Last week, it was announced that the first bunch of state-owned shares in the Royal Bank of Scotland were to be sold off.
Those shares (totaling around 6% of the total shares in the bank, leaving the state with about 70% control) were sold at 330 pence each, which is a loss of almost a third in value from the 502 pence they initially cost the taxpayer back in the aftermath of the financial crisis.
Now call me crazy, but shouldn’t shares in a bank which is operating in a supposedly healthy and growing economy be worth MORE than shares in a bank which is failing under the weight of it’s own ineptitude amidst a backdrop of global financial meltdown?
The disparity in the cost of the shares has amounted to a loss of approximately £1 billion to the government purse and if all of the state’s shares were sold at the same value, then the loss would be around £15 billion.
For a chancellor who is considered in some circles to be an economic genius, that doesn’t really look like good business, does it?
What makes this even more galling is that the majority of the shares that were sold last week were snapped up by hedge funds and similar investment firms who just happen to be the kind of concerns that make big donations to the Conservative party (and anyone else who favours financial deregulation) and were also the parties responsible for the financial crash in the first place.
Yeah, that’s right, we are selling a bank which failed as a direct result of a global financial crash caused by dubious investment practices to the very elements which engaged in those dodgy practices and we’re doing it at a loss to the public purse.
Effectively, George Osborne has handed the very people responsible for the financial crisis a cut-price stake in a major national bank at the taxpayer’s expense.
This is entirely in keeping with the neoliberal ideological desire to privatize and deregulate at any cost based on the dogmatic belief that private enterprise and lack of oversight leads to the generation of wealth, in complete denial of the observable facts.
It also follows the re-privatisation of the East Coast railways after several years under profitable public control (which, like RBS had been nationalized as the private ownership had resulted in a failing company) and the under priced sell off of the Royal Mail to establish a pattern of profit making entities, either built up or rehabilitated under state control being sold off to corporate interests at well below the market value.
This equates to tremendous business for the investment firms who get to pick up shares at cut price but awful business for the country in both financial and social terms.
In a time where the nation is searching down the back of it’s metaphorical sofa for spare change and cutting vital services in order to appease the austerity agenda, it makes no sense that the state would sell off profit-making assets at all, never mind that they would do so at well below market value, making a considerable loss in the process.
Nonetheless, we are constantly fed the lie that privatization and reduction of the state is a good thing which fosters growth and economic stability, when nothing could be further from the truth.
The Royal Mail could have stayed in public hands, guaranteeing the continuation of universal service and helping to stimulate the growth of the economy by providing low cost mail services to small businesses.
The East Coast rail line could have stayed in public hands, stimulating business in the area by offering a good service and reasonable pricing while also offering competition to the privately owned West Coast line.
This is thrown even more into relief when we consider that the new operator of the Scotrail franchise is Abellio, who are in fact a subsidiary of the Dutch state owned rail operator – so fare rises in Scotland will be funding lower fares and service improvement for a state-owned transport network in Holland!
Most of all, RBS could have stayed in public hands and helped to grow the economy by offering preferential rates to small businesses and stabilized the so-called precariat by providing low cost banking and appropriate overdrafts and loan rates.
All of these assets could have helped the country by providing services which are geared to grow the economy as a whole, benefitting the state by increasing the tax yield and reducing the benefits bill while also adding social value and security to millions. They’d also still have made a profit, which would have gone directly into the exchequer’s pocket to help pay down the deficit.
As privately owned enterprises, these assets will reduce low-profit services and concentrate on extracting as much money from consumers as possible, removing mail services from those in isolated areas, increasing travel fares and making business startup almost impossible for people who are not already independently wealthy.
Sure, they’ll make their shareholders a lot of money, but in truth they will remove money from the onshore economy and reduce the service capability and potential growth of the nation.
All of this merely exposes the lie implicit in the belief that the Conservatives are financially responsible (or even competent) or that the neoliberal ideology is economically beneficial.
The sell off of RBS is merely the latest in a string of government decisions which benefit only the wealthy and the speculators of the financial sector but it is also symptomatic of the ongoing denial as to what actually caused the financial crisis in the first place.
By returning the bank to the hands of the very people who nearly brought the global economy to it’s knees, the Conservative government is showing it’s hand as complicit in the continuation of an evidently broken system, quite happy to court a similar disaster in the near future.
A second financial crisis would be one that Britain would be poorly placed to weather given the decimation of our once robust national infrastructure and welfare system in the name of austerity.
It’s the Great British Sell Off –the asset stripping of a nation for the short term benefit of the few.
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