Is the Government really going to buy the last chunk of RBS? Not if George Osborne can help it

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So, the banks don't lend enough and we own nearly all of one of them. Why then, the cry goes up, don't we just take one of them over, the one that already lends more than any other to UK firms, and then dictate exactly what it does?

Headquarters of the Royal Bank of Scotland in the City of London
Headquarters of the Royal Bank of Scotland in the City of London Credit: Press Association

With the state of the RBS share price the taxpayer could buy the remaining chunk for a song and become the proud, full owner of a high street bank.

Not so fast... Many companies do report punitive banking terms that make it almost impossible for them to borrow. We have reported many times on this and it is an issue that is very real. But just as big a problem right now is the lack of demand. Companies are terrified of what will happen in the economy next. So it is a brave firm right now who takes on much more debt. It is not remotely clear that having a state owned bank would make borrowing more attractive. Would companies suddenly feel more confident about taking on risk if ministers were in charge of a bank?

. Credit: Press Association

But more simply, a full nationalisation of RBS is so unlikely because George Osborne and his officials think it is a bad idea. So much so that I'm told that the Treasury is refusing requests from Vince Cable to get officials to model how it might work. Officials at his own department, Bis, I'm told, are not thought to have the expertees required to carry out a proper consideration of how a state controlled RBS might look.

Big brains at the Treasury are thought to have the capability to do so. And surely it makes sense at least to look at the idea? Yet their political masters are preventing the work from actually taking place it is suggested. For as long as that remains the case, the idea remains a non starter. But a source at the bank tells me 'Vince just won't take no for an answer.'

Sources close to the Business Secretary say there are no current conversations taking place about the idea of taking RBS entirely into state hands, and that no specific requests have been made. But the response of a Treasury source suggests there is some tension behind the scenes - 'our officials are not in the business of modelling different scenarios at the request of another Secretary of State' they say. Ouch!