Nick Clegg, UK deputy Prime Minister, has caused a minor stir with his idea to give away shares of the nationalised banks to voters.
There has been some opposition saying that the banks should be sold off with the proceeds going to the government to help pay off the deficit.
This argument would mean that in essence, the banks, after sucking huge amounts of taxpayers money to prop them up, would be able to buy themselves back cheap. A sort of pawnbroking deal you can get with someone really bad at pawnbroking. To add insult to injury, the proceeds are then handed by the treasury straight over to the bondholders who are mostly, the banks! Genius plan if you’re a banker!
There is however, one teeny weeny flaw in this plan to grab more shares for the ‘deserving‘. While it’s obvious that it’s income tax payers who are the intended beneficiaries, income tax is not ring fenced. It’s thrown into a great big pot along with all the other taxes such as VAT. Taxpayers in this case would include the ‘undeserving’ and, incidentally, also include any child that has ever bought an ice cream…
Nick Clegg’s asserts that his idea would democratise the banks with the participation of legions of small investors. Experience shows with previous privatisations that this would just end with the dictatorship of the institutional investor.
My preferred option? Tempting though the offer of free money is, the caveat is that we would only get above what the government paid for the shares originally anyway. So I’d prefer a more transparent and democratic solution. Sell off the gambling arms of the banks to any mug that’ll buy them at an over-inflated price. Consolidate the rest into one single bank, rationalising the product ranges to save the costs of duplication. The management would be made up of representatives of the bank’s employees, the government and representatives from interested consumer groups. Now that would be more like a true ‘Peoples Bank’.