George Osborne was branded a ‘hidden Chancellor’ today after failing to turn up to the Commons to defend selling the public stake in RBS for less than the Government paid.
Mr Osborne announced last night the Government would begin selling its 80% stake in the bank with the shares at 361p – down from 500p when RBS was bailed out in 2008.
This afternoon, junior Treasury Minister Harriett Baldwin gave a statement on the sale to MPs in the Commons, but Labour asked why Mr Osborne was not in the chamber to defend the “dodgy” announcement.
Shadow Chancellor Chris Leslie said: “Where is the Chancellor of the Exchequer? Shouldn’t he have the courtesy to come to the House of Commons and answer questions for himself on what might well be one of the most important financial decisions of this parliament? Taxpayers deserve to know more about what is going on here and why is it that when there are difficult questions the Chancellor always blames someone else or sends someone else?”
Mr Osborne was branded a “submarine chancellor” earlier this year when he failed to come to the Commons to answer questions about former HSBC boss Lord Green’s appointment to the Government.
Labour pumped £45.5billion into RBS seven years ago as the bank stood on the brink of collapse.
If it had gone bust, it could have lead to a run on the banks as depositors and investors pulled their cash out of other British financial institutions.
In his annual Mansion House speech last night, the Chancellor revealed the Government would sell its RBS shares over the next five years.
He said: "It's the right thing to do for British businesses and British taxpayers. 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 pay."
The sell-off plan was welcomed by Bank of England Governor Mark Carney, who claimed it "would promote financial stability".
A report by investment bank Rothschild claimed that once the Government had sold off its stake in all banks, and together with other fees, the public purse would be £14billion better off.
But Tory MP Andrew Tyrie, chairman of the Treasure Select Committee, expressed serious doubts that taxpayers would make that money.
He said: “The Rothschild review puts the net gain to the taxpayer from the bank bailouts at £14billion. This would benefit from a great deal of qualification. It excludes the cost of funding the bailouts. The OBR put this at £17billion, and it treats fees paid in exchange for a service as if they were income, or recoveries.”
Mr Leslie said even if the Rothschild calculations were correct, taxpayers were still getting a poor deal from the sale of RBS.
He said: “We come to this extremely dodgy claim that if you roll everything together, stand on one leg and you squint a little bit and then you look at RBS losses, they’re not really that bad, really. Isn’t that a bit like saying I’ve sold the house and lost a fortune but don’t worry I’ve got a great deal on the car. Come off it.”
He called on the Government to announce a “red line” which it would not sell the shares below in order to stop the public losing out on even more money.
Labour's Shadow Chancellor Chris Leslie
Ms Baldwin, Economic Secretary to the Treasury, hit back at Mr Leslie’s criticisms and said unless he was “Mystic Meg” he would not be able to say at what price the shares would be sold.
She added: “I will take no lectures on economic competence from an opposition party that in office sold off the country’s gold reserves at an all-time low, crashed the banking system and the economy and left us with the biggest peacetime deficit in our nation’s history.”
While Labour expressed reservations about selling the shares at a potential loss, others welcomed the move.
Philip Booth, from the Institute of Economic Affairs, said: “The losses that are being crystallised by the government as a result of selling at the current price are the result of the mistakes of the past and will not magically disappear by the government holding on to its stake in the bank.
“It is crucial that the taxpayer never again foots the bill for the reckless behaviour of banks. Investors in banks should feel the full consequences of their actions and banks that make mistakes similar to those made at RBS must be allowed to fail in the future."
Jonathan Isaby, Chief Executive of the TaxPayers' Alliance, said: "The headlines will be grabbed by a potential loss on the sale of RBS but the overall profit from the combined bank bailouts suggests that the Chancellor is making the best of a bad job, especially as these were emergency recapitalisations rather than long-term investment decisions.
“RBS belongs in the private sector - it will be freer to lend, freer to operate and taxpayers will no longer have to bear the cost of fines and high pay. The government should not play the stock market, and therefore the Chancellor is right to sell off the stake as quickly as practically possible."
Unite, the country’s largest union, was more critical of the plan.
Rob McGregor, Unite National Officer for Finance, said: “Like Royal Mail and British Gas before it, the Tories are ripping off the public by selling our stake in RBS at a knock down rate to city investors.
“That Osborne is choosing to let the Treasury lose out on millions, while using the deficit to justify £12 billion in welfare cuts shows he is motivated by pure ideology.”