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Tories to sell cut-price shares in state-owned banks

Joe Churcher,Pa
Sunday 21 February 2010 10:40 GMT
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Shares in state-owned banks would be offered to voters at a discount as part of a Tory effort to encourage young people and those on modest incomes to invest, George Osborne announced today.

The shadow chancellor said his "people's bank bonus" would reward taxpayers for the £850 billion ploughed by the Government into propping up crisis-hit financial institutions.

During the financial crisis, the Government nationalised Northern Rock and took stakes in the Royal Bank of Scotland (RBS) and Lloyds Banking Group in return for bailing them out.

Cut-price shares would be offered to everyone with extra discounts for target groups, Mr Osborne indicated - in a conscious parallel with Margaret Thatcher's wave of privatisations.

Tory officials compared the scheme with the 1980s "Tell Sid" campaign aimed at encouraging people to buy shares in British Gas which attracted more than two million first time shareholders.

They warned that the sale could only happen at a time when the Government stood to make a profit - which experts recently suggested could be as long as five years away - and that institutional sales would also form part of the package given the sums involved.

Bank regulation would make them safer investments by preventing "irresponsible" behaviour, they suggested but critics dismissed the plans as a cynical "gimmick" that put taxpayers' money at risk.

Chief Secretary to the Treasury Liam Byrne said: "The Tories' deficit reduction plan is now a certified farce.

"When it comes to the shares in the banks the public expect us to focus on getting their money back. That means selling them at a time and way that maximises their value, not an irresponsible and expensive political gimmick.

"The Tories can't pretend that they care about helping the poorest save when they'd take the Child Trust Fund from families on modest and medium incomes."

Liberal Democrat economics spokesman Vince Cable said: "Dangling this prospect, when UKFI has said it will take at least five years before the likes of RBS are back in private hands, is Tory electioneering at its most cynical.

"They have no understanding of the economy they are aspiring to run.

"The nationalised and semi-nationalised banks should be reprivatised when the conditions are right to maximise tax payer return. Selling shares off at a discounted rate will not achieve this.

"These banks should be set the concrete objective of ensuring lending to sound small- and medium-sized businesses who are the drivers of our economic recovery.

"Actively encouraging people on very low incomes to invest in a volatile share market beggars belief and shows just how removed the Tories are from everyday reality.

"A young couple on low income is more concerned with putting food on the table than speculating on the stock market.

"If the Tories were actually committed to helping people on they would be trying to instil fairness into the tax system instead of coming up with this ill-conceived attempt to buy their vote."

The Co-operative Party, which sponsors 28 Labour MPs including Treasury Minister Sarah McCarthy-Fry, said the policy was "irresponsible".

General Secretary Michael Stephenson said: "Osborne's half-baked plan for a 'Tell Sid'-style sale of bank shares will only create a short-term, quick-buck bonanza as shares are sold on the quick.

"It is just the irresponsible approach which led the last Conservative government to force through the demutualisation of the building societies - the real 'people's banks' - which helped create the financial instability which got us all into this mess in the first place."

Business Secretary Lord Mandelson told BBC1's Andrew Marr Show: "It's a rather silly little gimmick.

"Given the share price of RBS now, rather low, people can buy shares and wait for the share price to rise in due course.

"But what I would say to George Osborne and David Cameron is that if the deficit really is the priority - and cutting it - what on earth are they doing playing around giving away the assets and shares in RBS at knock-down prices at this stage which would be at the expense both of the taxpayer as a whole and our future ability to reduce the deficit.

"It's another piece of headline-grabbing incoherence."

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