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Summer Sales Begin

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Former Chancellor George Osborne in Matrix attire

The chancellor rush to sell the state assets rekindled the memories of former Conservative majority governments. Political pundits say the summer sale is just on and more to come…reports Kaliph Anaz

Chancellor George Osborne in Matrix attire
Chancellor George Osborne in Matrix attire

Chancellor George Osborne announced the sale of 80% stake in the Royal Bank of Scotland in his annual Mansion House speech in London.

This is in addition to the sale of 30% stake in Royal Mail, which earned £750 million to the treasury. The chancellor George is also considering £5 billion cuts to child tax credits.

The chancellor rush to sell the state assets rekindled the memories of former Conservative majority governments. Political pundits say the summer sale is just on and more to come.

Welfare cuts

The government is considering reducing tax credits for millions of working families as part of its £12bn welfare cuts, the BBC reported.

Allies of George Osborne are studying an Institute for Fiscal Studies idea to return tax credits to 2003/4 levels, plus inflation – saving £5bn. Changes would cut entitlements for about 3.7 million low-income families by about £1,400 a year, the IFS said.

There is widespread concern inside Downing Street that the cuts are impossible to do while repositioning the Conservatives as the party of working people.
During the general election, Prime Minister David Cameron promised he would not be cutting many benefits – including the state pension, pensioner benefits, and child benefit.

MPs and experts close to Mr Osborne believe reducing current tax credits would see low-income households encouraged to take on more work to keep their family income up. The plan would return the per-child element of child tax credit to its real CPI-adjusted 2003/4 level.

Government sources said it would represent a cutting of the system of tax credits put in place by former prime minister Gordon Brown, which they believe “papered over” poverty in the UK rather than seeking to address its “root causes”.
The IFS has calculated that for the poorest families it would mean a reduction of £845 per child per year.

A family with two children, where at least one parent works full-time, would see their tax credit entitlement running out at £28,847 of gross earnings – rather than £32,969.

Stephen Timms, Labour’s acting work and pensions secretary, said plans to cut £12bn from social security would hit “working families and children hard”.
“It’s clear that David Cameron and George Osborne’s plan will make working families less secure,” he said.

Stake in the RBS

Governor of the Bank of England Mark Carney said the phased sell-off “would promote financial stability” and benefit the wider economy. The government provided RBS with a £45.5bn bailout in 2008.

The government paid 500p a share for the bank, compared with the current price of 354.8p.

The chancellor said the RBS sale must be seen as a whole and the share price will increase in subsequent offerings as confidence grows.

Mr Osborne said: “It’s the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than that was paid for it – but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay.”

A review from Rothschild investment bank said that, despite this price gap, taxpayers can expect to make £14bn more than it paid out in bank bailouts if the sale of bank assets and fees already received are taken into account.

RBS has already paid back about £5bn in fees and repayments for insurance systems set up by the government as part of the bailout. The sell-off plan was criticised by Unite, which questioned the timing given the current share price of RBS.

“By selling off the public stake in the Royal Bank of Scotland, George Osborne is short-changing the public and wasting a historic chance to bring needed change to Britain’s banks,” the union said, criticising the risk of selling the stake at a “knock-down rate to city investors.”

RBS’s chief executive, Ross McEwan, said: “I welcome this evening’s announcement from the chancellor and we are pushing ahead with our strategy to build a simpler, stronger, fairer bank that is totally focused on the needs of its customers and centred here in the UK.
“When the government starts selling its shareholding, it will be selling a bank determined to be the best in the country.”