• Text size      
  • Send this article to a friend
  • Print this article

Labour admits value of taxpayers' bank shares could fall under plan

Labour has admitted that the value of taxpayers' shares in banks such as Royal Bank of Scotland (RBS) could plummet under plans to break up the UK's biggest lenders.

The party insists that any dip would be short-lived and that the public would benefit overall.

But there were signs of almost immediate market jitters with shares in the two state-owned banks, RBS and Lloyds, both under pressure as Ed Miliband outlined his plans.

The reaction also raised questions over whether the reforms would delay any return of the banks to the private sector.

Business leaders also weighed in, warning the move could lead to branch closures in rural areas.

In a heavily anticipated intervention, the Labour leader said yesterday that the financial services sector had been a "poor servant" of the economy.

His speech had been overshadowed overnight by the Chancellor George Osborne's surprise announcement that he backs a rise in the minimum wage.

But Mr Miliband insisted that more needed to be done to heal the economy than just a rise in salaries for some.

He warned that small and medium-sized businesses, that should be at the centre of a real recovery in the economy, were struggling to get loans to expand.

Labour wants to break up the 'big 5' banks it insists have a stranglehold on the market.

A Labour government after 2015 would force institutions to sell off branches and oversee the creation of two new "challenger' banks.

Earlier, Mr Miliband's shadow business minister, Chuka Umunna, had admitted that "in the short term you may see a hit on the share price of these banks".

"I mean it is probably happening as we speak now," he added.

Shares in RBS and Lloyds were both down around 1% on the FTSE 100 Index after Mr Miliband's speech.

The Conservatives seized on the drop in share price. Tory Treasury Minister David Gauke denounced Mr Miliband's plan, saying it was not "helpful". Matthew Fell, from the Confederation of British Industry, warned that the plans could lead to branch closures in rural locations.

"In more rural or less prosperous areas, or a combination of the two, these branches would be less attractive to keep but more attractive to divest. They would be the first to go," he said.

Contextual targeting label: 
Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

206495