Losses to be ‘more than offset by profits on other bank share sales’ as Osborne confirms RBS sell-off

The Chancellor of the Exchequer George Osborne has confirmed that the UK Government is to begin selling-off its 80 per cent stake in bailed-out Royal Bank of Scotland, regardless of any losses incurred by British taxpayers.

Speaking at his annual Mansion House address last night, Mr Osborne said the “decision point” had been reached, seven years after the global financial crash when the Government was forced into a £45.5bn rescue of the Edinburgh-based lender -the largest privatisation in British history.

He said that he had come to his decision following an independent review that concluded the losses to the taxpayer would be more than offset by the profits on other bank share sales, including the stake in the Lloyds Banking Group.

In 2008, the Government paid 500p a share for its share of RBS, compared with the current price of 354.8p.

Should that share price remain the same over the next five years –the duration Mr Osborne plans the to sell the government’s stake, the sale would still make £32bn for the Treasury.

The move has been endorsed by Bank of England governor Mark Carney who warned that delaying the start of the sale could lead to the taxpayer losing even more.

The independent review into the proposed sale, carried out by Rothschild, hypothesised that if the RBS shares were sold in one go at their price on June 5, the loss to the taxpayer would be an estimated £7.2billion.

But Mr Osborne said that the size of the government’s holding meant that the sell-off would take “some years” to complete and projected an estimated overall profit of more than £14billion if all the government’s remaining shares in the banks were sold, as against a forecast loss of £20billion to £50billion at the time of the bail-outs.

However, his announcement came just a day after we reported that The New Economics Foundation (NEF) has predicted that such a move would lead to a massive loss for the UK taxpayer that could run up to at least £13 billion but possibly double that.

Mr Osborne added that while the complexity of the sale meant that the first offering, to take place in the coming months, would only be to the financial institutions, he said future disposals could include ordinary investors.

He said: “In the coming months we will begin to sell our stake in RBS. It’s the right thing to do for British businesses and British taxpayers.

“Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay.

“And when you take the banks in total, we’re making sure taxpayers get back billions more than they were forced to put in.

“From bailing out the banks to bringing them back from the brink, now is the time for RBS to rebuild itself as a commercial bank no longer reliant on the state, but serving the working people of Britain.”

In a letter to the chancellor, Mr Carney said public ownership of RBS had “largely served its purpose” and that a “phased return” to private ownership would promote financial stability.

Also reacting to the news, RBS’s chief executive, Ross McEwan, said: “I welcome this evening’s announcement from the Chancellor and we are pushing ahead with our strategy to build a simpler, stronger, fairer bank that is totally focused on the needs of its customers and centred here in the UK. When the Government starts selling its shareholding, it will be selling a bank determined to be the best in the country.”