Dear UK Government Investments
I am seeking further information on the divestiture of government shares in the banking sector arising from the 2008 bank bail out.
In Budget 2017 2/3 of the investment was supposed to be sold during 2018-19.
In 2018 it was announced that full disposal would take place by 2023-24.
In 2020 it was announced that full divestiture would take place by 2024-25
In the 2021 Budget this was apparently put back until 2025-26.
Each year therefore it seems that the date gets put back further and further. I realise that given that the intention is to sell only when such a sales represents value for money, and to reward the taxpayer for its investment, that market conditions mean that the timetable needs to be altered. However, in that regard it seems sensible to have some clarity on what VFM represents. In particular to address the question as to whether to be VFM 1) the eventual receipts from disposal need to be greater than the cost of acquisition, or whether 2) account should be taken of the cost to the taxpayer of financing this investment.
As a taxpayer I am interested in understanding the return on investment that the bail out package will eventually realise and in my view that means taking account of the cost of borrowing this money to give it to the banks. Hence, I would not consider it VFM if the shares were sold back before the price had risen sufficiently to cover the cost of financing the investment.
Your website notes the existence of a Trading Plan – is this a publicly available document? I note commentary by Reuters that all deals so far struck have been below the bailout share price of 502 pence per share. If this continues to be the practice, I cannot see how the investment in the banks will return a profit, never mind cover the cost of financing the investment.
The latest OBR economic and fiscal outlook (March 2022) seems to suggest that the current return is very negative – a loss of 31 billion on the 137 billion invested. Is this expected to be reversed before the 2025-26 deadline?
I would therefore be very grateful for a statement from yourselves about what ‘VFM for the taxpayer’ means in terms of the work of the UKGI.
Many thanks
Museum of Debt
Sent in April 2022. No reply recieved.
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