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UK Government in talks over selling part of RBS stake to Abu Dhabi

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Monday, 26 March 2012 23:10
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By Andrew Barr

The UK Government has held discussions over selling part of an 82 per cent stake in the Royal Bank of Scotland.  The stake, which is currently held by UK taxpayers, could be sold to an Abu Dhabi sovereign wealth fund at a loss.

£45.5bn of taxpayers’ money was invested by the UK Government in 2008-9 in order to prevent the bank from collapsing.  At the time the UK Government bought RBS shares at an average of 50p, almost double that of the current price.

Up to a third of the UK Government’s stake could be sold to Abu Dhabi, which is likely to be a loss making sale.  Taxpayers could lose £1bn for every £1bn paid to the UK Government, according to current share prices.

Abu Dhabi, a small state in the United Arab Emirates, is home to the world’s largest sovereign wealth fund, estimated by the Economist to be worth around £550bn. Like Norway and Scotland, Abu Dhabi is relatively small in size but gifted with high levels of oil and gas reserves.

Chris Leslie, Labour’s shadow financial secretary to the Treasury, said: “It’s vital that taxpayers get back the money they invested in RBS.

“We mustn’t have another rushed sale by George Osborne, like the loss-making selloff of Northern Rock, which leaves the British taxpayer hundreds of millions of pounds out of pocket.”

The potential sale of RBS shares to an Abu Dhabi sovereign wealth fund could be met with difficulty as the bank is currently undergoing an overhaul and restructuring of business.

However, the deal could prove politically beneficial to the coalition, helping to divert pressure from the UK Government towards the next controversial bankers’ bonus season, potentially allowing the argument to be made that executive pay is no longer the sole responsibility of the Treasury and UK Financial Investments.

Simon Denham, chief executive of Capital Spreads, said: “The coalition is probably crying out for a buyer so that it doesn’t have to deal with attacking or even defending bankers in a year’s time.”

The talks have also been met with fierce opposition from Liberal Democrat peer, Lord Oakeshott, who said: “Flogging off RBS shares this year at a loss would be the worst of all worlds. We poured £45bn into RBS to save it and make it lend, not as a share punt.”

The Treasury has played down proposals for an early selloff, claiming its current strategy for recovery is working.

A Treasury spokesman said: “The aim is to repair and return RBS to full health so that it is able to support the UK economy in the future, and the current strategy is working to achieve that. The Government’s policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.”

Comments  

 
# Marga B 2012-03-27 01:23
If it’s any comfort, this sounds very like what’s happening over in Spain with a nationalised savings bank, China was mentioned.

Difference is that being Spain, there’s no concept of taxpayers having an opinion, never mind a say.
 
 
# Wee-Scamp 2012-03-27 08:37
Quoting Marga B:
Difference is that being Spain, there’s no concept of taxpayers having an opinion, never mind a say.


UK taxpayers may well have an opinion but the Govt will ignore their views.
 
 
# Marga B 2012-03-27 13:14
Yes, Scamp, that’s what makes it such a heartwarming experience going on demos these days.
 
 
# chicmac 2012-03-27 01:28
1 Northern Rock had over 40 billion written off before its sell off.

2 How could they sell RBS and lose 1 billion for every billion they paid for it?
 
 
# Wee-Scamp 2012-03-27 08:43
Surely there’s a certain irony that one oil rich nation has to rely on another to buy shares in its nationalised bank. Suggests perhaps that the first oil rich country should really have piddled its oil riches down the drain.
 
 
# EphemeralDeception 2012-03-27 08:49
I had a look for ‘RBS’ in the budget report and couldn’t see anything. I may have missed it, but I doubt it.

However I would expect this transaction at a huge loss to the taxpayer to be itemised with the expected loss. Perhaps it is only recorded after the fact – but this is a ‘Budget’ report.

However getting the royal mail pension debt and selling the public asstests is mentioned. But I did not see this in the news???

From budget: Section 2.2.1
Royal Mail Pension Plan (RMPP) – On 1 April 2012 the Government intends, subject to State aid approval, to transfer the historic liabilities of around £37.5 billion from the RMPP, a private sector pension scheme, to a newly established unfunded public pension scheme, the Royal Mail Statutory Pension Scheme. The liabilities will be treated as contingent in the National Accounts, but will feature in Whole of Government Accounts. An estimated £28 billion of assets will also be transferred to Government. These assets will be disposed of in a measured fashion.

So, we take on 38 Billion of private debt. Where is the 28 billion in assets coming from? And in any case will be sold off.
 
 
# Marga B 2012-03-27 13:16
It was in the news, Ephemeral, can’t remember where though.
 
 
# J Wil 2012-03-27 10:34
I remember all the assurances that the money given to RBS would come back to the public purse eventually. Obviously not.

It just demomstrates once again that politicians and governments are not to be trusted. Long term projects, where, in the meantime, governments change colour, means that promises made by one government are unlikely to be kept by a succeeding one.

The whole reason behind this seems to be that the coalition do not want to be bothered spending time on what is effectively a nationalised company, even if there is potentially a huge loss to the public purse.

I cannot get my head around this. Are they selling off the family silver?
 
 
# Marga B 2012-03-27 13:19
This is exactly what is happening in Spain, which is famous for its olympian incompetence. Either Cameron is not trying very hard or is equally incompetent. Take your pick.
 
 
# Legerwood 2012-03-27 19:09
Quote:
J Wil 2012-03-27 09:34
I remember all the assurances that the money given to RBS would come back to the public purse eventually. Obviously not.


The same promises were made about Northern Rock but they, the UK Government, sold part of that off to Virgin at a loss to the taxpayers
 
 
# Peter A Bell 2012-03-27 11:51
Quote:
Taxpayers could lose £1bn for every £1bn paid by the UK Government, according to current share prices.


Really?

[Thanks for raising this typo. Editorial team have been alerted to it – NNS Mod Team]
 
 
# Seagetagrip 2012-03-27 16:11
Well, Gordon sold off the gold at £350 an ounce. No reason why Dave should be any different. Hard to tell them apart really.
 
 
# Angry_Weegie 2012-03-27 23:25
I can’t imagine that, considering the current price, Abu Dhabi will pay anything like 50p. Anyway, they will only buy if they can make a profit from it and whatever profit they make will be prfit that should have come to the UK taxpayer. If recent statements from RBS are accurate, and we see an improvement over the next year, giving Abu Dhabi a quick return, it will be interesting then to see if they sell off their stake and take the profit. Won’t Cameron look silly then.

No doubt Cameron will claim that they are making the best of the situation Labour put them in, which is pretty much their excuse for Northern Rock.

Or will the UK government get something from Abu Dhabi in return?
 

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