Taxpayer could lose £28bn through Tell Sid plan
The taxpayer stands to lose £28 billion from the sale of shares held in NatWest, according to analysis of the Chancellor’s plan which also raises questions about the timing of the process.
Jeremy Hunt announced in last week’s Autumn Statement that the government would look at selling its remaining 38.7% stake in the bank to the public through a 1980s-style privatisation programme.
Recalling the advertising campaign to denationalise state-owned utilities such as British Gas he said it was “time to get Sid investing again”, a reference to the slogan that was used to popularise the initiative.
In 2008 and 2009 the Labour government spent £45.5 billion buying an 85% stake in the Royal Bank of Scotland to save it from collapse.
A of number of tranches have been sold to institutional buyers at a loss, and the government wants to sell its remaining shares in the rebranded NatWest Group to finally put the bank fully back into the private sector.
However, as noted by Daily Business last week, the government is likely to make another big loss. The bank’s value has plummeted following the resignation of former chief executive Dame Alison Rose who admitted being the source of a story concerning the cancellation of ex-UKIP leader Nigel Forage’s account with Coutts.
Investment firm Hargreaves Lansdown says that if the shares were sold at the current price there would be a loss of £28 billion to the taxpayer.
NatWest resumed dividend payments in 2018 after a ten-year pause, providing an estimated £4.4bn for the government, but this will not compensate for the anticipated overall loss.
It has been stated by those who made the decision to support the bank that it was not an investment, but was designed to ensure it survived.
Derren Nathan, head of equity at the investment group, said: “It needs to be said that gain on investment wasn’t the main motivation for the initial bailout, as this was seen as essential for the nation’s financial stability.
“But given where we are in the cycle the timing of a disposal may be somewhat questionable. Based on forward earnings the valuation is close to a ten-year low.”
The Treasury said the plan was to sell its final shares by 2025-26 “subject to market conditions and value for money”.