Thanks to the 2008 banking crisis and decisions by the last Labour administration, this coalition Government has inherited responsibility for part ownership of a number of banks. Clearly it is you and I who actually own the banks, and this week the Government has been suggesting how they will distribute our shares with a view to improving our economic wellbeing as a nation. The Government has decided they will use a mechanism that they hope will  ensure that many of us will become shareholders on a personal basis. This approach resonates with some of the policies of the Thatcher era, however this does not make the decision a good one. George Osborne is already speaking about allowing us to hold the shares and only pay for them when we dispose of them. Quite apart from the delay in obtaining the funds which the chancellor needs, this twist will create additional problems for the ‘investors’.

In the years after the sell off of BT and British Gas, the vast majority of people did not extend their investment portfolio, instead they sold these shares off, not always at a good moment in the market for them as investors. Indeed many people lost money which is not a surprise when one considers how markets are intended to work.Various financial products were created to allow people to transfer their shares into pensions or savings schemes. The people who benefited most were those who designed the financial products. Owning shares is not the same as possessing broad based  investments such as pensions or share based ISAs which offer a much more stable form of investment. One reason for encouraging widespread share ownership is to encourage people to invest more broadly. However this should not point people towards individual shareholdings for the reason above and it is creating false expectations if the cost of the shares is not realised until after the sale (and a big disappointment if the value of the shares has dropped).

A spokesman on yesterdays Today programme suggested that people could benefit from a few hundred pounds free of charge. The Government already has mechanisms for distributing funds if it wants to give money away. If the Government believes we need to increase our savings (as they should) this will not help us develop the habits needed. Sadly this proposal appears to be simply a very cynical way of transferring assets for electoral gain. A phrase coined during the sale of public utilities back in the late 1980’s was that of a share owning democracy. This phrase was used again a couple of months ago in a Daily Telegraph article. If the Government are to deal with the sell off of the banks then the mechanism employed needs to be one we agree upon or else the use of the term democracy is as false as the concept of holding shares that we believe have cost us nothing!