In his annual Mansion House Speech this evening, chancellor George Osborne announced that the government will begin to sell off its stake in the Royal Bank of Scotland (RBS), even is it is at a loss.
He said a “decision point” had been reached, and that it was in the interest of taxpayers to begin the sale in the coming months, based advice from Bank of England Governor Mark Carney and an independent review by Rothschild.
The bank's report estimated there would be a £7.2bn loss to the taxpayer from RBS if the government sold its remaining shares in the bank in one go at the share price as at 5 June, but this would be offset by proceeds from other interventions, such as on shares in Lloyds.
“I am responsible for getting the best deal now for the taxpayer and doing whatever I can to support the British economy,” he told an audience in the City of London.
There is no doubt that starting to sell the government’s stake in RBS is the right thing to do on both counts. That is not just my judgement – it is the judgement of the Governor of the Bank of England, whose views I sought and whose letter to me on the issue we publish today.
It marks a turnaround from the chancellor's previous stance - until now he has insisted on waiting until the share price rises above what it was bought for. However, bank shares have a track record of improving after sale - Lloyds shares are now significantly more valuable than when the government first started selling them off.
Royal Mail employees get bigger stake
The chancellor also used his speech to say that beyond the sale of part of the government’s remaining stake in Royal Mail, announced by the business secretary earlier in the day, a further one per cent of the entire company will be sold by the government to Royal Mail's employees.
“I can announce that the first sale of our remaining stake in the Royal Mail has begun tonight,” Osborne said.
“We want to help the Royal Mail attract more investment and serve its customers, and use the money we raise in return to pay down the national debt.”
European single market must be preserved
As part of Britain's renegotiation of its EU membership, Osborne said it was important to retain the integrity of the single market and ensure fairness between those who are pro and against membership.
“We need a settlement that recognises that while the single currency is not for all, the single market and the European Union as a whole must work for all.
It’s in our interests that the Euro is a successful, strong currency. So we’re prepared to support the Eurozone as it undertakes the further integration it needs. But in return, we want a settlement between the UK and the Eurozone that protects the single market and is stable, fair and lasts.