Stephen Hester on the Today programme this morning (transcript courtesy of Coffee House) started a hare running, which ought to be shot, if that is still legal. The RBS boss said:
Not only are we trying to generate wealth in terms of profit and something that ultimately will give the taxpayer £45 billion back – by the way that £45 billion was lost three years ago – but in addition to that we’re defusing, delicately, this big time bomb and I think that’s an incredibly valuable thing for the country if we do it well.
“That £45bn was lost” was a loose way of putting it, and was repeated, misleadingly I think, by Robert Peston and Iain Martin. The taxpayer has not “lost” £45bn, in the sense that this was money that could otherwise have been spent on nurses, police officers or iPads for MPs.
The taxpayer bought RBS, in effect guaranteeing its debts. It acquired a bank which, because it was underwritten by the government, was worth something. It didn’t cost the taxpayer anything because we exchanged cash for shares. The price of those shares has gone down, so we now show a loss, on paper (I don’t know how much but nothing like £45bn). The plan is, and always was, that when Hester had worked his magic, for which he would be well paid, the company would rise in value, because it could hope to earn profits in future, and the taxpayers’ shares would be sold at a profit.
Although shares go down as well as up and have done recently, nothing has fundamentally changed and that plan is still the intended outcome. The taxpayer has not “lost” any money in RBS. He or she may be “exposed” to something like £45bn if the bank went bust, but the whole point of the operation is to prevent that happening.
Eagle Eye 