Julian Knight: Free bank shares sound good – but just won't work

Lloyds unveiled total losses of £3.5bn for last year (REUTERS)

It took barely 24 hours for No 10 to close down Nick Clegg's idea that we should all be given shares in RBS and Lloyds.

Honestly, I'm not sure what to think of it. First, as if we needed another reminder, the quick move by Cameron's team to dampen down the plan shows that this is a rag-tag Government with one minister seemingly not knowing what the others are doing – in some ways almost a refreshing change after the control freakery of Alastair Campbell et al.

As for the idea itself, it has some initial appeal. I think taxpayers deserve a reward for the burden they had to suffer when taking on these bust banks, and will continue to endure through exceptionally high borrowing over the coming years. In a way it would be good as well to recapture that Eighties spirit of share ownership – where millions of us took a tangible interest in the markets.

However, thinking back to that time – and this is one major flaw in Clegg's plan – what happened following the great privatisations of BP, BT and British Gas was that millions of people who were allocated shares soon cashed them in for a profit, and these companies instead of having lots of little shareholders who took an active interest in the business soon became owned by the big city institutions and pension funds. The supposedly great Thatcherite Eighties share-holding democracy, if it ever actually existed, flickered briefly then died.

The same thing would only happen again as people inevitable cashed in their freebie shares. A better idea would actually be to mutualise both RBS and Lloyds – as I suggested for Northern Rock. It would be rather delicious in some ways to see the almost uniquely acquisitive culture at RBS deal with mutuality. Apparently, Sir Fred "the shred" Goodwin may be long gone from RBS but the management is littered with little shred wannabes. However, like the planned sale of Northern Rock – a technically easier and even better candidate for mutualisation – the Treasury will get its way and the proceeds of a sale of RBS and Lloyds will disappear into the nation's fiscal black hole.

Sharp elbows required

A timely warning this week from Adam Phillips, the chair of the Financial Services Consumer Panel, that he is seriously concerned that in the revamp of the FSA the consumer is being forgotten. In brief, Mr Phillips is concerned that the new regime will be focused solely on not repeating the banking crisis of 2008, rather than genuinely ensuring that banks, insurers and investment companies don't lie and cheat their customers – which every man and his dog knows they have a long track record of doing.

This has always been my concern – that in a Treasury with George Osborne at the top we will see the focus on the balance sheets but not enough care about the regular everyday experience of you and me with our finance companies. A Tory-led government is always going to be, by nature, opposed to interference in the everyday conduct of business. And although I have great sympathy with that view in many aspects of life – Ronald Reagan once said the scariest phrase in English was "hello, I am from the government" – in this area we need a pro-active regulator with the sharpest of elbows.

Direct question

First Direct has for the second year won the Which? bank customer service award. Apparently, First Direct offers customer service that approaches the heady levels of what would be judged just about acceptable in most other industries. But for me, rustling through my post-bag here – about 60 per cent bank complaints – the question isn't why is First Direct so good (it's not, as its decision to scrap paying interest on current accounts shows), but more why are the others so bad?

Remember Clotsdale

This is probably the first time the words subtlety and Australia have appeared in the same sentence, and I am, of course, being sarcastic. Having been to Oz a few times now – and admittedly loved the place – I can recall the average marketing and advertising campaign having all the nuance of being hit over the head with a dirty great big frying pan. If in doubt shout and make reference to the toilet – or dunny – seems to be the killer storyboard at most ad agencies.

But even by Antipodean standards the National Australia Bank surpassed itself by arranging for not one but two branch managers to be tied to lampposts in Sydney and Melbourne. This heinous act was said to have been carried out by rival banks angry at the NAB's "fantastic" range of cut-price product – yes, that is a groan forming in your throat. Bizarrely, this sub stag-do stunt helped NAB carry off a top PR prize in Cannes last week. Of course it's infantile, but harmless. But then I recall that NAB owns Clydesdale Bank – or Clotsdale as we like to call it in this column. The same bank that incompetently cocked up thousands of mortgage repayments and then ruthlessly tried to claw back every penny from its wronged customers and wouldn't for an age listen to reason. I bet quite a few of Clydesdale's customers would like to tie a banker to a lamppost – and not as part of a stunt.