Royal Bank of Scotland

Lord Ashton of Hyde Excerpts

Wednesday 1st July 2015 Lords Chamber

[Lord Sharkey]

To ask Her Majesty’s Government whether they will ensure that any review of their shares in Royal Bank of Scotland examines all options for the bank’s future, including alternatives to reprivatisation.

[Lord Ashton of Hyde (Con)]

My Lords, the Chancellor announced on 10 June that the Government intend to begin selling their shares in the Royal Bank of Scotland in the next few months. The Chancellor is acting on independent advice from the Governor of the Bank of England and a review by Rothschild that it is in the interests of taxpayers to begin now to sell our stake in RBS and return the bank to the private sector.

[Lord Sharkey (LD)]

That is very disappointing. We now have an opportunity to break up RBS into regional stakeholder banks. We know that these banks are better at lending to SMEs and more stable, and contribute more to regional growth. Will the Minister agree to publish a proper and full analysis of the comparative merits of different ways of dealing with RBS, including breaking it up into regional stakeholder banks?

[Lord Ashton of Hyde]

My Lords, it was never the intention of the Government to be a permanent investor in the UK banking sector. At a national level, both RBS and Lloyds are already in the process of divesting part of their UK banking businesses. The Government do not believe that the case for breaking up the core operations of any bank in which the Government have a stake into regional entities meets the objectives of maximising the bank’s ability to support the British economy, getting the best value for the taxpayer or facilitating a return to private ownership. The cost of reorganisation would be attributable to the banks and, as a result, would be fully borne by the taxpayer. The significant issue is the trade-off between the costs, which are certain and significant, and the benefits, which are uncertain.

[Lord Davies of Oldham (Lab)]

But, my Lords, as the Minister has just indicated, the bank is involved in restructuring at present and is still awaiting a judgment in the United States on the mis-selling of subprime mortgages—which takes us back a little while. How can the Government think in terms of having an early timetable for the selling off of this bank? The bank is now trading a long way below the price that the Government paid for it in 2008. Will that not mean that there will be a distinct and significant loss to the taxpayer?

[Lord Ashton of Hyde]

My Lords, I made no criticism of the Labour Government when they bailed out RBS and made no criticism of the average price that they paid. But of course it is part of the mathematics of selling the bank for a loss that they paid 502p. As to the present price and whether it is being discounted, it is true that there is a law suit from the FHFA in the United States, but our independent advice is that the current share price fully reflects the concerns about any future law suits in that regard.

[Lord Lawson of Blaby (Con)]

My Lords, can my noble friend explain to the spokesman for the Opposition that the fact that the Labour Government grossly overpaid for a bombed-out bank with shares that were virtually worthless should be a matter of shame to him and should not inhibit the Government from doing what is the right thing to do?

[Lord Ashton of Hyde]

My noble friend has put it like that; I was trying to be a bit more conciliatory.

[Lord Campbell-Savours (Lab)]

My Lords—

--- Later in debate ---

[Lord Campbell-Savours]

My Lords, is the driver behind this policy the prospect of the price of the shares falling?

[Lord Ashton of Hyde]

That is not the prospect. Since the policy was announced, the shares have actually gone up. The independent advice we received from Rothschild said that giving a strong signal that it was ready for sale would help the share price. By letting some shares go now, the free float would increase and the benefit to the taxpayer would be increased. The Governor of the Bank of England concurred.

[Baroness Kramer]

My Lords, the Parliamentary Commission on Banking Standards specifically recommended exactly the study that my noble friend Lord Sharkey described because of the lack of diversity in the UK’s banking system. Given that report after report has identified lack of diversity and lack of local banks as the biggest barriers to securing both economic growth and financial stability, why did the Government specifically ignore diversity in the review that they carried out?

[Lord Ashton of Hyde]

My Lords, we have not ignored diversity. We are committed to increasing competition in banking to improve outcomes for consumers. The Government have an ambitious programme of reforms to increase competition in banking. This includes, for example, divesting both Williams & Glyn and TSB from RBS and Lloyds, creating a seven-day current account switch service, and delivering more data to enable customers to compare which bank is best for them—I could go on.

[Lord McFall of Alcluith (Lab)]

My Lords, the Chancellor of the Exchequer at the time of the bailout promised that all the money expended by the taxpayer would be recovered in full and that there would be a reformed Royal Bank of Scotland. Neither of those promises has been realised. The Royal Bank of Scotland has still to escape the shadows of seven years ago. Why is the Chancellor breaking his promise?

[Lord Ashton of Hyde]

I do not agree that he is. The Chancellor said two years ago that he would return RBS to private hands. He is doing that. He is increasing competition. RBS has been reformed. The independent advice is that this is the best time to go forward. We have reformed the banking sector completely. I cannot agree with the noble Lord.