WSJ(2/22) Tories Unveil Plan For Bank Shares

   (From THE WALL STREET JOURNAL)
   By Laurence Norman

LONDON -- The U.K.'s opposition Conservative Party would, if voted into power, offer discounts on shares to all taxpayers when it sells the government stakes in leading U.K. banks, the party's economic spokesman said Sunday.

In a plan that would mirror some of the popular privatizations of public utilities by a previous Conservative administration in the 1980s, George Osborne said special discounts would be available to lower-income and younger taxpayers to encourage them to participate.

"Taxpayers bailed out the banks so they deserve a people's bank bonus when the time comes to sell the government shares," Mr. Osborne said. "This is a golden opportunity to start building a savings society so that more people have a stake in the future of the economy."

In comments to the Sunday Times, confirmed by his spokeswoman, Mr. Osborne said the Conservatives "will look at special offers, discounted share sales and the like" for younger people and those on low incomes.

The Conservatives, led by David Cameron, are the favorites to win an election that must be held by June 3, although their poll lead has slipped.

The U.K. government invested some GBP 43 billion ($66.5 billion) in the Royal Bank of Scotland and Lloyds Banking Group at the height of the financial crisis, and the government capital injection has since risen to around <pound>70 billion.

Taxpayers now own about 84% of RBS shares and some 43% of Lloyds.

The stakes are being managed by U.K. Financial Investment Ltd., which has said it could take a number of years to divest them.

The Conservatives said they are still drawing up precise plans, but that one option would be for people to purchase the shares through savings vehicles such as tax-free Individual Savings Accounts. They also signaled that retail sales to taxpayers could be combined with offerings to institutional investors and other potential buyers.

Offering a discount to British privatization initial public offerings follows a tradition stretching back to the flotation of state assets in the 1980s, when Prime Minister Margaret Thatcher wanted to encourage retail-share ownership of former state utilities in Britain. The Conservatives are hoping the plan for selling the bank stakes will capture the public imagination the way Ms. Thatcher's sales of public utilities like British Gas did.

However, critics say the plan raises doubts about whether the taxpayer will get the best price available. By preventing the banks from being sold off as a going concern to another institution, and pushing through an IPO in what are often choppy equity markets, they say, a future Conservative government could see the shares bring in less income.

Liam Byrne, chief secretary to the Treasury, attacked the Conservative plan as a "gimmick."

"The Tories' deficit-reduction plan is now a certified farce. When it comes to the shares in the banks, the public expect us to focus on getting their money back. That means selling them at a time and way that maximizes their value."

The smaller Liberal Democrats Party also slammed the plan, calling it "electioneering at its most cynical."

"Actively encouraging people on very low incomes to invest in a volatile share market beggars belief," said Vince Cable, the Liberal Democrats' economic spokesman.

A spokeswoman for Mr. Osborne responded that the Conservatives would only sell the bank stakes at a profit to the taxpayer. She also said the planned sales could take place at any time during the next parliament, which could end in 2015, leaving the Conservatives to pick their timing.

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(END) Dow Jones Newswires

February 21, 2010 21:16 ET (02:16 GMT)

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