It is a breach of trust to sell stake in RBS to Abu Dhabi

Columnist

Wednesday 28 March 2012

When next I am at dinner in the flat above Number 11 Downing Street – the Lottery having come up and the revolution having been accomplished – I might ask the Prime Minister a question in exchange for my modest donation.

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Ian Bell

"Dave," I might say, "how is it that when the First Minister of Scotland, your favourite mad Scotsman, advocates a sovereign wealth fund based on a country's oil and gas resources, he gets derided, yet when any Gulf oil fund turns up you are – so to speak – all over them?"

When the reasonably priced dessert is being served, I might manage a few more questions. Why does selling-off Liverpool (more or less) to the Chinese never seem to involve a human rights argument? Why is it wise to market England's highways to foreign wealth funds – your latest wheeze, Dave – while ignoring the possibility of British investment, state or private, when the latter sector is hoarding cash?If vintage port is being offered, and the cheque has been written, I would probably be warming up. "Tell me this, Dave," I would probably say. "Would the royal house of Abu Dhabi want to buy a big piece of Royal Bank of Scotland if they didn't think they could turn a profit?"If that's the case, why would we sell them that big piece at a fire-sale price? And why couldn't we, the people who paid £45.5 billion for the piece, also turn a profit from the remnants of one of the biggest banks in the world?"It's entirely possible, of course, that the Government and UK Financial Investments Ltd (UKFI), the taxpayer's "arms-length" owners of British banking, have a cunning plan. That would explain the decision to leak news of talks with Abu Dhabi over RBS. Commercial confidentiality is forgotten if you intend to promote a loss-leader. In some circles, it's known as ramping the share price.Even as an outside bet, however, that's unlikely to realise the average of 50.2p a share we paid for RBS. As with Barclays, an astoundingly rich Gulf family – through personal endeavour, of course – will pick up another under-priced asset for their engorged portfolio. A nice deal for them. In what shape or form will it benefit the British taxpayer, or enhance Britain's economic security?We should be more specific. A lot of shareholders, small and large, lost a great deal of money when RBS collapsed. Some contend – court cases are proceeding – that they were misled by Fred Goodwin and other executives over the true state of the bank at the time of a £12bn rights issue. Reducing Treasury borrowing is one thing. How many of these shareholders would benefit from a cut-price sale to Abu Dhabi?Often the people who bought the shares were ordinary RBS employees. They thought they were securing their pensions and their futures. Many have since lost their jobs, and lost a lot of money. The Treasury can boast of returning RBS "to full health", the better to "support the UK economy". Where would a quick sale to a foreign wealth fund leave those – to use a technical term – who got screwed?The argument being floated is that 31.75p for an RBS share would be a justifiable deal because, first, it would be close to the bottom price when the taxpayer came to the rescue, and second, because it would enliven the interest of markets generally. The first claim is preposterous. The bank is emerging from intensive care; the price couldn't become worse. The fact that it is being stripped down for sale, rather than developed, leads to the second point. So intense is the fanatical, free-market short-termism of all those involved, no-one will even discuss the obvious. Why sell it at all? If Abu Dhabi wants to own part of a balance sheet that is bigger, still, than the entire British economy, doesn't that constitute a clue?The short answer is that not a single lesson of 2008-2009 has been learned. In the corridors of real power, there is a determination to restore each of the old, failed financial and economic models simply because they represent big money. George Osborne's wilfully insulting Budget was proof enough. They have not given up on this version of market theology.After the crash, there was a general belief – some of it sincere, some apparent – that state-owned banking might not be a bad idea. We would get security against cowboys, credit where it was needed and a decent profit for "the taxpayer", to be used as required. That rational idea has been discarded.If a tranche of RBS is to go to Abu Dhabi, all of Vince Cable's rhetoric over "national" banks can, as usual, be forgotten. The truth is that this asset is not worthless. In fact, according to our home-grown oligarchs, this asset is too valuable to be left in the hands of the people who spent £45.5bn to keep it alive, and who still foot the bill. You are not allowed – simple as that – to own such a thing.Still, why should a hard-pressed Chancellor with books to balance sell such a thing cheap? Among the things reasserted since 2008, when the banks and the politicians were cowed, is the belief that money should always be footless. Once again, they argue that it doesn't matter who owns something. Sub-prime and the derivatives game taught them nothing. Wealth moves, magnetically, towards wealth. Nations and communities don't count.RBS is fundamental to the British economy: that's why it was nationalised. To advocate that it should therefore be sold cheap to the Al Nahyan family, whose right to run their statelet as a franchise meets no definition of democracy, is worse than a breach of trust. It is as irrational and dangerous as selling a government for the price of a meal.A Gulf Arab would say, of course, that no-one in Britain complained when Fred Goodwin was making his flag-waving global acquisitions for UK plc. This is indisputably true. Look, though, at where that led, and look at the cost, and how the cost was met.

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It is a breach of trust to sell stake in RBS to Abu Dhabi

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