Auditors say sale of stake in Lloyds lost UK £200m

 
Tim Wallace
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THE TAXPAYER lost £200m on its first sale of Lloyds shares instead of making a profit as initially claimed, official auditors said today, because the government’s sums did not take account of the cost of borrowing money to bail the bank out.

September’s sale of 4.3bn shares brought in £3.2bn and outweighed the amount paid for the shares by £120m.

However, the National Audit Office (NAO) said the Treasury failed to include the three per cent cost of borrowing that bailout money in its calculations, and in fact lost £200m.

The government still holds 33 per cent of the bank, but is not yet able to make a profit once those funding costs are factored in – the share price last night stood at 76p, below the 77p level when the six per cent stake’s sale was announced.

But the NAO still praised the way the Treasury conducted the sale, saying it was quick and smoothly done, achieving good value for money by selling at a price close to a 12-month high for the stock.

The auditors also said the £200m loss could still be seen in a positive light.

“This shortfall should be seen as part of the cost of securing the benefits of financial stability during the financial crisis,” the report said.

The Treasury said the cost of borrowing illustrates the need to cut the budget deficit.

“The proceeds from the sale have reduced the national debt by over half a billion pounds, but as the NAO also rightly points out the country has had to pay a high price for the extra debt it has taken on because of the financial crisis,” said minister Sajid Javid.

“The government’s long term economic plan is dealing with this: we have put in a place a new regulatory system to create a stronger and safer banking system and have reduced the deficit by more than a third.”

The rest of the stake is likely to be sold before the 2015 general election, and could include a retail offering in which individuals will be offered the chance to buy the shares from the Treasury, as well as institutional investors.