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City applauds Tory cut-price shares move

CONSERVATIVE plans to offer millions of people cheap shares in Britain’s nationalised banks have received a tentative thumbs-up from the City.

Shadow chancellor George Osborne yesterday outlined a scheme to hand small investors shares in Royal Bank of Scotland and Lloyds Banking Group when the government exits its £70bn stake.

The “people’s bonus” would reward taxpayers for the £850bn of public money pumped into the banking system at the height of the financial crisis, with shares being conferred through Isa accounts so that dividends and capital gains are tax-free.

Cut-price paper would be offered to everyone, although young people and those on lower incomes would receive more attractive discounts.

Labour and the Liberal Democrats immediately rubbished the idea as a “gimmick” and “Tory electioneering at its most cynical”. But senior Square Mile figures were enthusiastic about the proposal, which would mark an even larger privatisation than Margaret Thatcher’s “Tell Sid” campaign, which gave families stakes in British Gas in the 1980s.

Angela Knight, chief executive of the British Bankers’ Association, said: “If you look at what happened in the past with privatisation, a small proportion of shares were reserved for individuals at a discount and that provided them with a nest egg which served them well.”

David Buik of inter-dealer broker BGC Partners described the move as “a splendid idea”. “Just think of the number of grannies and grandfathers who have been absolutely larruped with RBS and Lloyds,” he added.

Not all feedback was positive, however. The chief executive of one stockbroker dismissed Osborne’s move as politicking. He said: “We’re nearly in an election campaign and this is typical headline-grabbing.”

The government owns 84 per cent of RBS and 43 per cent of Lloyds. While both banks aim to return to profitability by 2013, some analysts expect them to leave the state-run Asset Protection Scheme as early as the end of this year.