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RBS government stake to be sold, chancellor announces

The government plans to sell its stake in the Royal Bank of Scotland, Chancellor George Osborne has announced in his annual Mansion House speech.

Mr Osborne said the “decision point” had been reached.

Governor of the Bank of England Mark Carney said the phased sell-off “would promote financial stability” and benefit the wider economy.

Mr Osborne also set out more details of the sell-off of the Government’s remaining stake in Royal Mail.

Royal Mail employees will share a further 1% tranche in the firm, while 15% will be placed with institutional investors.

The government provided RBS with a £45.5bn bailout in 2008, paying around 500p a share. The share price currently stands at 354.8p.

‘Best price’

The chancellor argued that the sale must be seen as a whole and the share price will increase in subsequent offerings as confidence grows.

Mr Osborne said: “It’s the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than that was paid for it – but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay.”

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A review from Rothschild investment bank said that, despite this price gap, taxpayers can expect to make £14bn more than it paid out in bank bailouts if the sale of bank assets and fees already received are taken into account.

RBS has already paid back about £5bn in fees and repayments for insurance systems set up by the government as part of the bailout.

‘Knock-down rate’

But the plan drew criticism from the Unite union, whose members include bank workers.

“By selling off the public stake in the Royal Bank of Scotland, George Osborne is short-changing the public and wasting a historic chance to bring needed change to Britain’s banks,” the union said, criticising the risk of selling the stake at a “knock-down rate to city investors.”

City sources have told the BBC’s Business Editor Kamal Ahmed that Mr Osborne wants to take a two-stage approach to the sale.

Firstly, he wants an inquiry into the options for a sale and how it would be done. This could include a “Tell Sid” British Gas-style retail offer to the public or, as is perhaps more likely, a sale to institutions such as pension funds.

Secondly, he will look at a timetable for when the sale will start to take place.

RBS’s chief executive, Ross McEwan, said, “I welcome this evening’s announcement from the Chancellor and we are pushing ahead with our strategy to build a simpler, stronger, fairer bank that is totally focused on the needs of its customers and centred here in the UK.

“When the Government starts selling its shareholding, it will be selling a bank determined to be the best in the country.”

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