Chancellor of the Exchequer George Osborne has announced plans to sell off the British governments 79% stake in the Royal Bank of Scotland.
RBS, bailed out by the taxpayer at the height of the 2008 financial meltdown, is now likely to be worth about £13bn ($20bn) less than the government paid for it at the time, £45bn.
Speaking at the annual Mansion House speech in the City of London, Osborne also gave his support for Bank of England governor Mark Carney, who said he would impose tougher punishments on bankers who manipulated and fixed markets.
Carney had warned City traders they could face 10 years imprisonment for market manipulation, saying: For others who free-ride on your reputations: the age of irresponsibility is over.
On RBS, the Chancellor said the sell-off could take some years and will likely involve all types of investors – from major institutions to private individuals, Osborne said.
Its the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay, said Osborne. Im not interested in whats easy — Im interested in whats right.
And when you take the banks in total, were making sure taxpayers get back billions more than they were forced to put in.
The Chancellor had commission a report from Rothschild investment bankers, who concluded that RBS shares may never return to their pre-crisis levels and the current share price fairly reflects the fundamental value of the bank.
He added: I was not responsible for the bailout of RBS or the price paid then for shares bought by the taxpayer. But I am responsible for getting the best deal now for the taxpayer and doing whatever I can to support the British economy.
RBS shares closed on 10 June at 354.80p - up 0.62% on the day. It was bailed out when the price was 501p a share.
A letter from Carney to Osborne, published on 10 June before the speech, noted: Continued public ownership without a foreseeable endpoint runs risks including limiting RBSs future strategic options, and continuing the perception that taxpayers bear responsibility for RBS losses. In these regards, there could be considerable net costs to taxpayers of further delaying the start of a sale.
Regarding Carneys crackdown, Osborne said: The public rightly asks why it is after so many scandals, and such cost to the country, so few individuals have faced punishment in the courts.
And so to Europe...
Britains relations with the EU also came to the fore on the speech when Osborne demanded the rewriting of one of the blocs guiding principles: a commitment to ever-closer union.
Even the most pro-European in the room would, in time, come to question the benefits of British membership of the EU if we did not tackle these issues now, Osborne said. It is a particular challenge for the UK - and one that was not envisaged in the EU Treaties. such as the 1957 Treaty of Rome where the phrase first appears.
Among the principles we seek to establish in this re-negotiation are these simple ones: fairness between the euro-ins and the euro-outs enshrined, and the integrity of the single market preserved, Osborne said.
One of the greatest threats to our international competitiveness comes from ill-designed and misguided European legislation.
Although Britain is not part of the single currency, Osborne said: Its in our interests that the euro is a successful, strong currency. So were 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.
You can read the full text of the Chancellors speech here
