Making a fast (or slow) buck was never the object

EVER since the government bailed out the Royal Bank of Scotland to the tune of £46 billion back in 2008, there was always going to be a day when the majority shareholding would be sold off and the taxpayer reimbursed.

Seven years after RBS was rescued at the height of the financial collapse, that day is almost upon us, following Chancellor George Osborne’s announcement in his Mansion House speech that the sell-off will begin in the next few months.

According to Mr Osborne, this is “the right thing to do for British businesses and British taxpayers”. Not so, says Chris Leslie, Labour’s shadow chancellor, who believes the Chancellor is selling at the wrong time, at great loss to the taxpayer, and should have been in the Commons yesterday to answer criticism over the strategy.

In one respect, Mr Leslie is correct. If the Chancellor chose to break the news at the Mansion House rather than in Parliament, he had a responsibility to be at Westminster the following day, rather than hand over to Treasury minister Harriet Baldwin to stand in for him.

The argument that the Chancellor is selling taxpayers down the river is more difficult. The bottom lines that Mr Leslie complains about cannot be denied. If the RBS stake is sold off in one attempt, a £7bn loss would be expected.

Of course, that is a poor return on the original price paid, but this is where the interpretation of investment needs some clarification. The government of the time did not view the situation as an opportunity for future gain. Bailing out RBS was about protecting the UK from an even bigger financial crash than was experienced. The deal saved RBS, and thus helped to shore up the economy at a time of crisis.

If RBS had gone under, the consequences would have been catastrophic. And if the shares are now sold at a loss of £7bn, then that was the price of this important intervention as the government desperately sought economic stability.

Mr Osborne has argued that although there may be a loss over RBS, he expects the taxpayer to be in the black to the tune of an estimated £14bn when the sale of the government’s remaining shares in all the bailedout banks are sold.

The opposition claims that this will be wiped out by the £18bn cost to the Treasury to pay interest on the money it borrowed to fund the bail-outs. But again, that £4bn deficit would be the price of those bailouts.

And if, at that time of crisis and panic, Labour had been offered stability for £4bn, the government would have jumped at the chance.

If the interests of the taxpayer are paramount, we must not forget that, ultimately, the 2008 deal was done in the interests of the wider economy – but never with a view to a dividend.