Before the 2010 election, one of the tartan goodies that the Lib Dems, and Nick Clegg in particular, waved in front of the Scottish electorate was the promise of splitting Lloyds Banking Group to ensure that HBOS was returned to Scotland. It was an impossible dream, regardless of whether Clegg knew it at the time or not. You don’t sew two banks together for two years only to pull them apart on a political whim.
Fresh from that misguided move, Nick Clegg has today offered to hand out banking shares to the public as if they were little goody bags to be tossed around like confetti.
In promising free shares for all, Nick Clegg is trying to rinse one last poll boost from the drying cloth of anti-bank sentiment in the UK right now. He might as well be proclaiming that the Lib Dems are against ID cards, against the Iraq War and in favour of AV for all the timeliness good it will do him.
It is understood that the banks messed up but constantly bashing them for no other purpose than it feeling good is of no use to anyone, and the public saw through that a long time ago. After all, if giving away shares to the public was a good idea then a Government would have bought up parts of Shell, BT Group and Barclays in the past and arranged a massive mail shot. It didn’t do so because it would be a crass move and completely counter-productive to the British economy.
In many ways, George Osborne is adopting the same strategy for the Government as banks are, focussing on core services/customers and washing his hands of costly non-core services/customers as quick as he can because money and resources are tight. Agree with him or not, (and I disagree with him, people need the Government’s largesse as much as customers need banks to continue lending to them) but there is a plan in place that the coalition needs to stick to and Nick Clegg, for wishful partisan gain, is working diametrically opposite to this.
George Osborne needs the RBS and Lloyds share prices to reach a certain level whereby the Government can make a profit from its investment and then either pay down the deficit or reduce the rate at which spending is being cut. What the Chancellor doesn’t need is the Deputy Prime Minister landing a mischief-making, ‘muscular liberalism’ headline on the front page of the FT and promising everyone shares, candy floss and a pony each which results in the Lloyds share price dropping 3.68% at the close of business to a new 52-week low.
The Lib Dems got battered in the Council elections, they got battered in by-elections and they got battered in the Holyrood elections. The quickest route to total oblivion for Nick Clegg’s party is to fatally undermine what the Conservatives are trying to do in Government while pretending to be mature partners.
Nick Clegg took a large, silly leap forwards towards that oblivion today by cravenly suggesting free money for all.
The Lib Dems can work against the Government from the Opposition benches or they can work as a team alongside Cameron and Osborne, but they can’t do both at once.
#1 by James on June 23, 2011 - 6:12 pm
I’m marginally more open-minded, but the last par is really where it’s at.
“Nick Clegg calls for” is fine for the leader of an opposition party, but absurd for the Deputy Prime Minister. The appropriate form of words there would be “Nick Clegg announces”, unless of course (like this) it isn’t going to happen.
#2 by Gryff on June 23, 2011 - 7:50 pm
Actually, I don’t think this is really an anti bank grab, if anything it is a bit of classic one nation toryism.
I would like to hear how everyone else expects the Government to dispose of its share of the banks, it can’t flood the market with them all at once, it may as well try something a bit innovative. If at the same time it can perform a distributive role, attempting to edge towards a participatory capitalist democracy; why not?
#3 by Nikostratos on June 23, 2011 - 8:35 pm
Cleggy reminds me of one of those carpetbaggers who went around a few years trying to demutualise good well run Building Societies just to gain a few bawbees.
Although Cleggy has a hell of lot less sincerity about him .
#4 by Alec Macph on June 23, 2011 - 9:53 pm
I agree on the vacuousness of his proposals, Jeff, but a couple of points:
Minus the H bit, I assume.
Why not? Your specified time scale and manner of their union suggests they could quite easily be separated. The union was not a political decision, but an acquistorial decision by a gaggle of provisional bank managers – whom the leader of your political party at the time was coo’ing over – which quickly was shown to have need massive state aid to stop them from bringing down national economies.
They should have accepted any and every demand from Government.
~alec
#5 by Jeff on June 23, 2011 - 10:09 pm
No, not minus the H bit Alec. Halifax and Bank of Scotland merged way back in 2001 and Clegg wasn’t suggesting a demerger there. Nor would I for that matter.
