‘The faster the government starts selling its stake, the better for everyone,’ RBS chief Stephen Hester told the British Chambers of Commerce conference last week. In doing so, he opened up what may become the hottest financial debate after the Budget hoo-hah has died down: when and how should the government’s holding company, UK Financial Investments, start disposing of its 82 per cent stake in RBS and its 41 per cent stake in Lloyds? In the case of RBS, the government bought in at an average share price close to 50 pence against a market level of 29 pence today, and at least one more year of losses is expected before the bank begins to look relatively healthy again. Nevertheless, some analysts rate the shares a ‘buy’ — UBS says RBS is ‘a clear recovery play on the UK and US’ — so the price gap can be expected to narrow, but not quickly. If UKFI were to sell, say, one third of its holding before the end of this year, it might (on an optimistic price view) recoup a £10 billion ‘windfall’ for Treasury coffers, while cementing a £5 billion loss against the original investment. But RBS would still be majority-owned by the taxpayer, and the ‘overhang’ of shares remaining to be sold would act as a semi-permanent brake on the share price.
So it’s a tricky question, and every investment bank in the City — even Goldman Sachs, despite the accusation from a departing employee that it regards its clients as ‘muppets’ — must have teams of pale and sweaty financiers burning the midnight oil over presentations to newly promoted UKFI chief Jim O’Neil as to what he should do. But media coverage so far has largely failed to address the alternative course, which is to realise value for taxpayers through a frenzy of old-fashioned asset-stripping. Selling off the parts might be easier and more lucrative than trying to get shot of the whole.
RBS itself is a tainted brand, but its NatWest subsidiary, bolstered by an effective ‘customer charter’ advertising campaign, still has a solid name in the high street. Why not refloat it as a separate entity, with or without its former private banking arm, Coutts, the historic brand under which RBS now focuses its ‘wealth management’ activities? Or sell Coutts on its own to private-equity investors? There are already plans to sell off the group’s insurance brands by 2013 to comply with an EU ruling, and rumours that its major US business, Citizens Financial, will be on the block if the price is right.
Flogging off all these would leave a bundle of cash for distribution — plus the bits no one wants such as the shrivelled investment banking arm, which could be quietly closed down. And of course there would still be the ancient and authentic Royal Bank of Scotland, which could one day reclaim honoured status in Alex Salmond’s independent northern fiefdom. That’s the way I’d go with RBS, and I won’t be surprised in a year’s time to find that Jim O’Neil and Stephen Hester have agreed with me all along.
Ton of bricks
The Chancellor has ‘come down like a ton of bricks’ on stamp duty avoidance, partly to be seen to be doing something painful to wealthy homeowners short of conceding the Lib Dems’ longed-for mansion tax. But there is still an unhealthy distortion at the top of the property market from which, one way or another, more tax revenue might be extracted without offending voters at all.
A West End estate agent told me this week that he has not sold a house to anyone British for more than two years. If the buyers are not from the Middle East, they’re from Italy, Spain and Greece, in most cases making pure ‘safe haven’ investments: content to leave the property empty in the knowledge that it’s unlikely to fall in value, or be seized by revolutionaries, or incur taxes that hurt and can’t be avoided.
That’s why the average asking price for a family house in Kensington and Chelsea has passed £2 million — and probably why the private equity firm BC Partners has just bought back the rollercoaster-performing estate agency Foxtons, which it first bought at the height of the boom in 2007. But if Greek surgeons and Syrian generals with suitcases of cash really want a safe haven, let them buy gilts and help fund the deficit. Driving Londoners out of their own housing market without providing significant trickledown effects is no contribution to UK economic recovery. As Boris keeps saying, everyone’s welcome in our cosmopolitan capital — but we can all agree that foreign owners of empty mansions deserve to be taxed till the bricks squeak.
Other contributors have already saluted the centenary of the loss of the Titanic, but this column will continue to celebrate the doomed ship’s timeless legacy to financial journalism, the Titanic metaphor. Impossible to count the number of icebergs that have loomed in the night and bands that have played on as the decks splintered in coverage of the banking and economic crises of recent years. But the prize for the most extended and imaginative use of the genre must go to Estonian historian Anti Poolamets, whose ‘Welcome to the Titanic!’ campaign in 2010 failed to persuade his countrymen not to abandon their own currency, the kroon, for the euro — making Estonia ‘the passenger that got the last ticket’.
In the spirit of Poolamets, rest assured that the great wreck will never rest quiet on the ocean floor as far as Any Other Business is concerned, even after next month’s anniversary has passed. Meanwhile I am discovering more food for thought on every page of Richard Davenport-Hines’s brilliant social history Titanic Lives, including this observation as to why the British are more hostile to wealth than the Americans, though the gap between the first-class super-rich and the poor down in steerage was and still is so much wider over there: ‘The hungry beggar who glimpses a sumptuous feast feels more marvel than hatred. Envy occurs when people become capable of mutual, and invidious, comparison.’
This article first appeared in the print edition of The Spectator magazine, dated March 24, 2012