It was the Government’s version of a seven-year itch.
Since the autumn of 2008, ministers in successive Labour, Coalition and Conservative administrations have wondered how to resolve the biggest legacy of Britain's banking crisis: the sale of its 78% stake in Royal Bank of Scotland (RBS).
Now, more than five years after becoming Chancellor, George Osborne has bitten the bullet and fired the starting gun on what will eventually be the largest privatisation in UK history.
Mr Osborne has long abandoned any pretence that he could break even when offloading the initial tranches of the shareholding; he commissioned a report from Rothschild earlier this year which recommended that a sale would offer value for money, while benefiting the bank, the Government and the UK economy.
More importantly, Mark Carney, the Governor of the Bank of England, offered his support for the sale process to begin.
Yet their collective endorsement does little to disguise the bald facts of Tuesday morning’s share sale: the taxpayer has lost more than £1bn on the sale of a 5.4% stake in RBS to institutional investors.
Treasury sources argue that that is the wrong way to look at the trade. The rescue of RBS in 2008 was not an investment, they say, but an emergency measure to prevent Britain’s banking system collapsing into the abyss.
They have a point. Yet the same Treasury officials have been quick to point out each time that taxpayers have made a profit on the sale of shares in Lloyds Banking Group.
It is also the case that RBS shares were trading above 400p as recently as February; it doesn’t take a conspiracy theorist to conclude that a loss-making sale less than three months before the General Election would have been far more politically toxic for Mr Osborne.
And it is difficult to find much evidence to support the Chancellor’s argument that the state’s shareholding in RBS is acting as a drag on the wider UK economy.
After all, taxpayers still hold nearly 73% of its shares following Tuesday’s £2bn sale, and they will continue to own a majority stake for at least the next couple of years.
As for the investors which took the shares off the Treasury’s hands, officials refuse to disclose their identities.
However, Sky News understands that 60% were sold to hedge funds and the remainder to ‘long-only’ investors (who can only benefit economically when the share price rises).
The buyers who plan to wait for RBS’s value to increase could be in for a long ride; the bank is still going through a painful restructuring, and the sins of the past will continue to haunt it for some time.
For the bank and Ross McEwan, its chief executive, the sale is a vote of confidence. He will hope that annual rows over bonuses, mis-selling and small business lending diminish in volume in proportion to the Government’s shrinking stake.
Mr McEwan will also be thankful that his pay, unlike that of his counterpart at Lloyds, is not tied to taxpayers recouping their investment in the bank.
And for Mr Osborne, make no mistake: this was a decision motivated by politics rather than prudent economics. Expect it to face tough scrutiny in the months ahead.
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