And after two years I can assure you (without giving away state secrets) that HBOS and LTSB were anything but two standalone banks. Given the amount of money and effort that went into efficiently putting the two banks together it would have been madness to just undo it all as Britain tried to get banking and the economy at large back on its feet, particularly as you can’t just imagine HBOS’ problems away.
#6 by Alec Macph on June 23, 2011 - 10:34 pm
Yes, that’s fair enough, Jeff. I worded the first bit it badly. I stand by my point, though, that the collapse stemmed from the H and BoS bits merging, and the prestige Scots – including Salmond – thought it represented came from that.
I won’t push the other point further lest an FSA snatch-squad decide to abseil through your windows.
Separately, checking Wiki, I was surprised to see just how young Hornby was when made a CE.
~alec
#7 by Jeff on June 23, 2011 - 10:46 pm
I have honestly never heard of the suggestion that Halifax sunk HBOS. I guess that doesn’t mean it’s not true but my understanding is that the bank as a whole overstretched itself over the recent past and the buck stops with Andy Hornby. Not someone who ran a separate bank 10 years ago.
I suppose if you’re saying that the greed of gobbling up other banks and trying to be the biggest bank in the world was the root of the problem and that started back with H-BOS then, yeah, fair enough, I’d agree with that.
Scotland needs more banks, not less, and it’ll be interesting to see who the new players on the High St will be.
#8 by Erchie on June 24, 2011 - 10:06 am
“I have honestly never heard of the suggestion that Halifax sunk HBOS. ”
Where have you been? That has been one of the points being made for the last two years whenever the “too wee, too stupid, couldn’t bail out the banks” bleat has been brought out
#9 by mav on June 23, 2011 - 11:17 pm
The Clegg plan is a non-starter. Its essentially an open ended warrant scheme, as there would be a floor attached to each share that would have to be returned to the govt when the shares were sold. The voter (for everyone on the electoral role will receive them) takes the rest as profits. The floor is set to ensure the govt gets it money back. What that means is a huge bureaucratic nightmare. Additionally, because the share price would have to rise above the breakeven price before the voter would sell, it takes longer for the govt to get the money back. All to create a symbolic gesture. If the govt manage it right, the eventual sale of the banks (and RBS are expected to be sold in tranches, starting next year) could make the treasury money, saving interest payments, or cutting taxes or avoiding cuts. Or we could agree with Nick.
Piers Morgan said last year that Clegg was his most vaccous interviewee ever. The more I see of Nick, the more I agree with Piers.
#10 by cameron on June 24, 2011 - 2:55 am
Is that really how it’s meant to work? I’d figured they’d just value the government’s shares in RBS and LLoyds, deduct shares to the value of what the government paid to those two banks then divy out the remaining shares to the population which would be rather a lot simpler.
Though to be fair this is tantamount to cutting tax when you have a massive debt and a massive deficit.
#11 by Alec Macph on June 24, 2011 - 10:16 am
I wasn’t meaning to suggest that Halifax _did_, just that it was all part of the same overstretch. The prestige Clegg would have been attempting to invoke in the minds of Scottish voters didn’t really hark back to the time of a regional bank with a big office in Edinburgh.
Like most of Scotland, that attitude was a disgrace to Scotland.
~alec
#12 by Scottish republic on June 25, 2011 - 6:15 pm
Does Clegg really imagine for a fraction of a second that voters won’t read this as trying to buy their votes?
#13 by Calum on June 27, 2011 - 12:25 pm
Royally screwed up political presentation, but this is actually a good idea.
One of the major reasons the price of LBG shares hasn’t climbed out of the trough is that the market knows there is a huge glut of shares ready to hit the market as soon as the shares reach a certain price point.
There are various ways to deal with this, but one of the simplest is to simply get rid of the single owner problem.
#14 by Jeff on June 27, 2011 - 1:32 pm
I personally would have thought that the market would have priced in an expectation that the Government would simply sell their share back to the Government, hence why the shares tanked when Clegg’s announcement was made (I still think the drop was curtailed by disbelieving traders).
The share price is down simply because the bank isn’t expected to return to big profits for a while, dividends aren’t allowed and they have the biggest exposures to dodgy mortgages and they have a stonking £3.2bn provision (potential loss) for PPI claims. For me, it’s nothing to do with release of shares other than setting an artificial ceiling on the share price at 70p (Osborne’s break-even point). But, given the price is low 40s, that isn’t relevant right now.