Page last updated at 11:27 GMT, Sunday, 21 February 2010

Tories propose 'people's bank bonus' in cheap shares

RBS and Lloyds logos
Sale of the bank holdings could yield a profit for the government

The public could be offered discounted shares in state-owned banks under a "people's bonus" plan outlined by Tory shadow chancellor George Osborne.

In a Sunday Times interview, Mr Osborne said the measure would be a reward for the £850bn of public money used to prop up failing financial institutions.

Young people and those on low incomes would be offered extra discounts.

Labour called the plan a "silly little gimmick", while the Liberal Democrats said it was an attempt to buy votes.

Mr Osborne told the Sunday Times: "The bankers have had their bonuses. We want a people's bank bonus for the people's money that was put into these organisations."

ANALYSIS
Joe Lynam
By Joe Lynam, BBC business correspondent

Given the paucity of detail in these Tory plans, it's hard to gauge what kind of appetite there might be from the wider public to buy shares in government controlled banks.

But since there have been very few mass share offerings since Dot Com became Dot bomb, it's reasonable to suggest that the public might grab the chance to make a medium rather than short term profit from a floatation of RBS or LBG shares.

The old argument remains though: why should we pay once again for shares in companies we already control? Also could the Tories be happy with very poor families borrowing money to buy shares in banks, which have shown of late that they can go seriously down as well as up?

It was expected people would be offered shares worth between a few hundred and few thousand pounds at a discount on the market price, the paper reported.

There could be extra discounts for young people, low-income families and parents saving for their children.

Some have compared the scheme with the 1980s "Tell Sid" campaign - which was aimed at encouraging people to buy shares in British Gas.

'Saving culture'

"The man who would be chancellor wants a new generation of mass share ownership," said BBC business correspondent Joe Lynam.

"And he wants to create a new culture of saving rather than borrowing."

Mr Osborne said the share offer would only be made when the banks were properly regulated and could not take the kinds of risks that preceded the recession.

The financial crisis saw the government nationalise Northern Rock, and take stakes in Royal Bank of Scotland (RBS) and Lloyds Banking Group.

Encouraging people on low incomes to invest in a volatile share market shows how removed the Tories are from everyday reality
Vince Cable
Lib Dem Treasury spokesman

Chief Secretary to the Treasury Liam Byrne said: "When it comes to the shares in the banks the public expects us to focus on getting their money back.

"That means selling them at a time and way that maximises their value, not an irresponsible and expensive political gimmick."

RBS and Lloyds shares are currently worth about a third of the prices paid by the government.

Business Secretary Lord Mandelson told the BBC that the Tory plan was "a rather silly little gimmick" and "another piece of headline-grabbing incoherence".

"What I would say to George Osborne and David Cameron is that if the deficit really is the priority - and cutting it - what on earth are they doing, playing around, giving away the assets and shares in RBS at knock-down prices at this stage, which would be at the expense both of the taxpayer as a whole and our future ability to reduce the deficit?"

Liberal Democrat Treasury spokesman Vince Cable said that it was expected to be several years before the banks could be sold off, so "dangling this prospect" was "electioneering at its most cynical".

"These banks should be set the concrete objective of ensuring lending to sound small and medium-sized businesses who are the drivers of our economic recovery," he said.

"Actively encouraging people on very low incomes to invest in a volatile share market beggars belief and shows just how removed the Tories are from everyday reality.

"A young couple on low income is more concerned with putting food on the table than speculating on the stock market."



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SEE ALSO
Banks 'still restricting loans'
16 Feb 10 |  Business
Banks sale 'may take five years'
15 Feb 10 |  UK Politics
UK banking bail-out 'justified'
04 Dec 09 |  Business
RBS and Lloyds set for sell-offs
03 Nov 09 |  Business

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