Delivering his annual Mansion House speech, Osborne said the sale must be seen as a whole, and that the share price will increase in subsequent offerings as confidence grows.
“It’s the right thing to do for British businesses and British taxpayers,” Osborne argued. “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 be pay.”
The government had provided RBS with a £45.5bn bailout back in 2008.
Osborne added that the fees and proceeds received from other banks as a result of support during the financial crisis meant that taxpayers would get back over £14bn more than they originally put in.
Mark Carney, the governor of the Bank of England, agreed that the proposed sell-off would “promote financial stability” and end up benefiting the wider economy.
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Unite union was critical of the phased plan, claiming the government was “short changing the public”. It added that Osborne was “wasting a historic chance to bring needed change to Britain’s banks”, and criticised the risk of selling the stake at a “knock-down rate to city investors”.
The move reflects Osborne’s own belief in opposing the state owning major businesses like banks. As RBS is Britain’s biggest privatisation ever, the sale will make £32bn for the treasury – even if the share price didn’t increase at all over the five-year period the government will use to sell its stake.
RBS chief executive Ross McEwan “welcomed” the announcement and added that when the government starts selling its shareholding, “it will be selling a bank determined to be the best in the country”.
Also covered in Osborne’s speech was a threat to withhold British support for the Eurozone, unless the UK’s demands for reforms were met – ahead of David Cameron’s in-out referendum.
He said: “It’s in our interests that the euro is a successful, strong currency. So we’re 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.”
Osborne also detailed the sell-off of the government’s remaining stake in Royal Mail, with employees to share a further one per cent tranche in the firm, with 15 per cent being places with institutional investors. It means the government received another £750m, selling another part of its 30 per cent stake.
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