The chancellor, Philip Hammond, kickstarts sale of 925 million shares.
Philip Hammond has restarted the sale of government owned shares in Royal Bank of Scotland, offloading a stake worth almost £2.6bn to City investors at a loss.
The chancellor, through UK Financial Investments, which owns the RBS stake on behalf of the government, kickstarted the sale of 925 million shares, representing about 7.7% of the bank’s stock. The government, which will still own a majority stake in RBS almost a decade after the bailout during the financial crisis, said it would reduce the state’s ownership of the bank from about 70.1% to 62.4%.
The disposal marks the first time RBS shares have been sold since the summer of 2015, when Hammond’s predecessor George Osborne was forced to defend the sale of a first tranche at a loss of about £1bn.
Analysts said the government would need to sell the shares for slightly less than the 280.9p closing price on the London Stock Exchange on Monday in order to entice City investors to buy. The Treasury said it would announce the sale price on Tuesday morning.
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However, at just below the current share price, the latest sale will net less than the last disposal under Osborne, when the government offered shares to investors for 330p.
Labour criticised the latest share sale, with the disposal coming well below the 500p per share paid by the government to save RBS at the height of the financial crisis, costing taxpayers more than £40bn.
John McDonnell, the shadow chancellor, said: “There is no economic justification for this sell-off of RBS shares. There should be no sales of RBS shares, full stop. But particularly with such a large loss to the taxpayers who bailed out the bank.”
The view at the Treasury has increasingly become that RBS shares are a yoke that needs to be removed as quickly as possible, with potential to use the funds to help cut the government’s budget deficit. Officials are of the view the price paid for the shares is an irrelevance because they were bought to save RBS from collapse and not as an investment.
City analysts also said there was little chance of the government recovering all of its money from RBS for at least several years. Sam Dumitriu of the free market Adam Smith Institute said it was a mistake for Labour to think that because RBS was once worth twice as much it would ever be worth that again.
“Chasing your losses is not a sound investment strategy, it’s problem gambling,” he said.
The latest disposal could help Hammond lay the ground for raising public spending at the budget later this year. The chancellor earmarked RBS share sales worth £3bn for each financial year until 2023 at the autumn budget, helping to keep the government’s budget deficit shrinking over the course of the current parliament.
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