James Moore: The dangers in an RBS sell-off to Abu Dhabi

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The Independent Online

Outlook The "revelation" that talks are under way between the UK and Abu Dhabi over the possibility of the Gulf state buying part of Royal Bank of Scotland look to be driven as much by internal BBC politics as they are by an imminent deal. Look, look we can do business stories too, Newsnight was saying, by picking up a rumour of the State's interest and then declaring advanced negotiations to be under way with an announcement due by, erm, Christmas. Maybe.

So in fact these talks are about as advanced as a steam-driven car with square wheels.

The story has been given some extra legs by the fact that it appears that the government of Abu Dhabi is involved directly rather than its various sovereign funds and that Amanda Staveley, the banker who helped get Barclays out of a hole with the help of lots of Middle Eastern cash, is advising.

But in the real world it would be news if UK Financial Investments, which stewards the state's interest in the banking sector, wasn't talking to potential buyers everywhere and anywhere.

UKFI's role, to keep the Government at arm's length from a banking sector it has billions of pounds of taxpayers' money invested in and to eventually oversee its sale, is essentially a fiction. Ministers have already proved that they can and will intervene in the running of the nationalised banks where there is political capital at stake.

However, UKFI still has a staff and they do have to find something to occupy themselves with, so sizing up buyers isn't a bad idea.

There is even some support in the City for an early sale and some semi-sensible arguments for one too. Even if it would be loss making for the taxpayer such a move would at least broaden the the range of RBS's investors and make it look more like a "normal" company which, with over 82 per cent of its shares in government hands, it can't be considered right now.

However, quite apart from the anger such a move would generate with the public – "they're letting their mates in the City take us for a ride again" – it would also be dangerous, if not foolhardy.

If you show the market you are willing to sell your assets cheap once then the market will expect you to do it again. And again. So ultimately you will never realise their true value.

Ms Staveley is well aware of that fact. Vince Cable and George Osborne ought to be.