By William James
LONDON (Reuters) – British finance minister George Osborne will set out plans on Wednesday to streamline the sale of 23 billion pounds ($35.7 billion) of bank shares and other publicly owned assets by creating a new government-run company.
In a speech to business leaders in London, Osborne will highlight the plan as part of a drive to improve Britain’s low productivity – which he refers to as the “long-standing weakness in the British economy”.
“If we want a more productive economy, let’s get the government out of the business of owning great chunks of our banking system – and indeed other assets that should be in the private sector,” Osborne will say, according to advance extracts provided by his office.
In March, the government said it wanted to sell 9 billion pounds of shares in Lloyds Banking Group <LLOY.L> and 13 billion pounds of home loans held by bailed-out Northern Rock and Bradford and Bingley by the end of the 2015/16 financial year.
The sales are part of efforts to recover 66 billion pounds of taxpayers’ money spent bailing out banks in the 2007/8 financial crisis.
UK Financial Investments, which manages the government’s stake in the Royal Bank of Scotland <RBS.L> and Lloyds, along with other financial assets, will be merged with the Shareholder Executive, which controls 23 other stated-owned businesses, the finance ministry said.
The new entity, to be named UK Government Investments, aims to ensure it gets the best price for public assets by combining expertise within the two organizations, the Treasury said.
Osborne will also promise to publish a plan to improve overall productivity in the economy before a July 8 budget.
Boosting Britain’s dismal productivity performance since the financial crisis is one of the country’s biggest economic challenges. The Bank of England cut its growth forecasts last week, citing a weaker outlook for productivity as a key factor.
“Improving the productivity of our country is the route to raising standards of living for everyone,” Osborne will say. The plan will look at areas such as transport, skills and broadband access to identify where structural improvements can be made.
He will also urge government departments to come up with ways to further reduce their spending, ahead of a department-by-department review due later in the year that will seek to shave 13 billion pounds from their overall annual budget.
The spending cuts are one half of a major austerity drive planned by Osborne as he seeks to finish off balancing the country’s books, which will drastically reshape the role of the British state. He also wants to cut welfare spending by 12 billion pounds.
(Editing by Susan Fenton)