Don’t hold your breath for Nick Clegg’s bank bonanza

Nick Clegg's idea for giving away £1,000 in shares in the nationalised banks – RBS and Lloyds -  succeeded in grabbing a headline for the Lib Dem leader during his tour of slums in Rio de Janeiro. But the Mole's advice is don't hold your breath waiting for pay day, because it is not going to happen.

The deputy prime minister's decision to fly the people's banking kite with the Times appeared to be a master stroke. It was manna from heaven for the hapless hacks covering his three-day trade trip to Brazil with culture secretary Jeremy Hunt, universities minister David Willetts and trade minister Lord Green as well as the heads of 20 leading British firms.

At least it helped justify the expense of the trip for the newsdesks of the Times and Daily Mail, which hailed it as the biggest share hand-out since the privatisation of state enterprises by the Blessed Saint Margaret  in the 1980s.

Back in Westminster, however, it was seen as an audacious gambit by Clegg to embarrass the chancellor, George Osborne, and to put some distance between the Lib Dems and the Conservatives.

Under Clegg's scheme, every adult in Britain could be given shares in the two banks bailed out by the taxpayer. Everyone on the electoral roll or on the national insurance register would receive an estimated 1,450 shares in RBS and 450 shares in Lloyds. They would currently be worth £770 but it could amount to a £1,000 windfall for everyone when the banks are eventually sold back to private investors.

Clegg said: "Psychologically it is immensely important that the British public feel they have not been overlooked or ignored. Their money has been used to the tune of billions and billions and billions to keep the British banking system on life support and they have absolutely no say at all in what happens when normality is restored."

But it quickly emerged that Clegg had not sought David Cameron's clearance before leaking his own letter to Osborne containing the plan and Downing Street soon poured a river of cold water on the idea. Cameron's official spokesman said Clegg's proposal would be looked at as one of the options for disposing of the government's shares in banks, but that ministers would be focused on achieving "value for money for the taxpayer".

It will take years for that to happen. RBS shares closed yesterday at 36.65p. The break-even price – the purchase price paid by the taxpayer – is 50.4p. Lloyds shares were at 47p; the break-even price is 73p. It is inconceivable that the government could sell the shares until they had reached the break-even price unless Downing Street wants to dine out on more of its own words.

Even his Lib Dem cabinet colleague, business secretary Vince Cable – a man who is perhaps too honest for politics – found it difficult to keep his face straight, saying the proposal was "very preliminary" and that the sell-off was "some years" away.

The Liberal Democrats were talking "in an amicable way" to the Treasury, which was looking at the "feasibility" of the idea, he said. That was seen by his colleagues as code for "Clegg's having a laugh at Osborne's expense".

So why did Clegg do it? Most people around Westminster for once agreed with shadow chancellor Ed Balls, who said: "The test for what happens to the nationalised banks must be the long-term best interests of the taxpayer not the short-term need to get headlines for Nick Clegg's overseas trip." ·