Royal Bank of Scotland should be mutualised to overhaul the culture of the bailed-out bank and bolster high street competition, according to an MP.
With the 73% taxpayer-owned bank on course for its ninth consecutive year of annual losses since its £45bn bailout, Gareth Thomas argued that turning it into a mutual like a building society would “conserve the strength and credibility of one of our major financial global players whilst injecting a much needed dose of competition and diversity into British banking”.
Chairman of the Co-operative party, Thomas will make his case in a 10-minute rule bill – a way for MPs to put their case for new legislation – on Tuesday.
In a comment piece for the Guardian, the MP for Harrow West said: “Turning it into a mutual with its assets protected from the so-called carpet-baggers who championed building society demutualisation in the 1990s would substantively change the culture at RBS and, crucially, make banking more competitive.”
He argued that RBS should become a “people’s bank, which every tax-paying British citizen would have the right to become a part-owner of”.
Ever since its rescue, a number of ideas have been floated for the bank, which also owns NatWest and Ulster Bank. In February 2010, in the run-up to the election that year, the Conservatives set out plans to sell RBS shares at a discount to the public.
The following year, the Liberal Democrats set out ideas to give shares to everyone on the electoral register. In 2013, the PolicyExchange thinktank published a proposal to allow 48 million taxpayers to apply for shares in both RBS and Lloyds Banking Group, possibly worth £1,650 per person, which they would pay for later.
When George Osborne was chancellor he commissioned work on breaking up RBS into a “good” and “bad” bank, which stepped back from a full carve-up. He later sold off a 5% stake at a £1bn loss.
Last month, RBS failed its annual health check from the Bank of England and Philip Hammond, the chancellor, has already said he cannot sell the remaining 73% taxpayer stake. The bank faces a large penalty from the US Department of Justice over a decade-old mis-selling scandal and is still trying to sell off 300 branches to meet the state aid terms imposed by the EU.
“The suspension of the sale and reprivatisation of shares in RBS offers a new opportunity to put in place an alternative to either state or private ownership,” said Thomas.
There had been calls to consider mutualisation of Northern Rock but the idea was rejected and the “good” part sold to Virgin Money. The government is in the process of disposing of its last remaining stake in Lloyds Banking Group by selling them on the stock market.
