things they don’t tell you about Capitalism’ – it really debunks a lot of stuff that we are told about the joys of capitalism.
Apparently Osborne’s best man, who runs a hedge fund, benefited by £36 pounds-I wonder which of his retinue is due to benefit from the RBS sale?
That’s of course £36 million pounds and no doubt Osborne (not Osbourne) will find himself on the board of said hedge fund at some later date. Just as welfare reforms do for Duncan-Smith, these sales make perfect sense when one views them as a convoluted way of shoveling taxpayers’ money into Osborne’s pockets. I suspect there’s rather more than simple misconduct in office going on here, this appears to me more like straightforward looting.
Agreed- looting is the word! What shocks me is why the ‘good ole’ British don’t seem to get it, when it is egregious; blatant?
Recently Cameron reprimanded one of his M.P’s for critisising the benefit sanctions system (one of his constituents was sanctioned for missing an interview due to giving birth!) he slapped the groveling MP down repeating the myth that ‘sanctions were necessary to end the something for nothing culture.’ As the Private Eye used to put it: “shurely shome mishtake-ed.”