The government has finally made back all the money it spent bailing out Lloyds Banking Group during the financial crisis, nine years after it injected £20.3bn into the lender, the chancellor said today.
During a speech at the IMF in Washington today, Philip Hammond said the government had received £20.4bn from sales of its shares in the lender - just over the amount it spent bailing it out in 2008.
The figure excludes the amount it cost to finance the bailout. Figures by the National Audit Office suggest the government spent a total of £20.5bn bailing out the bank.
In a speech today Hammond said recouping taxpayers' cash marked a "significant milestone".
While it was right to step in with support during the financial crisis, the government should not be in the business of owning banks in the long term.
The right place for them is in the private sector and I’m pleased to be able to say we are approaching the point at which we will sell our final shares in Lloyds Bank.
Having bought a 43 per cent stake in the bank in 2008, the government began selling off its shares in Lloyds in 2013. By the beginning of this month, it had cut its shareholding to below two per cent.
However, the fate of the other taxpayer-owned bank, Royal Bank of Scotland (RBS), has been rather different. Earlier this week Hammond admitted the government may sell shares in the troubled lender at a loss.
The troubled lender's shares are still trading less than half the 502p the government paid in 2008, when it ploughed £45.5bn into RBS, leaving it with an 81 per cent stake.
The Treasury has since reduced its share to 72 per cent, but despite pledged by his predecessor not to reduce the stake further until shares rose, on Wednesday Hammond said the government must "live in the real world".
"Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous government paid for them," he said.
Laith Khalaf, a senior analyst at Hargreaves Lansdown, said today's announcement was good news for the government.
‘The taxpayer has finally recouped all the money ploughed into Lloyds during the final crisis, though it’s taken almost a decade, much longer than expected. The remaining stake can now be sold off as pure profit for the government, and when Lloyds finally returns in its entirety to private hands, it will become a normal bank once again."