Monday, March 07, 2011

Share and share alike? My reservations about Stephen Williams' bank share giveaway plan

Ok, I'm going to write about something I know very little about. I will ignore the shouts of "what's new?" I can hear in the distance.

Today liberal think tank Centre Forum has published a plan by Stephen Williams, Liberal Democrat MP for Bristol West, which would involve shares in the banks bailed out by the taxpayer being distributed free of charge to British people for them to do what they liked with.

My gut instinct is to be opposed to it. Not because it isn't a good idea to give ordinary people a say in how businesses are run. Part of the argument for doing so is that ordinary people would have a say in how the banks were run. That'll be like they have a real say in how privatised utilities are run, then. I'm not aware of any of the privatised utility companies being particularly people centred in their approach, and in reality, they are mainly owned by corporate, rather than individual shareholders. The likelihood of you or I ever being able to influence the banks' future strategy is pretty minimal.

Industrial democracy has long been a key part of liberal thinking, and rightly so, but I'm not sure the time is right for this scheme. We own £65.8 billion of the banks. The country's deficit is £155 billion - with some of that being the money we had to borrow to bail out the banks. Are we not better off as a country selling the shares in the banks and using the proceeds to pay back our loans or to provide better public services for those who need them? It seems to me to be almost rude to be talking about giving shares to people when they're seeing their Councils cutting services they rely on or central government cutting benefits they desperately need.

I think I understand the thinking - wanting to give people a stake in the banks they bailed out and giving a small investment or windfall. But surely the industry's problems are more effectively solved by regulating the banks that matter to ordinary people within an inch of their lives. The idea that we as shareholders would all turn up and vote against massive bonuses isn't credible to me.  It just seems that we have more important and pressing things to do with public money than give away to individuals what could be used to provide better services for us all.

What do you think?


Andrew Hickey said...

I like the idea myself - if nothing else it's a nice bit of redistribution, because poorer people will benefit more from the money and will have contributed less of the money towards the original bail-out, but it still seems 'fair' in a way that Tories can't argue with. It's a transfer of money from the rich to the poor, and I like that.
The only quibble I have myself is that non-citizens' tax went to paying for the bank bailouts, but they're not going to get the shares, whereas non-taxpayers who are still on the electoral roll will...

Keith Legg said...

I can see pros and cons in this. One big advantage would be that, unlike a standard market placing as per BT or BA, none of the shares would be going directly to fund managers, nor would it be particularly easy for them to build up quickly as significant shareholding - thus pushing the banks into making swift returns.

The major disadvantage though is almost the opposite. If the shareholder base has a significant number of small shareholders, it can become difficult then to exert pressure or control on the bank to restrain it - both HBOS and Northern Rock had this problem.

On balance, assuming that there's no outright buyer of the banks (and it doesn't look that way at present) I think this could be a pretty lo-cost way of disposing of the bank.

iain said...

I share you anxiety. If the shares are given away it will not be long before they are bought up by the existing financial institutions.
We should back the plans to mutualise the state owned banks and create regional/national financial bodies. This will spread jobs, reduce risk, reduce mega pay awards and keep the banks long term in the peoples hands. This is something we need to do together not as individuals.
Sell off the Investment/cascino banks this way if you want but lets put the High St retail banks in Mutual ownership


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