George Osborne's flashy giveaway of Lloyds shares
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Version 0 of 1. Congratulations to the Treasury and its sidekicks at UK Financial Investments: the little-and-often “trading plan” they devised last year for offloading Lloyds Banking Group shares is working splendidly. The drip-feed of stock has not interrupted the smooth upwards progress of the Lloyds share price. After the latest sale, the state’s stake has been cut from 24.9% to 19.9% in three months with minimum fuss. At the current pace, the state could be out of Lloyds altogether by this time next year. Who would wish to interfere with this winning formula? Well, George Osborne, the man whose officials designed it, would. During the election campaign, he pledged to shed Lloyds shares in flashier fashion via a retail offer to private investors. This will include a one-for-10 “loyalty bonus” for those who keep their shares for a year. The thin justification was to “encourage a culture of long-term share ownership”. The flipside of a loyalty bonus, though, is lower proceeds for the Treasury. We’re not talking zillions, since there will be a £200 cap per head. But if, say, £2bn-worth of shares attract the bonus, that’s a £200m giveaway. There is no need for it. A government preaching fiscal discipline should not be letting £200m slip between the cracks. Stick to the trading plan, which is quietly finding buyers for Lloyds shares at the best price for the public purse. EasyJet’s sudden dive The toilets will not get smaller on easyJet’s reconfigured Airbus A320s, we are assured. Thank goodness. But the share price did shrink on Tuesday – by almost a 10th. That’s a very strong reaction to the mildest of warnings about the outlook for the second half of the financial year. Revenue per seat will be down around four percentage points for the third quarter. It’s not much – and most of the effect can be explained by the timing of Easter and the April strikes of air traffic controllers in France. So why the violent share price reaction? Put it down to the mistaken belief that airlines always get an easy leg-up from lower fuel prices. Life is rarely so straightforward. Lower fuel costs mean lower ticket prices and thus more demand from passengers. But marginally profitable airlines also find it easier to stay in business and provide competition. So profit margins are not necessarily boosted. Last year, easyJet’s margins were a very healthy 12.8%, having doubled since 2010. So maybe the company is approaching the point at which further advances are trickier to achieve. That’s hardly a long-term problem, though, if margins can stay around the 13% mark and there is demand for more flights. EasyJet will still make profits of £635m this year, up from £581m, and returns on capital remain excellent. At about 12 times earnings, there is no reason for shareholders to panic. Greece on the brink? Is Greece really down to its last €600m? Could the country go bust in the next couple of weeks, as finance minister Yanis Varoufakis suggests? It’s impossible to know. Sifting information from misinformation is a mug’s game when both sides in a negotiation are engaged in brinkmanship. But, if the numbers are accurate, eurozone lenders may soon be asked to send a partial advance to Athens. As a gesture of goodwill, and an expression of confidence in a successful outcome, would they hand over a couple of billion euros from the €7.2bn (£5.2bn) that is at issue? If the alternative is Greece’s accidental slide out of the euro, surely the answer would be yes. Would such a concession strengthen the Greeks’ negotiating hand? Possibly. Political responsibility Robert Jenkins, former member of the Bank of England’s financial policy committee, makes a good point in a letter to the FT: politicians are better at resigning than the bosses of big banks. The leaders of the Labour and Liberal Democratic parties have gone, taking responsibility for their parties’ policy shortcomings. By contrast, those who served on the boards of banks during periods of “market manipulation, failed acquisitions, rampant money-laundering and tax-related wrongdoing” tend to acknowledge responsibility but rarely offer their resignation. Jenkins’s moral: only the politicians understand that responsibility and accountability go hand in hand. |