The Conservatives are looking at plans to sell the government’s stake in Lloyds Banking and Royal Bank of Scotland to the public.
In a move akin to the 1980s privatisations of BT and British Gas, the plans would see the state not look to offer bank shares on the open market.
The Financial Times reports City bankers proposed the idea to shadow chancellor George Osborne, but the Conservatives are weighing up a number of ways forward.
A Conservative spokesperson refused to rule out selling shares directly to the public.
He said: “We are considering all options and this option is just one under consideration.”
The government currently holds over 70 per cent of RBS and 43 per cent over Lloyds Banking – after pumping some £60 billion into them.
The Treasury’s line on its holding in RBS and Lloyds Banking is that it is holding shares at arm’s length through holding company UK Financial Investments (UKFI) as it seeks to create the best value for the taxpayer.
The Lloyds Banking share price today stood at 104.05p – well up from lows in March of 31.32p.
RBS shares are selling at 55p – up from a January low of 10p but still depressed.
Any government sell-off of shares would need to price them at a point attractive to investors but still provide the taxpayer with a profit.
The public would also need to be convinced of the long-term prospects of the banks.
Speaking over the weekend – City minister Paul Myners said the state’s stake and investment in the banks was a “nest egg”.
“A lot of capital has been put into the banks, but that’s an investment and that investment will prove to be very productive in due course,” he told Sunday Live on Sky News.
He added he was confident over time the government would make a profit on the investment in less than ten years.
Lord Myners went on to describe the stake as “a nice little nest-egg for the British taxpayer”.
The future of Northern Rock also remains uncertain.
The Treasury has revealed a number of interested parties have come forward and it would be politically beneficial to sell the lender before the election.
Currently plans are for Northern Rock to be split into two companies; one dealing with savings and new mortgage lending and the other holding the older, often toxic, mortgage debt.
Once freed from the bad debts, a buyer should be much easier to find, with the taxpayer left holding the old mortgage book.
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