Brazil nuts

Oh dear. Cracks are starting to show in Nick Clegg's proposals to hand out shares in state-owned banks.

Initially the plan for a "people's bank" got a lukewarm reception, with John Redwood and Lib-Dem Stephen Williams (who has pushed this before) in support and some predictable opposition from the City about only having one type of investor.

But opposition is now starting to mount as people get their heads round what sounds like a popular idea.

At the heart of the problem is how you decide who gets the shares. The original pamphlet admits there are "many options", including the entire population (which would mean literally everyone on the Census including foreigners and children getting shares); and taxpayers (which excludes the poorest households).

It says the "simplest option" is all British adults, using the electoral register as a "sound starting point". But this too seems deeply flawed: there are serious concerns about the register's accuracy, and it could mean a 17-year-old soldier missing out while a lifelong workshy benefit claimant would gain. And if prisoners are given the vote, they'd be eligible too.

Just think how that would go down with the hard-working Brits who suffered the effects of bailing out the banks on our economy.

Professor Philip Booth, of Cass Business School, sums it up nicely.

“It is taxpayers who paid money into the banks but not necessarily taxpayers who get these shares,” he said adding that it could cost £250 million (that's a quarter of a billion pounds) to run a scheme that would lead to fragmented bank ownership - another negative.

Tory MPs are also turning against the idea, floated by Clegg on a trip to Brazil.

Treasury select committe member David Ruffley said the DPM had "not thought it through", arguing the electoral roll would lead to "injustice" in who got shares. Far better to use the money to pay for a cut in the basic rate of income tax which will benefit "hard-working families", he argued.

Shipley MP Philip Davies said the idea was "hopelessly impractical" while Cities of London and Westminster MP Mark Field described it as a "non-starter". Priti Patel added: "The headlines sound great but the pratical side of who gets the shares needs looking at and has got to be questioned."

For his part, Ed Balls said disposing of the shareholdings must be in the best interests of the taxpayer, "not the short-term need to get headlines for Nick Clegg's overseas trip".

The Treasury have pledged to look at all ideas when the time is right but there does not appear to be huge enthusiasm for this particular suggestion. Don't be surprised if you end up having to buy the shares in RBS and Lloyds if you want to get your hands on them.

Craig Woodhouse
Follow me on Twitter @craigawoodhouse

Comments

[Iain Parkes]

Doesn't surprise me that both Tory's and Labour are against it - Tory's Because they want all the shares to go to big business and Labour because they need people to stay poor and needy just to get power again!

Give Every British citizen equal shares in these banks, let them have the dividends tax free but make sure that they are clobbered if they sell them! This would start to raise people out of the gutter and onto the investment ladder!