Taxpayers to be given their own slice of Lloyds?

Under new recommendations, taxpayers could finally benefit from the government bailout of Lloyds and RBS. Although a committee on banking standards could scupper that.

by Emma Haslett
Last Updated: 20 Jun 2013

Critics of the government’s bailouts of RBS and Lloyds are fond of talking about the banks’ ’60 million shareholders’. Now that could be about to become more than just a technicality: think tank the Policy Exchange has suggested that when the banks are sold off (more on which later), their shares should be transferred straight to the public.

A report by the think tank says stakes worth between £1,100 and £1,650 should be given, free of charge, to those who apply for them. If share prices rise, their new owners can sell them off and pocket the difference. If not, the government retains ownership.

The report’s publication came as the pressure is jacked up on George Osborne to begin a sale of the banks. During his annual speech at Mansion House next Wednesday, the chancellor is expected to give details on his plans for the government’s exit from the banking industry – although how well-formed those plans will be is subject to debate.

While it’s pretty much guaranteed he’ll confirm a sell-off of the banks before the general election in 2015, some have suggested that there are plans to privatise the first 10% of Lloyds, of which the government owns 39%, before the end of the year – which is a more radical timeframe.
 
To some extent, what Osborne will say depends on the outcome of a two-day sit-in, beginning today, by the Parliamentary Commission on Banking Standards, the body designed to clean up the UK’s banks. The meeting will address – among other issues – the problem of what to do about state-owned banks.

Last week, a leaked draft of a report by the commission suggested that both RBS and Lloyds should be split into ‘good’ and ‘bad’ banks, with the good ones sold off and the bad ones retained and managed by the state. But Osborne is reportedly unenthusiastic, saying it would cost the government £8bn-£10bn.

Then again, if he ignores advice from the commission, which he set up himself, it’ll look bad. So taxpayers’ dreams of owning their very own slice of RBS pie could yet be thwarted.

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