Monday, March 07, 2011

Stephen Williams proposes giving bank shares to every British adult

The connection between the Liberal Democrat think tank CentreForum and the concerns of the wider party has sometimes been difficult to discern. So it is good to see them publishing Getting Your Share of the Banks: Giving the banks back to the people by the Lib Dem MP Stephen Williams.

The pamphlet endorses a plan, drawn up by the corporate finance firm Portman Capital Partners, under which every British adult would be given shares in the banks that were rescued by the government. As the Daily Telegraph says:
Under the plan, each UK citizen could receive about 1,450 shares in RBS and 440 in Lloyds – worth a total of more than £900 at current market prices.
"Every citizen would have the same rights as shareholders at the moment, so they'd have the rights to get the company annual report. They could turn up at the AGM," Mr Williams told the BBC this morning.
"What might happen, for instance, is there could be shareholder associations set up of citizens who own these shares, who will put pressure on the banks to change their behaviour. Banks and all other companies are meant to be owned by their shareholders and to respond to their shareholders' wishes."
The idea of these shareholders associations is attractive, but I suspect that most shareholders would sooner or later take the money, as happened when the building societies were demutualised. And, given the pressure on public finances at present, there is a case for the government getting every penny it can for these bank shares when it comes to sell them.

But I find this plan attractive. It is, as I heard Stephen Williams say on television this evening, a way of ensuring that poorer people, whose taxes helped to bail our the banks, see some benefit when the shares are sold. If the are simply sold on the open market, this will not happen.

You can download the full pamphlet from the CentreForum site.


oneexwidow said...

I think this plan had much to commend it and is arguably more equitable than selling the share through a conventional privatisating process.

Depending on the value per share that the government would want back on sale and the prevailing value when people receive/realise the shares, there could be a minor stimulous effect too.

Caron said...

But it doesn't get the money back for the country, does it? Surely if we spent £65 billion bailing out the banks, we could do with the money for selling the shares to reduce the deficit/impact of the cuts in public spending which are affecting so many people.

Didn't we just abolish the Child Trust Fund because it was not the best use of public money? Isn't this a similar sort of thing?

I'm not convinced.

oneexwidow said...

It would ensure the return of tax-payers capital over the longer term but you're right in that it wouldn't generate a profit.

It would mean, though, that the shares aren't just purchased by the institutional inversots and those with spare capital.

The pamphlet also is quite persuasive about the impact of structural overhang - e.g. the government's potential for profit is limited for as long as the market is anticipating a sell-off.

Perhaps an element of profit could be built in to the floor price of the shares - ensuring that the exchequor receives at least some element of return for it's holding period.

Anonymous said...

"It is, as I heard Stephen Williams say on television this evening, a way of ensuring that poorer people, whose taxes helped to bail our the banks, see some benefit when the shares are sold. If the are simply sold on the open market, this will not happen."

I really don't understand this comment at all. If the shares are sold on the open market, the sale proceeds go to government funds. Accordingly either taxes are lower than they would have been to provide a given level of services, or more services can be provided for the same level of taxes raised.

If you are arguing that poor peopek don't actually pay (much) tax, then the proceeding premise (that poor people's taxes paid for the bank nationalisation) is also wrong.

The only way in which the statement could be correct is if poor people pay taxes and get no benefit from them. Which is logically possible I suppose, but seems pretty unlikely

dreamingspire said...

Stephen Williams MP, gregarious, and does sensible meet the people things like using public transport, was by trade a Tax Accountant. So he is well prepared to develop a cunning plan for those bank shares.

But think of the cost to the banks of printing and mailing out those massive tomes that their annual reports are going to be - so he needs to include a provision for these people shareholders to routinely receive only a short
summary of the annual report.

iain said...

Personally Jonathan I would tell Sid to sling his hook as this proposal is not really different from the Gas privatisation he was so interested in. Long term it will not help to redistribute wealth nor will it challenge the excessive risk taking of the banks or force bankers to live the real world over pay.
One of the key structural problems with the banks is the dominance of one model of ownership-share ownership. Managers have as their prime objective increasing share value-hense the excessive risk taking since they know they are 'too big to fail'.
If we genuinely want to challenge the banks we need to promote alternative models of ownership. Williams's proposal does not do that.
If the banks were mutualised the asset would be owned long term by the members and the value would be locked in. The managers would then concerntrate on serving their members interests. Region mutual banks could be set up redistributing jobs away from London to the regions. The taxpayer could get their stake back over the medium term.
I am highly suspicious of a proposal that comes out days before a conference with a high powered launch. The banks collapsed ages ago. If this proposal had been published earlier it could have recieved proper scrutiny. Instead it strikes me that we are being bounced. We are now promised an Emergency motion at Sheffield.

If sold in this way the banks will eventually land up in the hands of the same shysters with the same business model that got us into the mess in the first place.
I regret that you friend Bonkers will not be able to deposit his cash in the Rutland Mutual but rather have to hand it over to Bob Diamond or one of his friends