Sunday, 26 June 2011

Giving everyone a share won’t make the banking system fair.

Its that man again, Deputy Prime Minister Nick Clegg I mean, back with another ‘wheeze’ he thinks might save his party from the chop at the next election.

This time he wants to give every voter in the UK a share in the Royal Bank of Scotland (RBS) and Lloyds, both of which were nationalised during the crash of autumn 2008 as part of his ‘People’s Bank’ plan. Mr Clegg, who was in Brazil when he announced that he had written to the Treasury suggesting the plan, said the British public needed to be given something back for bailing out the banks almost three years ago.

Speaking to Sky News he said: ‘Psychologically it is immensely important that the British people feel they have not just been overlooked and ignored.’ Obviously Nick Clegg has never had to go to a high street bank to try and get a loan to start a small business of a mortgage with which to buy his first home because that is exactly how people feel they are treated by the banks they partially own.

Under the proposed scheme 46 million voters will be given 1450 shares in RBS and 440 in Lloyds worth around £1000, these can be sold once they reach a value of 74 pence for the Lloyds shares and 51 pence for those in RBS with the owner keeping anything the shares make above that amount.

David Cameron expressed lukewarm support for the plan saying he would ‘look at all the possible ways of putting the nationalised banks back into the public sector.’ An official Downing Street spokesperson said the deputy PM’s plan is ‘one we will look at, but we will look at all the options.’ A spokesperson for the Treasury said ‘while the question hasn’t yet arisen, we have said we will look at all the options.’

This amounts to a polite way of saying; not on your nelly Nick.

Chuka Umunna, Shadow Minister for Small Businesses and a rising star in the Labour Party told Sky News that he couldn’t ‘help but think it’s a bit of a distraction’ from the ‘major issues we are suffering from as a country economically’ and that he would be ‘quite surprised in George Osborne agrees to this.’

Quite surprised? I’d be totally flabbergasted if he agreed to go along with it. When the nationalised banks are eventually sold off the Treasury will be under pressure to use the funds raised to cut the deficit not in an attempt to bribe people to vote Lib Dem at the next election.

For an expensively educated man who has spent his whole adult life in politics Nick Clegg really does come over as dangerously guileless. First he made a hash of fronting the AV campaign, refusing to share a platform with Labour leader Ed Milliband and by doing so sabotaging the idea that reforming the voting system would make our politics more mature and collaborative and less of a playground squabble; then he attached himself to plans to reform the Lords that have been designed to fail and now he has invented this farrago all by himself. The man seems to be drawn to hopeless causes in the way iron filings are drawn to a magnet.

If the plan to hand free shares in the nationalised banks over to the public were any more of a turkey it would gobble and feel nervous around Christmas time.

To begin with allocating shares to 46 million voters and setting up a mechanism that would allow them to sell them on when they reach their target value is so complex it invites disaster. There is talk of it being based on the system used to sell tickets for the 2012 Olympics, which seemed to have been set up on a hopeless underestimation of how many people would use it meaning the whole thing crashed within minutes and even now half the punters involved don’t know what events they’ve bought tickets for or where they’ll be sitting.

As for allowing the public to exert its influence over issues such as banker’s bonuses or the criteria for granting loans and mortgages diffusing share ownership so widely would make it impossible for the holders to organise collective action. Anyway the banks and their allies in the city would snap up the shares of the least financially savvy citizens at the lowest price possible meaning the returns to the tax payers would be minimal.

The inconvenient and dangerous truth is that the coalition government has been bought and paid for by shadowy people with deep pockets in the city, largely because the Conservative party which holds the whip hand in it has. However bravely David Cameron, George Osborne or anyone else on the government benches talks about reining in the worst excesses of the city and making the banks lend to small businesses and first time buyers at rates they can actually afford it is just so much hot air.

Talk is cheap and easy; regulating a financial system that has grown too big, too powerful and in many cases dangerously arrogant is hard and politically costly. If this is the best they can come up with then the government is clearly not up to the challenge.

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