Shares in bailed-out banks

[Deleted User]

has anyone else heard about this scheme? Apparently a think tank has proposed that every taxpayer should be handed a windfall of shares in Lloyds and RBS. The Centre for Policy Studies (CPS) plan would see taxpayers receiving more than £1,000 worth of shares in both the bailed-out banks.

If this goes ahead, (as I understand it, nothing definite yet), would people like pensioners who don't pay tax, be included in this scheme. As it stands, I'm not sure it would be worth much of a windfall, as the original £1000 would be paid back to the government and you only keep the profits on the shares when you sell them. Any comments please.

jimjames

Its actually a fairly old story and nothing more than publicity for the think tank that suggested it. I think the chances of it happening are pretty much nil.

mr_fishbulb

Seems like a good deal for the government. If they tried to sell their holdings onto the market directly it would be flooded and the price of the shares would plummet.

By giving them to the tax payer and saying "You owe me £1000 when you sell these" means the government get a fixed price for the shares.

rb10

[quote=[Deleted User];discussion/3238646]If this goes ahead, (as I understand it, nothing definite yet), would people like pensioners who don't pay tax, be included in this scheme.[/QUOTE]

Pensioners do pay tax.

Granted, not all pay income tax, but they still pay VAT.

ed123_2

...pensioners pay tax on all income above their personnel tax allowance......state pension, company pension, savings interest etc......

marvin

mr_fishbulb wrote: »

Seems like a good deal for the government. If they tried to sell their holdings onto the market directly it would be flooded and the price of the shares would plummet.

By giving them to the tax payer and saying "You owe me £1000 when you sell these" means the government get a fixed price for the shares.

They would leak them onto the market over several years or if RBS Lloyds have a profit they can use they can buy the shares back and cancel them.

Government is already planning a £5bn sell off of some RBS shares according to the press early next year.

The Government reducing its holding is no always bad for the shares as it gets the shares closer to paying divi's again.

However giving the shares away to tax payers is a bad move as with the demutualisation the vast majority will sell immediately and this will destroy the price. If it has no actual value to them it is all profit however little it is.

[Deleted User]

ed123 wrote: »

...pensioners pay tax on all income above their personnel tax allowance......state pension, company pension, savings interest etc......

This is where I would like clarification on what is meant by taxpayer. If a pensioner's income is below the personal threshold (many are), do they qualify as a taxpayer.

Sceptic001

marvin wrote: »

However giving the shares away to tax payers is a bad move as with the demutualisation the vast majority will sell immediately and this will destroy the price. If it has no actual value to them it is all profit however little it is.

As I understand it, shareholders would be required to pay the government £1000 when they sell the shares, so there would be no incentive to sell if the market value is less than £1000. This avoids the problem of flooding the market. An interesting idea.

opinions4u

40 million shareholders?

Hope they all turn up for the AGM!

(I think 50% of Halifax shareholders sold within a year of their 1997 demutualisation. I think this idea is a waste of time and effort for a relatively modest amount)

Sceptic001

opinions4u wrote: »

40 million shareholders?

Hope they all turn up for the AGM!

(I think 50% of Halifax shareholders sold within a year of their 1997 demutualisation. I think this idea is a waste of time and effort for a relatively modest amount)

I don't consider £66 billion (the cost of the bank bail-out to taxpayers) to be "relatively modest".

Comparison with Halifax (and other windfalls) is ridiculous. Those shares were given away. Even those purchased at launch could have been sold immediately for a substantial profit (ah, those were the days!).

If taxpayers are allocated shares which will not rapidly rise in value (and required to pay the government a floor price if they sell them in the market) the problem of market overhang is resolved at a stroke; the government can recoup its/our "investment" in full; and taxpayers will profit from any increase in share price above the floor price.

The full paper is here: http://www.cps.org.uk/cps_catalog2/give%20us%20our%20fair%20shares2.pdf
Worth a read.
(PS. I have no connection with CPS!)

Masomnia

I do like the idea of the public all owning shares, I think it would have positive social effects.

I think the easiest way of dealing with the shares though, would be to sell them straight back to the banks directly who could then cancel them. Easy peasy.