Nick Clegg's call, on June 23, for a government ‘giveaway' of banking shares to the British tax payer must be treated with caution, the Green Party has said.
The government currently owns 83% of shares in the Royal Bank of Scotland and 41% in Lloyds Banking Group after Labour ex-chancellor Alistair Darling moved to protect the banks during the 2008 financial crisis.
The Deputy Prime Minister has written to George Osborne to argue for the collective ownership of government shares by giving them away to the 46 million people who are either on the UK electoral role or who have a British national insurance number.
However, rather than citing the desperate need for both banking reform and a moral distribution of capital in the UK as reasons for his proposal, Nick Clegg justified his plan by saying "psychologically it is immensely important that the British people feel they have not just been overlooked and ignored".
But under Nick Clegg's scheme the tax payer will not be able to extract any value from their individual shares until the exchequer breaks even. That means that RBS's share prices must rise to 51p and Lloyds must reach 73p - currently they are at about 38p and 47p respectively. And experts warn that planned reforms by the independent commission on banking will only hinder the struggle for these shares to break even.
Green Party economics spokesperson, Molly Scott Cato, argued that "the danger with Nick Clegg's proposal is that it is no more than a gimmick. There is little reason to believe that collective ownership will give the tax payer any more power over the banks than if the government retained control of it all - especially if Nick Clegg intends to ensure the shares are worthless for an indeterminable period."
"What we need is greater regulation over the financial sector to prevent a reoccurrence of the recent disastrous crash. Focusing on share ownership instead of the irresponsible behaviour of the financial sector does nothing to address the real problem."
Green Party London Assembly Member, Darren Johnson, said "what is important is whether the British people are actually being overlooked and ignored. The Green Party will remain deeply suspicious of both the merits and motive of a proposal that simply aims to paper over the gaps in a structurally dangerous financial sector by simply making people ‘feel' better."
"What's required is a genuine and fully functional People's Bank, carefully built from the currently ‘nationalised' shares in RBS and Lloyds. In accordance with Green Party policy, such a bank would not have operational standards hindered by the arbitrary desire to generate excessive profits in order to pay bonuses. Instead it would limit its remit to serving the interests of citizens and their deposits"
--
Notes
1) All statistics found at: http://www.guardian.co.uk/business/2011/jun/23/nick-clegg-peoples-bank-giveaway?intcmp=239