George Osborne has fired the proverbial starting gun on the privatisation of the Government’s stake in Lloyds this morning. The treasury announced it plans to sell-off £2bn worth of its 12% stake in the bank, and has focused on attracting retail investors.
Those applying for less than £1,000 worth of shares will be given priority and members of the public will be given a 5% discount on the market price. Investors who hang on to their stake for more than a year will receive a bonus share for every 10 that they buy.
That seems like a bid to avoid the kind of criticism that has followed the Government’s sell-off of Royal Mail, which critics have depicted as a gift to the City. Institutional investors were prioritised in that sell-off, but many got out quickly after its share price rocketed by 38%.
The Government has been offloading its Lloyds stake (which was around 43% at one point) gradually - another contrast with its Royal Mail fire sale. At Lloyds’ current market cap, the £2bn sell-off will equate to less than a third of the Government’s remaining stake, but it’s thought Osborne is keen to unload the rest soon.
As well as making political sense for the chancellor, who is keen to move into Number 10 once David Cameron stands down at the end of this parliament, the Lloyds sell off will be welcomed in the City. Flooding the market would normally cause prices to drop, but the bank’s shares were up around 1% this morning as investors look forward to a freedom from government interference.
That’s not to say it will necessarily work well in the long run. Some have warned that handing over scrutiny of the bank from the government to the man in the street will afford its management more freedom to be reckless. Of course the bank will still be largely owned by institutional investors, but their record on keeping management in check is also patchy – you only have to look at what happened in the run-up to the financial crisis to know that.
In his speech at the Conservative Party Conference, Osborne also announced plans to abolish uniform business rates and let councils set their own rates, keeping all of the cash they collect rather than giving some of it to central government as they do at the moment.
This is likely to prove controversial. He pitched it as a case of giving councils more responsibility, but it also threatens to exacerbate the north-south divide as councils in booming cities will hold on to more cash than those in deprived parts of the country.
Osborne was also doing the rounds this morning to discuss his newly-announced National Infrastructure Commission. The body, chaired by former Labour minister Lord Adonis, has been tasked with speeding up decisions about major transport, energy and housing projects.
‘I’m not prepared to turn round to my children — or indeed anyone else’s child — and say: "I’m sorry, we didn’t build for you",’ Osborne said. ‘We have to shake Britain out of its inertia on the projects that matter most.’
It’s an honourable aim, but given how long Osborne’s colleagues have spent dithering over airport expansion, don’t expect any miracles.