Who is George Osborne?: On Selling Our RBS Shares

Who is George Osborne? This is not an existential question. He might be a human being or a hologram or a ventriloquist’s dummy – it doesn’t much matter. This is a political conundrum, and, insofar as this essay goes, has a specific context.

The context is the selling-off of the government stake in the Royal Bank of Scotland (RBS), acquired through the bailout of 2008-2009. The details have been numerously laid out in broadsheets (e.g. the 3 August 2015 timeline in The Guardian). Though the figures seem to slip a bit between accounts, the bare bones of this business are clear enough and could be summed up as follows:

[Let’s not wade through the quagmire that led to RBS needing to be bailed out in late 2008; the point is it was bailed out thus.]

• February 2007: RBS market share-value around £60.0 each.
• December 2008: UK Government buys £15 billion worth of RBS shares at £6.55 each, thus acquiring a stake of 58% of RBS.
• January 2009: RBS market share-value around £1.03 each.
• April 2009: UK Government puts in a further £5 billion to buy RBS shares at £3.18 each.
• December 2009: UK Government puts up another £25 billion to buy shares at £5.00 each. The total government ownership of RBS is 84.4%.

[Let’s not muddy the waters by pausing on the arrangements of this bailout and the interim up to 2015. As far as arrangements go, the UK Government made it clear that owning over 80% of RBS didn’t amount to “standard public ownership” – which is impossible to fathom. As far as the interim went, it was marked by continuing mismanagement, job losses, forced disinvestments, job losses, corruption (especially Libor-fixing and being fined for it), the ineptness and greed of CEOs Fred Goodwin and Stephen Hester, the greed of the RBS board which “defied” the Government to pay £1.5 billion bonuses in December 2009…. – let’s not pause on these.]

• June 2015: The Government’s total economic ownership of RBS is 78.3%. George Osborne decides to begin selling Government shares.
• 3 August 2015: RBS shares close at market-value of £3.37 each.
• 4 August 2015: UK Government sells 5% of its stake in RBS to City investors, reducing its ownership to 72.9%. The shares are sold at £3.30 each, under market-value (which troubles the City). £2 billion worth of shares are sold, and the loss to the public (whose money was used for the bailout) thereby is £1 billion.
• George Osborne promises that such selling-off of RBS shares will continue till the bank is fully re-privatized, with another round before April 2016.

[One could relate a not dissimilar story for the Lloyds Banking Group and …. but let’s not lose focus.]

This is where I pause and ask myself: Who is George Osborne? What is he doing and in what capacity and why?

What he is doing is clear enough. The UK Government had used public money to buy RBS shares in 2008-2009 for more than they were worth in the market, making them our shares – shares belonging to the UK taxpayer. I had myself effectively invested around £700 to bail out RBS in 2008-2009, as had each UK citizen, at the behest of the UK Government. Now, George Osborne is acting on behalf of the UK Government to sell off our shares for less than they are worth, or could be worth, or should have been worth in the market -- without any discernible need. He is ensuring that every one of us UK citizens lose money.

What sort of political entity does this and why?

Well, George Osborne holds an office – that of Chancellor of the Exchequer – which is apparently vested with the power to do this; he seems to be acting as Chancellor of the Exchequer. But is he?  For simple-minded citizens like myself I find the UK Government’s description of this office useful: “The Chancellor of the Exchequer is the government’s chief financial minister and as such is responsible for raising revenue through taxation or borrowing and for controlling public spending.”  The key phrase there is raising revenue; and it seems patently obvious that what George Osborne is at now is lowering revenue for the Government, lowering our revenue. It is questionable therefore whether he is acting as Chancellor; but he is unquestionably using the powers vested in the office of Chancellor. This is confusing.

Perhaps it is better to understand the political entity George Osborne in less high-flown terms, without taking recourse to the titles of office. Possibly, he could be thought of as an auctioneer – someone who undertakes to mediate between a seller and a buyer, so that the seller’s best interests are served without the buyer feeling cheated. So, at present, George Osborne is the auctioneer appointed to sell our RBS shares to City investors. But this characterization doesn’t quite work. To begin with, no one appointed him to do this, he appears to have appointed himself without consulting the seller (us) or the buyer (City investors). Indeed both parties have expressed scepticism about this self-allocated role of auctioneer of RBS government shares. More importantly, even if we live with that, we can’t help thinking this is a strange kind of auctioneer: he seems to work in reverse to the usual auctioneer’s role – he seems determined to serve the best interests of the buyer rather than the seller (actually makes the seller lose money), while trying to convince the seller that he isn’t being cheated in the process. It would do the profession of auctioneers a disservice to characterize George Osborne’s role re RBS shares thus – is there such an intermediary as a counter-auctioneer?    

Perhaps we need more political nuance, more of a sense of political rationales, to understand the political entity George Osborne. To say he is a Conservative is meaningless (Conservatives have not conserved much for a while); as meaningless as saying his predecessors as Chancellor, Alastair Darling and Gordon Brown, were Labour (i.e. New Labour, which meant nothing-to-do-with-labour-any-longer).

George Osborne’s selling-off of the Government’s RBS shares raises the above unresolvable conundrums precisely because it defies political or economic rationality. Perhaps the explanation lies in something that seems to be commonly tolerated despite being irrational: an article of faith. It seems fair to say that with regard to the RBS shares George Osborne is acting on an article of blind faith: that it, he believes it is best for banks to be unambiguously private rather than ambiguously public, even if that means lowering public revenue and making us all losers. I don’t want to suggest he is doing this for some underhand reason – I am not going to investigate how many RBS board members and City investors George hobnobs with in the club – no, a proud representative of the UK demos cannot stoop that low. I don’t wish to be labelled a Conspiracy Theorist. I am inclined to think George Osborne is acting on an article of faith just as any religious person might. Unlike most religious persons, he doesn’t care whether his faith makes a great many people (a whole population of taxpayers) losers, and a significant number suffer, and he isn’t bothered by deleterious consequences. Maybe he doesn’t care because he is surrounded and protected by a cabal of like-minded believers. I think this sort of believer is called a fanatic (according to the OED, the earliest 17th sense of this noun is of a “religious maniac”).

If a fanatic acts on an article of political faith so as to even potentially do harm to others, a great many others, then it is likely that his actions will inspire fear. Then he could be considered a terrorist of some sort and the cabal surrounding him as a terrorist cell of some sort – perhaps a slow-burning sort rather than an explosive sort. I must confess to being afraid of George Osborne, the counter-auctioneer of RBS shares and occupant of the office of Chancellor of the Exchequer, and the cabal around him.  

Suman Gupta, August 2015