James Moore: UKFI keeps mum where it matters

Like any rational person, I would want to ask some very hard questions before investing £3,000 of my own cash in banking shares. Of couse, in the case of the Lloyds Banking Group and RoyalBank of Scotland, I didn't get any choice. Nor did anyone else. The Government simply waded in and every household in this country now has £3,000 invested in the two of them.

In reality, ministers very likely had no real choice but to act. The alternative for both those institutions was probably collapse and they are of sufficient size that this could potentially have created a financial meltdown that would make the current reccession look like a champagne-drenched boom.

But having put up our money, you might expect that UK Financial Investments, the body charged with overseeing our little investment, would be prepared to answer some of those questions. Questions such as how UKFI justifies backing the RBS chief executive Stephen Hester's £10m remuneration package. Or why Eric Daniels is still at the helm of Lloyds after overseeing a disastrous merger with HBoS. Or even how it views potential EU demands for a break-up of that merger.

Regrettably, on all these topics UK Financial Investments was yesterday keeping mum, at least in public. The taxpayer has been left with a relatively thin annual report that is big on promises to work jolly hard to make sure they get a decent return for their money, but lamentably light on details about how this might be achieved. All we know is that it will take a long time.

It is, of course, easy to bash UKFI. Some might say that, having put up so much cash the Government really ought, through its creature, to be able to extract more for its money, such as cast-iron guarantees that banks will use the public funds they have been given to start lending again.

But it makes sense for UKFI to avoid indulging in this type of behaviour because it is the sort of behaviour that could hit the return we, as taxpayers, get from the banks when the conditions are right to sell. Investors will simply run a mile if they think UKFI is being used to turn its investments into instruments of goverment policy.

However, that does not mean UKFI should not be prepared to explain and justify its stance on the aforementioned issues and many more. One method being considered for maximising the taxpayers' return is to sell at least some of the shares to retail investors. Perhaps the Government could ressurect the famous "don't forget to tell Sid" campaign as "don't forget to tell (Sir) Fred".

But to do that it needs to build up trust with retail investors, as well as with institutions, and on yesterday's performance it has a long way to go if it is to do that.