Osborne closes in on decision to sell bank shares

Tim Wallace
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TAXPAYERS should be able to apply for more than £1,500 worth of shares in RBS and Lloyds Bank under a plan unveiled yesterday by the think tank Policy Exchange.

Holders of the shares would only make money by selling them when they had risen above a certain level. But if they went below that level they would not lose money.

The Policy Exchange plan comes days before Chancellor George Osborne’s speech to the Mansion House where he is widely expected to announce his intention to sell some shares in the two bailed out banks before the end of the year.

Osborne is widely expected to follow a traditional route for privatisation and offer shares in the banks to investors at a discount to their current price but not for free.

Lloyds is set to be the first to be offloaded. The government owns a 38 per cent stake in the bank, which has resolved most of its problems.

The lender’s share price has hovered around the break-even price of 61p for almost a month, suggesting a profitable sale is now a realistic prospect.

Policy Exchange suggests the best way to offload the stakes is to give the majority of the stock to households.

“By offering a large portion of its shareholding to taxpayers in this way, the government would be able to move much if not all of the banks into private ownership in one go, at a better price than through a traditional sale,” the report claimed.

But a Treasury spokesperson indicated the best price, rather than a handout to households, was the priority for the government.

“The government’s policy remains that RBS and Lloyds continue to become stronger and safer banks that support the British economy, which in time can be returned to full private ownership when it’s in the interests of the taxpayer to do so,” said the spokesperson in a statement.

Osborne will only announce the plans after the Banking Commission publishes its conclusions.

It is expected to call for a range of changes to the sector, including deferring bonuses for up to 10 years and introducing tougher punishments for bad bankers.