James Moore: Lloyds sale could stand alone without these silly accounting tricks


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The Independent Online

Outlook On the face of it, yesterday's sale of Lloyds shares was an unalloyed success, perhaps beginning the final chapter of the financial crisis.

Just getting some of the shares on to the market is a hugely important step: they have sat on the Government's books for five long years. But there were cherries on top too. The Government moved swiftly to take advantage of the shares' near five-year high, selling them at only a small (just over 3 per cent) discount to their Monday night close.

It could be argued that the Treasury could have offloaded even more, with the sale representing only 6 per cent of Lloyds' share capital (leaving the taxpayer still holding nearly a third). But that's quibbling. A £3.2bn sale is still a very respectable number.

A shame then that George Osborne had to queer the pitch with some of the Treasury's trademarked creative – some might say (Gordon) Brownian – accounting.

The Chancellor proclaimed that more than £500m had been knocked off the national debt through selling at 75p, but that's only because the taxpayer's stake was on the books at the unrealistically low price of 61p. That's the average price at which the shares had been trading when the state bought in, as opposed to the price the previous government actually paid – 73.6p.

The best of it is, he didn't even need to indulge in such silliness. He has still realised more than £3bn that had been tied up in Lloyds to put to better uses, and at a profit to the taxpayer of £60m or so. It would have been hard to picture him doing that even 12 months ago.

So why the sophistry? It may be with an eye on the next phase. Ultimately the plan is to give ordinary taxpayers the chance to participate in a sell-off through a retail share offer. The problem with such a privatisation is that it is electorally risky: voters would take a dim view of a chancellor who lost them money through such a sell-off.

Hence the need to sell to the public at a rather steeper discount than the one accepted by the institutions which took part in round one. Presumably a steep enough discount that they'd be almost guaranteed to turn a profit if they sold up quickly with the aim of making a fast buck. There will also be the need to offer bonus shares to persuade at least some of the buyers to stick around. You could probably achieve both of these aims with a baseline of 61p to make a profit for UK plc.

The point is, using such funny figures is still unnecessary, even with the requirement that retail buyers must not lose out.

Mr Osborne could simply argue that taxpayers deserve a break after all the privations of the past few years, and therefore he would be prepared to sell to them at a loss to the 73.6p at which the last government bought in. That would make him look generous, remind everyone of the last Labour government's failings, and demonstrate welcome bit of honesty.

Instead he's decided to fudge it. And people wonder why the public's trust in politics – not to mention its faith in government figures – is so low.